Archive for Economics & Fundamentals – Page 80

27 Dec

Oil rises in price amid rising geopolitical risks in the Middle East. Santa Claus rally supports broad market

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was up by 0.43%, while the S&P 500 Index (US500) added 0.42%. The NASDAQ Technology Index (US100) closed positive by 0.54% on Tuesday. Stocks rose on Tuesday in leisurely holiday trading as markets in Europe and parts of Asia were closed for the Christmas holiday. Meanwhile, the S&P 500 Index (US500) hit a nearly two-year high, and the NASDAQ index (US100) hit a record high. Stocks are supported by the seasonal Santa Claus rally (prices typically rise between Christmas and the first days of the New Year). Strengthening chip stocks boosted the overall market and pushed the Nasdaq 100 Index to a record high, while a more than 2% rise in WTI crude oil prices drove energy stocks higher.

Rising holiday spending indicates consumer confidence in the economic outlook, which is supporting stocks. According to Mastercard (MA), retail sales data, from November 1 through December 24, in-store and online sales (excluding automotive) were up by 3.1% year-over-year, while spending at restaurants was up by 7.8%.

Equity markets in Europe did not trade yesterday due to the holidays.

According to economists, the Bank of England is set to cut interest rates by at least 125 basis points next year, with the first quarter-point cut coming at the MPC meeting on May 9. This dovish reassessment is partly due to recent reports on UK inflation and GDP. As a result, some banks see UK inflation at 3% at the end of H1 2024, while others see it falling to the Bank of England’s 2% target. According to the latest GDP statistics, the final Q3 GDP contracted by 0.1%, missing expectations, while Q2 GDP data was revised downwards. Lower inflation will be needed next year to give a boost to the weak UK economy, which is close to recession.

WTI crude oil prices jumped more than 2% to a 3-week high amid geopolitical risks after the US military struck three sites in Iraq, targeting an Iranian-backed terrorist group blamed for a series of drone attacks on US troops. In addition, Britain’s navy reported an attack on two commercial ships traveling in the Red Sea near Yemen.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) gained 0.16% over yesterday, China’s FTSE China A50 (CHA50) closed at its opening price on Tuesday, Hong Kong’s Hang Seng (HK50) and Australia’s ASX 200 (AU200) were not trading due to holidays.

Japanese and Indian stock markets were Asia’s best performers through 2023. Key supportive factors were the Bank of Japan’s soft stance and optimism about the Indian economy. On the other hand, Chinese blue-chip stocks performed the worst in the region as lingering concerns over the country’s economic recovery led investors to pull out of local markets.

S&P 500 (US500) 4,774.75  +20.12 (+0.42%)

Dow Jones (US30) 37,545.33 +159.36 (+0.43%)

DAX (DE40)  16,706.18 0 (0%)

FTSE 100 (UK100) 7,697.51 0 (0%)

USD Index  101.41 −0.30 (−0.29%)

News feed for 2023.12.27:
  • – US Richmond Manufacturing Index (m/m) at 17:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
22 Dec

How government payments to the vulnerable can multiply to create economic growth for everyone

By Conrad Nunnenmacher, United Nations University; Franziska Gassmann, Maastricht University, and Julieta Morais, United Nations University 

The economic fallout of COVID-19 left people around the world facing a significant threat to their livelihood. As governments scrambled to mitigate the pandemic’s impact on their populations, many decided to use direct payments to support vulnerable citizens.

More than a sixth of the world’s population received some sort of cash transfer in 2020. These programmes were a key source of support for many people during the COVID-19 pandemic, with governments across the globe scaling up or introducing such payments.

Brazil, for example, introduced the Auxílio Emergencial programme, while the US implemented Economic Impact Payments. Both cash transfer programmes aimed to shield vulnerable populations. This was also not exclusive to middle- and high-income countries. Togo, for instance, implemented the Novissi cash transfer programme during the pandemic.

Using cash payments to protect people’s livelihoods and lift the poor out of poverty is not a novel strategy. It can be a simple way to provide basic social protection to people in need, helping citizens to withstand sudden shocks and also facilitating their recovery after a crisis.

Cash assistance as financial burden?

But cash transfers still attract a lot of debate. Besides typical concerns like creating dependency and reducing labour supply, these programmes are costly. This can cause concern about their sustainability and hinder the initial implementation and scale-up.

For example, the Social Assistance Grants for Empowerment programme in Uganda in 2010 became so politicised that it was challenged every step of the way to its implementation and later expansion. Even before its pilot programme, concerns regarding its financial sustainability and the potential creation of welfare dependencies were raised by politicians.

During periods of economic crisis, austerity policies can also directly influence social assistance initiatives. After the 2010 economic crisis, for example, Greece initially suspended and subsequently terminated its housing benefit programme, attributing this decision to budget constraints.

But cash transfer programmes aren’t “handouts”. The positive impacts on the people that receive them are well documented. They are powerful instruments for strengthening household resilience and fostering opportunities that can extend beyond the immediate recipients.

The multiplier effect

There is another vital element of social cash transfers that most people aren’t aware of: the economic multiplier effect. In a recent study with Ugo Gentilini, Giorgia Valleriani and Yuko Okamura of the World Bank, and Giulio Bordon of the UN’s International Labour Organization, we found the multiplier effect can greatly enhance the financial sustainability of social cash transfer programmes.

The core concept is that every dollar transferred that is spent rather than saved can increase the total income in the economy beyond its original value.

Consider a smallholder farmer who uses some of her grant to buy fertiliser at the local market. The local merchant profits from it and then spends this additional income, increasing profits for someone else and setting off a ripple effect through the economy. These taxable gains go beyond the people that get the payment, effectively “multiplying” the original grant’s worth for the economy.

Investing in the entire economy

We reviewed 23 studies of 19 cash assistance programmes across 13 countries and found substantial evidence of this multiplier effect from social cash transfers.

In Brazil, for example, Bolsa Família, the current national social welfare programme of Brazil and one of the largest cash transfer programmes in the world, was found to increase real GDP per R$1 (£0.16) spent by R$1.04. This is a small but positive spillover into the Brazilian economy.

Another noteworthy example is the GiveDirectly initiative in rural western Kenya, a pilot programme that offered a US$1,000 (£791) one-off transfer to 10,500 poor households. This programme led to a strong positive economic shock with a multiplier of 2.5 per US$1. So, every US$1 transferred generated a value of US$2.50 locally – a strong positive spillover to the local economy.

Social cash transfers have the potential to not only support the poor and vulnerable, but also to stimulate the wider economy. Rather than simply accepting the general perception of social transfers as an expense, we should start recognising their true value as an investment in a country’s entire economy.The Conversation

About the Authors:

Conrad Nunnenmacher, PhD Research Fellow in Innovation, Economics, Governance and Sustainable Development, United Nations University; Franziska Gassmann, Professor of Social Protection and Development, Maastricht University, and Julieta Morais, Researcher in Social Protection, United Nations University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
22 Dec

4 business lessons from the Boston Tea Party

By Jay L. Zagorsky, Boston University 

December 2023 marks the 250th anniversary of the Boston Tea Party, one of the most famous events leading up to the Revolutionary War. On the night of Dec. 16, 1773, Colonists marched aboard three ships and threw more than 90,000 pounds of tea into Boston Harbor. No one died, and the only things injured were the tea leaves, but this event helped precipitate a major war.

I am a business school professor who often drives by the Tea Party site while taking his wife to work. Each time, I ponder the lessons this “party” has for people in business. Many aren’t obvious. Here are four that come to mind.

1) Publicity is important

There were actually 10 “tea party” protests across the 13 Colonies in the late 1770s. However, only one ended up in the history books. The others, including a second one in Boston just four months afterward, were largely forgotten. Getting the word out fast, which in those days was done by newspaper, is key. Otherwise, you can do a lot of work that will be ignored.

2) Dramatic changes in the market can cause problems

The volume of tea imports into the Colonies rose at a very fast rate in the four years leading up to the Boston Tea Party. They went from 55 tons in 1770, which was close to the amount dumped in the harbor, to 370 tons the year the tea was dumped. This was an increase of almost seven times. The population of the Colonies was about 2 million people in 1770 and didn’t expand much in that four-year period. Basic economics tells us this dramatic increase in supply without more customers meant the price of tea had to fall a lot.

We don’t know for sure the identities of the ringleaders who convinced people to dump the tea. As a business school professor, I believe it’s clear that some protesters were protecting their commercial interests. Shopkeepers, merchants and smugglers who had stocks of tea on hand didn’t want to see 90,000 more pounds of tea flooding the market. It would make them lose money. Dumping the tea in the harbor was a way of protecting their investment.

3) Even relatively small dollar amounts make big impressions

For all the fuss about the tea that was dumped, the damages weren’t huge. The British East India Company reported 9,659 English pounds in damages. That would be about 1.2 million pounds in today’s money, according to the Bank of England’s inflation calculator. Using the current exchange rate of $1.26 to a British pound means the tea dumped cost about US$1.5 million.

To give you a rough idea of how small this is, last year the U.S. imported half a billion dollars’ worth of tea. In terms of my favorite British import, the destroyed tea was worth about the same price as three Rolls-Royce Phantoms.

4) Timing matters … but it isn’t everything

The Tea Party happened on a night when the tide was especially low, with only 2 feet of water under the ships. Because the tide was so low, much of the tea didn’t get wet. Instead, it ended up in a giant pile, mostly dry, beside the boats. This meant the partygoers had to climb out of the boats and spend hours sloshing in the mud moving the tea into the water.

Given that the tea arrived at the end of November, they could have picked a time that would have made the job less difficult. Nonetheless, the revolutionaries weren’t deterred, since hard work can often overcome the worst timing.

The Tea Act of 1773 helped set the stage for the Revolutionary War.

When it comes down to it, history is more than just stories we tell children. The past contains many lessons for adults, including businesspeople. This incident, which played a key role in inciting the Revolutionary War that freed the American Colonies from British rule, is so much more than a cartoon image of men dumping chests of tea into Boston Harbor.The Conversation

About the Author:

Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
22 Dec

Japan sees inflationary pressures easing. Angola leaves OPEC+

By JustMarkets

As of Thursday’s stock market close, the Dow Jones Index (US30) was up by 0.87%, while the S&P 500 Index (US500) added 1.03%. The NASDAQ Technology Index (US100) closed positive by 1.26% on Thursday. Thursday’s US Q3 GDP reports and the Philadelphia Fed’s December business outlook survey came in weaker than expected, raising expectations of a Fed rate cut and supporting the indices.

The Philadelphia Fed’s December business outlook survey unexpectedly fell by 4.6 to minus 10.5, which was weaker than expectations for a rise to minus 3.0. Also, the US Q3 GDP report was revised down by 0.3 to 4.9% (q/q), which was weaker than expectations of no change at 5.2%. In addition, leading indicators for November declined by 0.5% m/m, marking the twentieth consecutive month of declining readings. In contrast, weekly initial jobless claims rose by 2,000 to 205,000, indicating a stronger labor market than expectations of a rise to 215,000.

The US will release the PCE inflation report today, which is favored by the US Fed over CPI because the PCE measure covers a wider range of goods and services than CPI and a broader range of buyers. Economists expect the PCE price index to be unchanged for a second month in November, while the core index, which excludes volatile food and energy costs, is expected to rise 0.2%. A rise in the PCE index would temporarily restore confidence in the US dollar and be a headwind for indices and gold.

Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE40) declined by 0.27%, French CAC 40 (FR40) fell by 0.16%, Spanish IBEX 35 (ES35) added 0.03%, and British FTSE 100 (UK100) closed negative by 0.27%.

Oil prices came under pressure on Thursday after Angola announced its withdrawal from OPEC+ amid a dispute over oil production quotas. Angola is Africa’s second-largest oil producer, and the split between Angola and other OPEC+ members is bearish, signaling more strife between members of the organization. Others in OPEC+ may also resist Saudi Arabia’s attempt to force all members of the organization to cut production.

Natural gas prices rose sharply on Thursday amid a larger-than-expected decline in weekly US gas inventories. The EIA reported that US natural gas inventories fell by 87 billion cubic feet, more than forecasts of 82 billion cubic feet. As of December 15, natural gas inventories were up by 7.6% from a year earlier and were 8.5% above the 5-year seasonal average, indicating ample natural gas supplies. In Europe, natural gas storage facilities were 89% full as of December 17, above the 5-year seasonal average of 77% for this time of year.

Asian markets were mostly up on Thursday. Japan’s Nikkei 225 (JP225) gained 0.28% yesterday, China’s FTSE China A50 (CHA50) rose by 2.03%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.95%, and Australia’s ASX 200 (AU200) ended Thursday positive 0.53%.

In Japan, consumer prices excluding fresh food showed 2.5% y/y, down from the previous reading of 2.9%. The fall in energy costs intensified while the rise in processed food prices weakened. The latest data is consistent with previous Tokyo data and the BOJ’s view that price pressures will gradually ease as import-driven inflation falls, with the focus on whether the broader trend supported by wage growth takes root. The consensus among economists is that the Bank of Japan will bring the rate to zero in April 2024 after checking the outcome of annual wage negotiations due in March.

Apart from Japan, Australia is the only developed economy where traders are unsure if policymakers will start cutting the key rate in the next six months. Once the Reserve Bank’s rate easing cycle begins, the market sees it as the least likely to cut rates. The RBA’s rate is 1% lower than the Fed’s, emphasizing the subdued pace of tightening even though inflation in Australia remains higher than in the US and UK. These differences help explain why RBA chief Michelle Bullock is taking a hawkish tone and why money markets expect the RBA to tread cautiously on the easing path. This will lead to a stronger Australian dollar next year against major currencies.

S&P 500 (US500) 4,746.75 +48.40 (+1.03%)

Dow Jones (US30) 37,404.35 +322.35 (+0.87%)

DAX (DE40) 16,687.42 −45.63 (−0.27%)

FTSE 100 (UK100) 7,694.73 −20.95 (−0.27%)

USD Index 101.87 +0.03 (+0.03%)

News feed for 2023.12.22:
  • – Japan National Core CPI (m/m) at 01:30 (GMT+2);
  • – Japan Monetary Policy Meeting Minutes at 01:50 (GMT+2);
  • – UK GDP (m/m) at 09:00 (GMT+2);
  • – UK Retail Sales (m/m) at 09:00 (GMT+2);
  • – US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
  • – US PCE Price index (m/m) at 15:30 (GMT+2);
  • – Canada GDP (m/m) at 15:30 (GMT+2);
  • – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2);
  • – US New Home Sales (m/m) at 17:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
21 Dec

Hedge funds and large investors are locking in positions ahead of the Christmas holidays

By JustMarkets

As of Tuesday’s stock market close, the Dow Jones Index (US30) decreased by 1.27%, while the S&P 500 Index (US500) was down by 1.47%. The NASDAQ Technology Index (US100) fell by 1.50%. Stocks went up first on Wednesday, with the S&P 500 Index (US500) rising to a 23-month high and the Dow Jones (US30) and NASDAQ (US100) indices setting new all-time highs. Stocks found support amid better-than-expected data on home sales and consumer confidence in the US, which bolstered prospects for a soft landing for the US economy. But by the end of the trading day, the stock market began to sell off. Over the past two weeks, sharp gains in stock indexes have driven them into overbought territory, prompting profit-taking and technical selling by fund managers and investors ahead of the Christmas holiday. The losses on Wall Street were massive, with about 95% of the companies in the indices down.

US home sales in November rose by 0.8% m/m to 3.82 million, which was stronger than expectations of a decline to 3.78 million. In addition, the Conference Board’s US Consumer Confidence Index for December rose by 9.7 to a 5-month high of 110.7, exceeding expectations of 104.5. Philadelphia Fed President Harker’s comments on Wednesday were somewhat hawkish and favorable to the US dollar when he said the Fed should start cutting interest rates, but “we shouldn’t do it too quickly, and we’re not going to do it all at once.”

FedEx (FDX) fell by 12%, one of the biggest drops in the market, after it reported lower revenue and profit for the latest quarter than analysts expected. The company also expects its full fiscal year revenue to fall sharply from the previous year.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) decreased by 0.07%, France’s CAC 40 (FR40) was up by 0.12%, Spain’s IBEX 35 (ES35) lost 0.06%, and the UK’s FTSE 100 (UK100) raised by 1.02%.

Economic news for the Eurozone yesterday was mixed. Germany’s Producer Price Index (PPI) for November declined by 0.5% m/m and 7.9% y/y, weaker than expectations of 0.3% m/m and 7.5% y/y. The GfK German Consumer Confidence Index for January rose by 2.5 to a 5-month high of minus 25.1, stronger than expectations of minus 27.0. Eurozone Consumer Confidence Index for December rose by 1.8 to a 5-month high of minus 15.1, stronger than expectations of minus 16.3. Eurozone new car registrations for November rose by 6.7% y/y to 886,000, marking the sixteenth consecutive month of growth in registrations.

In the UK, inflation unexpectedly slowed to 3.9% in November from October’s 4.6%, reaching its lowest level since 2021. Weakening price growth is raising hopes that central banks around the world could abandon interest rate hiking campaigns and start cutting rates in 2024. Markets expect a rate cut from the BoE in May 2024.

The EIA’s weekly oil inventories report released on Wednesday was bearish for crude oil prices (WTI). EIA crude inventories unexpectedly rose by 2.91 million barrels versus expectations of a 2.3 million barrel decline. But geopolitical risks keep a bullish bias for oil. Concerns about disruptions to Middle East oil supplies will support oil prices as more shippers avoid the Red Sea and send oil bypassing Africa due to attacks by Houthi militants on commercial shipping in the Red Sea.

Asian markets were mostly rising on Wednesday. Japan’s Nikkei 225 (JP225) was up by 1.47% over yesterday, China’s FTSE China A50 (CHA50) lost 0.66%, Hong Kong’s Hang Seng (HK50) was up by 0.66%, and Australia’s ASX 200 (AU200) raised by 0.65%.

At the opening on Thursday, Asian indices began to sell off, following the US indices. Tokyo’s Nikkei 225 (JP225) fell by 1.5% after opening. Meanwhile, Japanese automaker Toyota led losses on the benchmark, falling as much as 3.9%. On Wednesday, the company said it was recalling 1 million vehicles due to a defect that could cause airbags to fail to deploy, increasing the risk of injury. It came amid news that Toyota’s small-car subsidiary Daihatsu has suspended deliveries of all its vehicles in Japan and overseas after an investigation found improper safety testing on 64 models, including some made for Toyota, Mazda, and Subaru. Officials from Japan’s transportation ministry searched Daihatsu’s offices on Thursday.

S&P 500 (US500) 4,698.35 −70.02 (−1.47%)

Dow Jones (US30) 37,082.00 −475.92 (−1.27%)

DAX (DE40) 16,733.05 −11.36 (−0.07%)

FTSE 100 (UK100) 7,715.68 +77.65 (+1.02%)

USD Index 102.43 −0.27 (−0.26%)

News feed for 2023.12.21:
  • – Hong Kong Inflation Rate (m/m) at 10:30 (GMT+2);
  • – Canada Retail Sales (m/m) at 15:30 (GMT+2);
  • – US GDP (q/q) at 15:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
20 Dec

China kept interest rates at current levels. The conditions for a rally have formed again for oil

By JustMarkets

As of Tuesday’s stock market close, the Dow Jones Index (US30) was up by 0.68%, while the S&P 500 Index (US500) added 0.59%. The NASDAQ Technology Index (US100) closed positive by 0.66%. Meanwhile, the Dow Industrials (US30) and NASDAQ (US100) indices rose to new all-time highs. Stocks rose on Tuesday as bond yields fell amid optimism of a Fed rate cut. FRB Richmond President Barkin opined that the Fed will cut interest rates if inflation progress continues. His colleague, FRB Atlanta President Bostic, also supported speculation that the Fed will cut interest rates soon. Markets rate the odds of a 25 bps rate cut at 10% at the next FOMC meeting on January 30-31 and 83% at the next meeting on March 19-20.

The US real estate news on Tuesday was mixed. On the upside, construction starts unexpectedly rose by 14.8% m/m to a 6-month high of 1.56 million in November, which was stronger than expectations for a decline to 1.36 million. Building permits in November, an indicator of future construction, conversely fell by 2.5% m/m to a 4-month low of 1.460 million, which was weaker than expectations for a decline to 1.465 million.

Boeing (BA) is up more than 1% after Deutsche Lufthansa AG ordered 40 Boeing 737-8 Max airplanes.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.56%, France’s CAC 40 (FR40) gained 0.08%, Spain’s IBEX 35 (ES35) added 0.52%, and the UK’s FTSE 100 (UK100) closed positive by 0.31%.

Unlike the US Fed, ECB policymakers are more hawkish. ECB Governing Council representative Kazaks said yesterday that the ECB needs to keep interest rates at current levels for some time to ensure that wage growth slows and prevents new risks to inflation, so it is too early to declare victory over inflation and, therefore, not the time to cut interest rates. His colleague Simkus noted that while Eurozone consumer prices were a positive surprise in November, the medium-term outlook has not changed much, so expectations of a quick interest rate cut may be too optimistic. The ECB’s hawkish stance will have a positive impact on the Euro and a negative impact on European indices.

For oil quotations, the situation is in the direction of continued growth. Firstly, the rally of US indices indicates confidence in economic prospects, which supports energy demand and crude oil prices. Secondly, geopolitical risks support crude oil prices after several major shippers stopped shipping crude oil through the Red Sea due to attacks on ships in the region. Third, OPEC+ countries are still on track to cut production, which reduces supply in the global market.

Asian markets were mostly up on Tuesday. Japan’s Nikkei 225 (JP225) gained 1.41% yesterday, China’s FTSE China A50 (CHA50) rose by 0.15%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.75%, and Australia’s ASX 200 (AU200) increased by 0.84%.

Yesterday at the BoJ press conference, BoJ Governor Ueda said that the side effects of negative rates are not serious enough to warrant an immediate policy adjustment, and there is little chance that the BoJ will announce a rate hike next month. As a reminder, the BOJ voted 9-0 to keep the policy rate at minus 0.1% and maintain the 10-year JGB yield target at around 0% and said it would patiently continue to ease monetary policy amid extremely high uncertainty in economic activity and prices.

China left benchmark lending rates unchanged during its monthly fixing on Wednesday, matching market expectations. The one-year prime rate (LPR) was kept at 3.45%, while the five-year LPR was left unchanged at 4.20%. Last week, the People’s Bank of China (PBOC) increased liquidity injections through medium-term loans while keeping the interest rate unchanged. However, market watchers still expect Beijing to continue easing monetary policy in the new year to support a faltering economic recovery as deflationary pressures push up real borrowing costs.

New Zealand Central Bank governor Adrian Orr said on Wednesday that unexpectedly weak third-quarter economic data was a challenging situation for the RBNZ. Gross Domestic Product (GDP) data released last week showed that the New Zealand economy unexpectedly contracted by 0.3% in the third quarter, while historical growth figures were also revised down significantly. Thus, there is a growing likelihood that the RBNZ will start considering options for a rate cut as early as spring 2024.

S&P 500 (US500) 4,768.37 +27.81 (+0.59%)

Dow Jones (US30) 37,557.92 +251.90 (+0.68%)

DAX (DE40) 16,744.41 +93.86 (+0.56%)

FTSE 100 (UK100) 7,638.03 +23.55 (+0.31%)

USD Index 102.14 −0.42 (−0.41%)

News feed for 2023.12.20:
  • – Japan Trade Balance (m/m) at 01:50 (GMT+2);
  • – China PBoC Loan Prime Rate at 03:15 (GMT+2);
  • – German GfK Consumer Confidence (m/m) at 09:00 (GMT+2);
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+2);
  • – UK Producer Price Index (m/m) at 09:00 (GMT+2);
  • – US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
  • – US Existing Home Sales (m/m) at 17:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
19 Dec

Bank of Japan disappointed investors with no plans for 2024. Oil rises due to Houthi attacks on tankers in the Red Sea

By JustMarkets

At Monday’s stock market close, the Dow Jones Index (US30) added 0.01%, while the S&P 500 Index (US500) was up by 0.45%. The NASDAQ Technology Index (US100) closed positive by 0.61%. Meanwhile, the S&P 500 (US500) rose to a 23-month-high, the Dow Industrials (US30) set a record high, and the NASDAQ (US100) climbed to a 2-year-high.

Goldman Sachs yesterday raised its target for the S&P 500 by the end of next year to 5,100 from a mid-November forecast of 4,700, saying the Fed’s dovish policy rate last week and lower consumer prices will allow real yields to fall and support equity valuations. Markets estimate the odds of a 25 bps rate cut at 8% at the next FOMC meeting on January 30-31 and 76% at the next meeting on March 19-20.

Fed President Cleveland Mester issued a dovish statement yesterday, indicating that financial markets are “slightly ahead” of policy normalization, targeting an interest rate cut early next year.

Canada will release its inflation report today. Core inflation is expected to fall from 3.1% to 2.9% year-over-year. The overall inflation rate will also fall from 4.2% to 4.0% y/y. But it should be noted that the Bank of Canada (BoC) is more focused on median indicators. The median CPI is now at 3.6% y/y and is forecast to fall to 3.3% y/y. At its last meeting, the Bank of Canada left the key rate unchanged at 5.0% and kept the possibility of further tightening open, stating that it remains concerned about high inflation, although it recognized the easing of price pressures and slowing economic growth. Thus, a further slowdown in inflation would increase the probability of a rate cut as early as 2024 (currently, the probability of a 25 bps rate cut in January 2024 is around 27%) and therefore negatively impact the Canadian currency.

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) was down by 0.60%, the French CAC 40 (FR40) fell by 0.37%, the Spanish IBEX 35 (ES35) lost 0.40%, and the British FTSE 100 (UK100) closed positive by 0.50%.

A spokesperson for the ECB Governing Council yesterday, Kazimir, said the following: “The policy mistake of premature easing would be more significant than the risk of staying tight for too long.” His colleague, Vasle, added: “Market expectations for interest rate cuts are premature in my view, both with regard to the start of cuts and the totality of the moves.” Thus, the ECB is trying to maintain a more hawkish tone than the US Fed, which could be positive for the euro but negative for European indices.

Crude oil and gasoline prices rose to two-week highs on Monday and closed with moderate gains. The main bullish factor for crude on Monday was geopolitical risks after BP joined Equinor and Euronav in suspending crude shipments to tankers across the Red Sea due to increased attacks on ships in the region. Attacks on oil tankers in the Middle East are forcing shippers to divert cargoes around the southern tip of Africa instead of going through the Red Sea, disrupting crude supplies. At least fourteen merchant ships have been attacked or approached in Yemen by Iran-backed Houthi militants in the Red Sea since Israel’s war with Hamas began in October.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) lost 0.64% yesterday, China’s FTSE China A50 (CHA50) added 0.11%, Hong Kong’s Hang Seng (HK50) was down by 0.97%, and Australia’s ASX 200 (AU200) was down by 0.22%.

The Nikkei 225 Index (JP225) rose by 1.2% after the Bank of Japan’s meeting on Tuesday. The Bank of Japan (BoJ) kept its ultra-soft monetary policy unchanged and maintained its forward guidance as part of its expected decision. The decision matched market expectations, but some investors were waiting for signs that the dovish Central Bank might signal a possible move away from negative interest rates. However, the BoJ did not provide information on its plans to tighten monetary policy in 2024. Market attention will now shift to Governor Kazuo Ueda’s press conference later in the day.

The minutes of the December meeting of the Reserve Bank of Australia (RBA) showed that while the Bank considered another interest rate hike, it decided against the move pending new data on the economy.

S&P 500 (US500) 4,740.56 +21.37 (+0.45%)

Dow Jones (US30) 37,306.02 +0.86 (+0.01%)

DAX (DE40)  16,650.55 −100.89 (−0.60%)

FTSE 100 (UK100) 7,614.48 +38.12 (+0.50%)

USD Index  102.51 −0.04 (−0.04%)

News feed for 2023.12.19:
  • – Australia RBA Meeting Minutes (m/m) at 02:30 (GMT+2);
  • – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
  • – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
  • – Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
  • – US Building Permits (m/m) at 15:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
19 Dec

Top 4 global market risks for 2024

By George Prior 

Investors are facing a myriad of uncertainties that pose substantial risks to the stability and performance of global markets – but as ever where there are risks there are also significant opportunities.
Here, Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations shares what he believes are the four most significant risks confronting global markets in 2024 and examines their potential impact on investors.
1. Middle East crisis escalation
“One of the most pressing risks facing global markets is the potential escalation of the Middle East crisis. The October 7 attack by Hamas on Israel has heightened concerns about the possibility of the conflict spreading to involve other nations and groups in the region.
“Any escalation could disrupt global oil supplies, leading to increased market volatility. Investors are closely monitoring the situation, as heightened tensions may have profound implications for energy prices and overall market stability.
“Industries tied to energy, transportation, and commodities could experience significant fluctuations. Diversification and risk management strategies will be crucial for investors to navigate potential geopolitical shocks emanating from the Middle East.”
2. Resurgent inflation
“While inflation witnessed a decline from its 2022 peaks in most major economies, including the US, UK and eurozone, the specter of resurgent inflation remains a critical risk in 2024.
“Energy prices, a major driver of inflation, are known for their volatility, and any sudden surge could lead to an increase in the headline inflation rate.
“Central banks, in response, may be compelled to raise interest rates to curb inflationary pressures, defying market expectations of rate cuts.
“For investors, a scenario of rising inflation and higher interest rates poses challenges, particularly in fixed-income investments and interest-sensitive sectors.
“Corporate earnings could be impacted, and the heightened risk of recession may lead to a reassessment of investment portfolios. Investors must remain vigilant and adjust their strategies in response to changing inflation dynamics to preserve capital and optimize returns.”
3. Elections across the globe
“2024 is marked by decisive elections in over 40 countries, representing more than 50% of the world’s GDP.
“Elections introduce an element of political uncertainty, and outcomes can shape economic policies, trade relations, and market sentiments.
“Key players, including the UK, the US, China, India, Taiwan, South Korea, Ireland, South Africa and others, are set to undergo electoral processes that could have far-reaching consequences for global markets.
“Investors are likely to face increased volatility in the lead-up to and aftermath of elections. Shifts in political landscapes typically result in policy changes that impact various sectors, prompting investors to reassess their portfolios.”
4. China’s growth crisis
“Contrary to earlier forecasts, China’s post-COVID-19 reopening has not led to the anticipated growth in 2023.
“The real estate crisis, representing a significant portion of China’s GDP, has been a key impediment to economic recovery.
“As we enter 2024, the prospect of China’s economic stagnation looms large, carrying implications for trade partners and global markets.
“Investors with exposure to China or industries heavily reliant on Chinese demand may face challenges if the economic downturn persists. Supply chain disruptions, reduced consumer spending, and market volatility could ensue, impacting the performance of multinational corporations.”
The deVere CEO concludes: “The interplay of geopolitical tensions, inflationary pressures, electoral outcomes, and China’s economic woes underscores the need for a proactive and diversified approach to investment management to protect and grow personal wealth.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions
18 Dec

Investors are expecting a Santa Claus rally. The Eurozone economy is close to a recession

By JustMarkets

At Friday’s stock market close, the Dow Jones Index (US30) was up by 0.15% (+2.90% for the week), while the S&P 500 Index (US500) closed at its opening price (+2.74% for the week). The NASDAQ Technology Index (US100) closed positive by 0.35% (+3.30% for the week). The Dow Jones Industrials Index (US30) set a new record, and the Nasdaq 100 (US100) climbed to a 2-year high.

Hawkish comments from the Fed on Friday lent support to the dollar. New York Fed President Williams said the question now is whether the bank has sufficiently constrained the economy. That said, talk of a rate cut in March is now premature. Also, Atlanta Fed President Bostic said that policymakers still need a few more months to see enough data to gain confidence that inflation will continue to decline, and he expects the Fed to start cutting interest rates in the third quarter of 2024 if inflation declines as expected.

The US economic reports on Friday dampened hopes that the Fed could provide a soft landing for the economy. Empire’s index of overall business conditions in the US manufacturing sector for December fell by 23.6 to a 4-month low of 14.5, weaker than expected. US manufacturing output for November rose by 0.3% m/m, weaker than expectations of 0.5% m/m. The S&P US Manufacturing PMI for December unexpectedly declined by 1.2 to 48.2, weaker than expected to 49.5 and the weakest reading in 4 months.

The US equity funds stepped up their buying of stocks. Bank of America (BoA) reported that according to EPFR Global, US equity funds received $25.9 billion in the week ended December 13, marking the ninth week of inflows and the longest streak in two years. This indicates that investors continue to invest in the stock market in anticipation of the holiday rally (Santa Claus Rally). Market volatility on Friday was higher than usual due to the expiration of monthly and quarterly options and futures contracts, which is known as the “triple witching.” In addition, many indices rebalanced on Friday. According to Tier1Alpha, about $3.1 trillion in contingent open interest is scheduled to expire or roll over into the new year.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) decreased by 0.01% (-0.05% for the week), France’s CAC 40 (FR 40) added 0.28% (+0.83% for the week), Spain’s IBEX 35 (ES35) lost 0.75% (-1.18% for the week), and the UK’s FTSE 100 (UK100) closed negative by 0.95% (+0.29% for the week).

The S&P Eurozone Manufacturing PMI for the decade was unchanged at 44.2, weaker than expectations of a rise to 44.6. The S&P Manufacturing PMI for December unexpectedly declined, falling by 0.6 to 47.0, weaker than expectations of a rise to 48.0. The Eurozone economy continues to struggle and could enter a technical recession in the coming weeks. According to the HCOB, the Eurozone economy is not showing any clear signs of recovery. On the contrary, it has been contracting for six consecutive months. The probability that the Eurozone has been in recession since the third quarter remains very high. If the Eurozone falls into recession and inflation continues to fall, the ECB may have to change course on interest rates and start preparing the market for a series of cuts next year. Swaps tied to ECB meeting dates are predicting a 25 bps probability of an 8% rate cut for the ECB’s January 25 meeting and 57% for the March 7 meeting.

UK inflation data will be released tomorrow. If inflation comes in below forecast, the Bank of England (BoE) will be pressured to consider an earlier rate cut, and this will put pressure on the British Pound in the coming weeks.

Silver prices came under pressure on Friday on concerns over demand for industrial metals after US manufacturing output data for November, S&P’s US manufacturing PMI for December, and Jibun Bank’s Japanese manufacturing PMI for December were weaker than expected.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) gained 0.94% for the week, China’s FTSE China A50 (CHA50) declined 2.01% over five trading days, Hong Kong’s Hang Seng (HK50) jumped by 3.98% for the week, and Australia’s ASX 200 (AU200) added 3.44% for the week.

The Bank of Japan’s (BoJ) monetary policy meeting will take place as early as tomorrow. The Bank of Japan has held the benchmark rate at 0.1% for a decade now, hoping to stimulate investment and borrowing to promote sustainable growth. One goal is to bring inflation to the 2% target. But while inflation is rising, wages have not kept pace, and central bank governor Kazuo Ueda remains cautious about taking major steps at a time of deep uncertainty about the global economic outlook.

S&P 500 (US500) 4,719.19 −0.36 (−0.01%))

Dow Jones (US30) 37,305.16 +56.81 (+0.15%)

DAX (DE40)  16,751.44 −0.79 (−0.01%)

FTSE 100 (UK100) 7,576.36 −72.62 (−0.95%)

USD Index  102.59 +0.64 (+0.63%)

News feed for 2023.12.18:
  • – Germany Ifo Business Climate (m/m) at 11:00 (GMT+2);
  • – New Zealand Trade Balance (q/q) at 23:45 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
12 Dec

US CPI: markets are overly confident of Fed pivot

By George Prior 

Markets appear to be overly confident of a policy pivot by the Federal Reserve, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from Nigel Green of deVere Group comes as the inflation in the US is published by the US Bureau of Labor Statistics.

He says: “Inflation remains sticky. The Fed will not want to take the risk of pivoting on policy too soon by cutting rates.

“We believe that the data is still not strong enough for the central bank of the world’s largest economy to commit to reversing its most aggressive tightening campaign in decades – yet the markets seem read to confidently and heavily price-in rate cuts.

“Therefore, we could see a market rally as the year ends, but we think this could be overly optimistic.

“It can be expected that the Fed will leave the US interest rate unchanged at the 5.25%-5.5% range tomorrow (Wednesday) following the last monetary policy meeting of the year.

“But, so far, there’s no pivot in sight.”

The deVere CEO continues: “Inflation is still turning out to be stickier than expected. We expect that markets are pricing-in cuts too quickly. It will be next year before we really know.

“Certainly, some stock surges – such as those which are AI-orientated – are reasonable. Yet many others are getting ahead of themselves.”

The deVere CEO goes on to add that investors should diversify across asset classes to spread risk and capture opportunities arising from different market conditions; and to consider alternative investments that may provide returns less correlated with traditional asset classes.

He concludes: “Will the Fed really pivot with inflation stubborn? We think not.

“Yet markets seem to be getting carried away that the Fed and its peers of major central banks are ready to pivot.

“Significant opportunities remain, but investors should avoid complacency.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions
← Previous Page
Next Page →