Economics & Fundamentals :: Page 91

Archive for Economics & Fundamentals – Page 91

Inflationary pressures are rising sharply in Australia. Corporate earnings keep indices from falling

As of Tuesday’s stock market close, the Dow Jones Index (US30) was up by 0.54%, while the S&P 500 (US500) increased by 0.73%. The NASDAQ Technology Index (US100) closed positive by 0.93% yesterday. Stocks rose moderately on Tuesday on the back of better-than-expected corporate earnings results. A negative factor for stocks was Tuesday’s stronger-than-expected US manufacturing activity data, which was hawkish for Fed policy. The S&P US manufacturing PMI for October unexpectedly rose to a 6-month high of 50.0, which was stronger than expectations of a decline to 49.5.

General Electric (GE) closed higher by more than 6% after reporting third-quarter adjusted EPS of 82 cents, well above the consensus of 56 cents, and raising its 2023 adjusted EPS guidance. Verizon Communications (VZ) shares are up more than 9%, leading gains in the S&P 500 (US500) and Dow Jones Industrials (US30), after the company reported third-quarter adjusted earnings per share of $1.22, which was better than the consensus estimate of $1.18. Coca-Cola Co (KO) closed higher by more than 3% after reporting 11% organic revenue growth in the third quarter, well above the consensus of 6.91%. Shares of Google Alphabet (GOOG) Inc. are down more than 5% after weaker-than-expected revenue growth from its cloud computing operations. Microsoft (MSFT) reported fiscal first-quarter results on Tuesday that beat Wall Street forecasts, as the tech giant’s investments in artificial intelligence fueled growth in its Azure cloud business. The stock price rose more than 4% after the report was published.

In the Middle East, French President Macron met with Prime Minister Netanyahu in Israel on Tuesday before calling for an international coalition to fight Hamas and warning other Iranian-backed militant groups against opening new fronts in the war between Israel and Hamas.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.54%, France’s CAC 40 (FR40) gained 0.63% on Tuesday, Spain’s IBEX 35 (ES35) fell by 0.28%, and the UK’s FTSE 100 (UK100) closed positive 0.20%.

The Eurozone manufacturing PMI for October unexpectedly fell by 0.4 to 43.0, weaker than expectations of a rise to 43.7. The German GfK consumer confidence index for November fell by 1.4 to a 7-month low of 28.1, weaker than expectations of 27.0. In her speech yesterday, ECB President Lagarde told the Presidents of the European Commission, European Council, and Eurogroup that stagnation and downside risks await the Eurozone economy in the next few quarters, although inflation risks have become more balanced.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) increased by 0.20%, China’s FTSE China A50 (CHA50) added 0.03%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.05%, and Australia’s ASX 200 (AU200) ended Tuesday positive 0.19%. Chinese stocks continued their recovery rally on Wednesday after the government announced plans for a massive bond issue. Beijing announced plans to issue 1 trillion yuan ($1=7.3088 yuan) worth of government bonds to support the economy. Nevertheless, Chinese stocks remain near 2023 lows, having suffered significant losses on fears of slowing economic growth and a collapse in the real estate market. Despite Wednesday’s optimism, the factors that drove domestic markets lower are still in place.

Japan’s business activity index for the manufacturing sector for October was unchanged at 48.5. The services PMI for October fell by 2.7 to 51.1, the lowest reading in 10 months.

In Australia, the consumer price index unexpectedly rose. In annual terms, the inflation rate rose from 5.2% to 5.6%. In quarterly terms, the index rose from 0.8% to 1.2%. Such data gives grounds for further interest rate increase by the Reserve Bank of Australia next week.

S&P 500 (F)(US500) 4,247.68 +30.64 (+0.73%)

Dow Jones (US30) 33,141.38 +204.97 (+0.62%)

DAX (DE40) 14,879.94 +79.22 (+0.54%)

FTSE 100 (UK100) 7,389.70 +14.87 +(0.20%)

USD Index 106.26 +0.73 (+0.69%)

News feed for 2023.10.25:

– Australia Consumer Price Index (m/m) at 03:30 (GMT+3);
– German Ifo Business Climate (m/m) at 11:00 (GMT+3);
– US Building Permits (m/m) at 15:00 (GMT+3);
– US New Home Sales (m/m) at 17:00 (GMT+3);
– Canada BoC Monetary Policy Report at 17:00 (GMT+3);
– Canada BoC Interest Rate Decision at 17:00 (GMT+3);
– US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
– Canada BoC Press Conference at 18:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 20:00 (GMT+3);
– US Fed Chair Powell Speaks at 23:35 (GMT+3).

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

24 Oct

The situation in the Middle East has a negative impact on market sentiment

By JustMarkets

American stock indices traded yesterday without any unified dynamics. At Monday’s close, the Dow Jones Index (US30) decreased by 0.58%, while the S&P 500 Index (US500) was down by 0.17%. The NASDAQ Technology Index (US100) closed positive by 0.27%. The decline in T bond yields on Monday was bearish for the US dollar and bullish for stock indices. The dollar on Monday initially found support in the jump in the 10-year bond yield to a new 16-year high, but then bond yields reversed and headed lower. From a fundamental perspective, the tightening of financial conditions in the US is certainly reducing the need for further monetary tightening, and many US Fed officials have moved to a less hawkish tone. Markets are currently pricing in just a 2% chance that the FOMC will raise the lending rate by 25 bps at its next meeting, which ends on November 1, and a 23% chance that the rate will be raised by 25 bps at its December 13 meeting.

The fear that the war between Israel and Hamas could escalate into a regional conflict is weighing on market sentiment. Western countries stepped up efforts to prevent the war between Israel and Hamas from escalating, and EU leaders supported the UN’s call for a “humanitarian pause” in the war. President Biden held talks with the presidents of Canada, France, Germany, and Italy to strengthen coordination among the allies. At the same time, late yesterday, there was news of explosions at three US military bases in the Middle East. This news interrupted Biden’s live-streamed remarks. Intelligence reports indicate that Iranian-backed militias are poised to step up attacks on US troops in the Middle East. Israel has said it supports diplomatic efforts to get Hamas to release hostages from Gaza, which could delay a possible ground invasion, but is not going to wait long to launch a ground offensive. Iran and its proxy forces in Lebanon, Iraq, and Yemen have warned they could retaliate against Israel if Israeli troops enter Gaza.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) rose by 0.02%, France’s CAC 40 (FR40) added 0.50% on Monday, Spain’s IBEX 35 (ES35) decreased by 0.37%, and the UK’s FTSE 100 (UK100) closed negative by 0.37%.

British consumers are curbing their spending ahead of the festive season, and the latest survey from Gfk suggests that the weather is not the only reason for this. Retail sales fell by 0.9% in September, well above expectations of a 0.3% decline. The Gfk Consumer Confidence Index fell back to 30. The outlook for the British economy remains bleak as growth is sluggish, and recent economic indicators point to a slowdown in manufacturing activity, while UK inflation remains stubbornly high.

The potential for an escalation of the conflict between Israel and Hamas and poor corporate earnings have left investors looking for safe havens, of which there are few left. The US dollar is not in the best position at the moment, as the US Federal Reserve does not plan to continue its tightening policy in the near future. According to economists, apart from the US dollar, only gold and the Swiss franc remain as safe havens. The Swiss franc is a longtime safe haven asset that recently hit its highest level against the euro since 2015 and has held up against the losses of its traditional peers.

Last Wednesday, the US said it would ease sanctions on Venezuela’s oil exports for six months in exchange for measures to ensure the country holds fair presidential elections next year. The easing of sanctions will bring additional oil supplies to the global market, which some analysts estimate will be about 200,000 barrels per day. However, oil traders believe that tension in the oil market will still remain due to the extension of the OPEC+ agreement on production cuts.

Asian markets were mostly declining yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.83%, China’s FTSE China A50 (CHA50) was down by 0.62%, Hong Kong’s Hang Seng (HK50) lost 0.72% on the day, and Australia’s ASX 200 (AU200) was negative by 0.82% on Monday. On Tuesday, most Asian stocks extended losses after weak business activity data in Japan and Australia. At the same time, Chinese markets rebounded from pre-pandemic lows thanks to a government fund starting to buy some stocks.

Japanese government bond (JGB) yields rose to new multi-year highs on Monday as investors assess the likelihood that the Bank of Japan will continue to adjust its yield curve control (YCC) policy next week. One possibility being discussed is an increase in the 1% ceiling for the 10-year yield.

S&P 500 (F)(US500) 4,217.04 −7.12 (−0.17%)

Dow Jones (US30) 32,936.41 −190.87 (−0.58%)

DAX (DE40) 14,800.72 +2.25 (+0.015%)

FTSE 100 (UK100) 7,374.83 −27.31 (−0.37%)

USD Index 105.62 −0.54 (−0.51%)

News feed for 2023.10.24:

– Australia Manufacturing PMI (m/m) at 01:00 (GMT+3);
– Australia Services PMI (m/m) at 01:00 (GMT+3);
– Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
– Japan Services PMI (m/m) at 03:30 (GMT+3);
– UK Unemployment Rate (m/m) at 09:00 (GMT+3);
– German Manufacturing PMI (m/m) at 10:30 (GMT+3);
– German Services PMI (m/m) at 10:30 (GMT+3);
– Australia RBA Gov Bullock Speaks at 11:00 (GMT+3);
– Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
– Eurozone Services PMI (m/m) at 11:00 (GMT+3);
– UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
– UK Services PMI (m/m) at 11:30 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 15:30 (GMT+3);
– US Manufacturing PMI (m/m) at 16:45 (GMT+3);
– US Services PMI (m/m) at 16:45 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

24 Oct

Warning: The anti-ESG movement could hit your wealth

By George Prior

The backlash against ESG – the use of environmental, social, and governance factors in investing – could hit your wealth, warns the CEO and founder 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 IEA’s World Energy Outlook for 2023 published on Tuesday reveals that demand for oil, coal and natural gas is set to peak by 2030.

It also follows findings from a separate report published in the journal Nature Communications that damage from the global climate crisis has amounted to $391 million per day over the past two decades.

The deVere CEO says: “The International Energy Agency’s World Energy Outlook shows that there’s a major evolution taking place in how the planet is powered. From 2030, oil, coal and natural gas will play a significantly less dominant role.

“The unprecedented rise of clean energy technologies, including wind, solar, heat pumps and electric cars, will play a vital role.

“Yet despite this evidence that cleaner energy is the future – and, therefore ,should be uncontroversially appealing to investors – the anti-ESG movement is real and is growing.”

In a recent survey by The Conference Board of more than 100 large US companies, almost half said they have already “experienced ESG backlash”, and 61% anticipate it to continue or intensify over the next two years.

“Much of this has been focused on the financial industry, and large asset managers in particular, which means that your investments could be being repositioned away from ESG. This, we believe, could have a longer-term, detrimental impact on your wealth.”

Nigel Green continues: “Anti-ESG proponents, including some financial advisors, often argue that ESG investing is just a trend that will eventually fizzle out. However, the data suggests otherwise.

“The growing emphasis on ESG factors is not just a fleeting fashion, but rather a reflection of changing market dynamics and consumer preferences. Ignoring these shifts would put a company’s stock performance at risk – and therefore, potentially, your investments.”

“Anti-ESG proponents may encourage you to miss out on profitable investment opportunities. Numerous studies have shown that companies with strong ESG performance often outperform their peers. Ignoring this data may lead to missed opportunities for portfolio growth,” he notes.

One of the primary drivers of ESG investing is risk mitigation. “Companies that perform well in ESG criteria tend to be better prepared to navigate a range of challenges, from environmental disasters to social controversies. Again, if you overlook these considerations, you may find your investment portfolio vulnerable to unforeseen risks that can lead to financial losses.”

An undeniable fact is that governments and regulatory bodies are increasingly recognising the importance of ESG factors. Ignoring ESG criteria can expose companies – and therefore their investors – to regulatory risks, including fines and legal liabilities associated with non-compliance with evolving ESG regulations.

Nigel Green concludes: “The anti-ESG movement – which is alive and well and becoming increasingly powerful – fails to see the bigger, longer-term picture.

“Our concern is that people will be coerced into this narrow, backward-looking view and miss out on major opportunities that could negatively affect their prospects for growing and safeguarding their 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 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions

17 Oct

Lego’s ESG dilemma: Why an abandoned plan to use recycled plastic bottles is a wake-up call for supply chain sustainability

By Tinglong Dai, Johns Hopkins University; Christopher S. Tang, University of California, Los Angeles, and Hau L. Lee, Stanford University

Lego, the world’s largest toy manufacturer, has built a reputation not only for the durability of its bricks, designed to last for decades, but also for its substantial investment in sustainability. The company has pledged US$1.4 billion to reduce carbon emissions by 2025, despite netting annual profits of just over $2 billion in 2022.

This commitment isn’t just for show. Lego sees its core customers as children and their parents, and sustainability is fundamentally about ensuring that future generations inherit a planet as hospitable as the one we enjoy today.

So it was surprising when the Financial Times reported on Sept. 25, 2023, that Lego had pulled out of its widely publicized “Bottles to Bricks” initiative.

This ambitious project aimed to replace traditional Lego plastic with a new material made from recycled plastic bottles. However, when Lego assessed the project’s environmental impact throughout its supply chain, it found that producing bricks with the recycled plastic would require extra materials and energy to make them durable enough. Because this conversion process would result in higher carbon emissions, the company decided to stick with its current fossil fuel-based materials while continuing to search for more sustainable alternatives.

As experts in global supply chains and sustainability, we believe Lego’s pivot is the beginning of a larger trend toward developing sustainable solutions for entire supply chains in a circular economy. New regulations in the European Union – and expected in California – are about to speed things up.

Examining all the emissions, cradle to grave

Business leaders are increasingly integrating environmental, social and governance factors, commonly known as ESG, into their operational and strategic frameworks. But the pursuit of sustainability requires attention to the entire life cycle of a product, from its materials and manufacturing processes to its use and ultimate disposal.

The results can lead to counterintuitive outcomes, as Lego discovered.

Understanding a company’s entire carbon footprint requires looking at three types of emissions: Scope 1 emissions are generated directly by a company’s internal operations. Scope 2 emissions are caused by generating the electricity, steam, heat or cooling a company consumes. And scope 3 emissions are generated by a company’s supply chain, from upstream suppliers to downstream distributors and end customers.

Lists of examples of sope 1, 2, 3 emissions sources with an illustration of a factory in the center — What scope 1, 2 and 3 emissions involve.
Chester Hawkins/Center for American Progress

Currently, fewer than 30% of companies report meaningful scope 3 emissions, in part because these emissions are difficult to track. Yet, companies’ scope 3 emissions are on average 11.4 times greater than their scope 1 emissions, data from corporate disclosures reported to the nonprofit CDP show.

Lego is a case study of this lopsided distribution and the importance of tracking scope 3 emissions. A staggering 98% of Lego’s carbon emissions are categorized as scope 3.

From 2020 to 2021, the company’s total emissions increased by 30%, amid surging demand for Lego sets during the COVID-19 lockdowns – even though the company’s scope 2 emissions related to purchased energy such as electricity decreased by 40%. The increase was almost entirely in its scope 3 emissions.

Lego’s tour of how its toy bricks are made doesn’t address the supply chain, where most of Lego’s greenhouse gas emissions originate.

As more companies follow in Lego’s footsteps and begin reporting scope 3 emissions, they will likely find themselves in the same position, realizing that efforts to reduce carbon emissions often boil down to supply chain and consumer-use emissions. And the results may force them to make some tough choices.

Policy and disclosure: The next frontier

New regulations in the European Union and pending in California are designed to increase corporate emissions transparency by including supply chain emissions.

The EU in June 2023 adopted the first set of European Sustainability Reporting Standards, which will require publicly traded companies in the EU to disclose their scope 3 emissions, starting in their reports for fiscal year 2024.

California’s legislature passed similar legislation requiring companies with revenues of more than $1 billion to disclose their scope 3 emissions. California’s governor has until Oct. 14, 2023, to consider the bill and is expected to sign it.

At the federal level, the U.S. Securities and Exchange Commission released a proposal in March 2022 that, if finalized, would require all public companies to report climate-related risk and emissions data, including scope 3 emissions. After receiving significant pushback, the SEC began reconsidering the scope 3 reporting rule. But SEC Chairman Gary Gensler suggested during a congressional hearing in late September 2023 that California’s move could influence federal regulators’ decision.

SEC Chairman Gary Gensler explains the importance of climate-related risk disclosures.

This increased focus on disclosure of scope 3 emissions will undoubtedly increase pressure on companies.

Because scope 3 emissions are significant, yet often not measured or reported, consumers are rightly concerned that companies that claim to have low emissions may be greenwashing without taking action to reduce emissions in their supply chains to combat climate change.

At the same time, we suspect that as more investors support sustainable investing, they may prefer to invest in companies that are transparent in disclosing all areas of emissions. Ultimately, we believe consumers, investors and governments will demand more than lip service from companies. Instead, they’ll expect companies to take actionable steps to reduce the most significant part of a company’s carbon footprint – scope 3 emissions.

A journey, not a destination

The Lego example serves as a cautionary tale in the complex ESG landscape for which most companies are not well prepared. As more companies come under scrutiny for their entire carbon footprint, we may see more instances where well-intentioned sustainability efforts run into uncomfortable truths.

This calls for a nuanced understanding of sustainability, not as a checklist of good deeds, but as a complex, ongoing process that requires vigilance, transparency and, above all, a commitment to the benefit of future generations.

About the Author:

Tinglong Dai, Professor of Operations Management & Business Analytics, Carey Business School, Johns Hopkins University; Christopher S. Tang, Professor of Supply Chain Management, University of California, Los Angeles, and Hau L. Lee, Professor of Operations, Information & Technology, Stanford University

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

Economics & Fundamentals Opinions

13 Oct

The situation in the Middle East is heating up. Inflation data in China disappointed investors

By JustMarkets

At Wednesday’s stock market close, the Dow Jones Index (US30) decreased by 0.51%, while the S&P 500 Index (US500) lost 0.62%. The NASDAQ Technology Index (US100) closed yesterday negative by 0.63%. Stocks posted moderate losses on Thursday amid a stronger-than-expected US CPI report for September. In addition, weekly US initial jobless claims remained unchanged, which was hawkish for Fed policy. Thursday’s hawkish reports keep the likelihood of another Fed rate hike this year alive. Stocks continued to lose ground Thursday afternoon as T-bond yields rose further amid weak demand at the $20 billion auction of 30-year Treasury bonds.

Concerns that the conflict between Israel and Hamas will spread to the Middle East was another negative factor for stocks amid reports that Israel launched airstrikes on major airports in Damascus and Aleppo in Syria. In turn, Iran has begun moving military equipment to its western border. Whether this equipment will travel further through Iraq toward Israel is still unknown, but the geopolitical risks of another major war have increased significantly in recent days.

The US Consumer Price Index for September came in at 3.7% y/y, unchanged from August and stronger than the 3.6% y/y decline. The core CPI excluding food and energy for September declined to 4.1% y/y from 4.3% y/y in August, which was in line with expectations. US weekly initial jobless claims were unchanged at 209,000, indicating a slight strengthening of the labor market compared to expectations of a rise to 210,000.

FRB Boston President Collins commented that she favors a pause in Fed rate hikes.

Equity markets in Europe traded lower yesterday. Germany’s DAX (DE40) decreased by 0.23%, France’s CAC 40 (FR40) lost 0.37% on Thursday, Spain’s IBEX 35 (ES35) was 0.26% cheaper, and the UK’s FTSE 100 (UK100) closed positive by 0.32%.

ECB Governing Council spokesperson Centeno said yesterday, “At the current level of interest rates, we will make a significant contribution to the 2% inflation target. We will achieve this target by continuing with this monetary policy stance, holding it for some time until we are fully confident that inflation is falling.” Another representative of the ECB Governing Council, Wunsch, said, “If we continue to see inflation figures in line with the forecast, we will not need to raise interest rates again.” Minutes from the ECB’s September 13-14 meeting showed that the risks of too much tightening and too little tightening have become more balanced and the ECB will hold off on raising interest rates.

Crude oil prices gave up early gains on Thursday amid a stronger dollar and after the EIA’s weekly crude oil inventories report showed an unexpected rise in crude stockpiles and US crude production hit a record high. Oil initially opened higher on Thursday on concerns over the escalating conflict between Israel and Hamas. Oil was also supported by comments from Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, who said oil producers will continue to work together and be proactive to keep the oil market balanced.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 1.75%, China’s FTSE China A50 (CHA50) gained 0.85%, Hong Kong’s Hang Seng (HK50) rose by 1.93% and Australia’s ASX 200 (AU200) ended the day positive by 0.04%.

In China, the Consumer Price Index (CPI) was unchanged in September, missing forecasts for a 0.2% y/y rise. In August, the CPI rose by 0.1% y/y. On an annualized basis, core inflation, excluding food and fuel prices, was up by 0.8%, the same as in August. The Producer Price Index (PPI) fell to 2.5% y/y, marking the 12th consecutive negative month, although the rate of decline slowed from August. Economists had forecast a drop to 2.4% y/y. CPI inflation at zero indicates that deflationary pressures in China remain a real threat to the economy. The recovery in domestic demand will not be strong without significant stimulus from the government.

S&P 500 (F)(US500) 4,349.61 −27.34 (−0.62%)

Dow Jones (US30) 33,631.14 −173.73 (−0.51%)

DAX (DE40) 15,425.03 −34.98 (−0.23%)

FTSE 100 (UK100) 7,644.78 +24.75 (+0.32%)

USD Index 106.58 +0.76 (+0.72%)

News feed for 2023.10.13:

– Singapore GDP (q/q) at 03:00 (GMT+3);
– China Consumer Price Index (m/m) at 04:30 (GMT+3);
– China Producer Price Index (m/m) at 04:30 (GMT+3);
– China Trade Balance (m/m) at 06:00 (GMT+3);
– Sweden Consumer Price Index (m/m) at 09:00 (GMT+3);
– Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
– UK BoE Gov Bailey Speaks at 11:00 (GMT+3);
– Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
– US FOMC Member Harker Speaks at 16:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks (m/m) at 16:00 (GMT+3);
– US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

12 Oct

US CPI comes in above expectations – what should you do with investments?

By George Prior

US Consumer Price Index (CPI) data published Thursday supports the case that the Federal Reserve will likely implement one more interest rate hike, says the CEO of one of the world’s leading financial advisory, asset management and fintech organizations.

The prediction from Nigel Green of deVere Group comes as September CPI inflation rises 3.7%, above expectations of 3.6%. US CPI is now up for four consecutive months. Core CPI inflation fell to 4.1%, in line with expectations.

He comments: “Taking into account the latest US CPI data, and the minutes from the most recent Federal Reserve meeting, which were published on Monday, we expect there to be one last 25 basis point hike at its two-day meeting beginning October 31.

“The Fed will be conscious of growing uncertainty of the trajectory of the world’s largest economy and the risks of overtightening – especially in times of growing geopolitical uncertainty; while at the same time, want to avoid complacency in the continuing battle against inflation.”

The deVere CEO continues: “As a result, we expect that interest rates will still continue to remain higher for longer.”

Based on the assertion that interest rate hikes are likely to be nearing an end, and high-interest rates are expected to continue, investors may want to consider rebalancing their portfolios.

“Financial institutions, such as banks and insurance companies, tend to benefit from higher interest rates as they can charge more for loans and earn higher yields on their investments. A portfolio allocation to financial services stocks or exchange-traded funds (ETFs) may be considered,” says Nigel Green.

“The energy sector also benefits from a robust economy and high interest rates. It’s typically positively correlated with economic growth and tends to perform well in such environments.

“Certain segments of the consumer discretionary sector, such as automotive, housing, and luxury goods, can perform well when interest rates are high. Consumer spending can remain strong, particularly if the economy is healthy, and these industries can benefit.

“Industrial companies often benefit from increased infrastructure spending and a robust economy. With expectations of continued high interest rates, these companies are likely to see growth opportunities in construction, manufacturing, and transportation.”

He goes on to add: “While technology stocks can be sensitive to interest rate changes, some tech companies continue to thrive in a high-interest rate environment, especially those with strong fundamentals and growth potential.

“Meanwhile, the healthcare sector is typically less sensitive to interest rate changes, making it a relatively stable option for a portfolio, as will essential goods, such as food, beverages, and household products.”

As ever, an investor’s best tool for mitigating risk and seizing opportunities is to remain properly diversified and by working with an independent financial advisor.

The FOMC since March 2022 has raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years.

Nigel Green concludes: “We don’t think we’re at the end of the hiking cycle just yet, even though we’re close, and rates will continue to be high, potentially impacting your investment portfolio.”

About:

Economics & Fundamentals Financial News

12 Oct

Claudia Goldin’s Nobel Prize win is a victory for women in economics – and the field as a whole

By Veronika Dolar, SUNY Old Westbury

Economic history has long been chronicled through a male lens, emphasizing the contributions of men and their viewpoints. For proof, just look to the Nobel Memorial Prize in Economic Sciences. It’s been awarded to 90 men since 1969 – and just three women.

The third woman to win the prize, distinguished Harvard labor economist Claudia Goldin, was honored on Oct. 9, 2023, for her decades of work studying the gender pay gap. It wasn’t a victory just for her but for women in the field.

As an economist, I take this issue personally. My field has a huge gender gap. Only 24% of tenure-track faculty in economics are women. In contrast, women make up 43% of tenure-track faculty across academia as a whole.

More than just stocks and bonds

Part of the problem is that economics is often stereotypically associated with finance, money and banking. This narrow perception might not appeal to everyone. Women in particular tend to be drawn to areas that have direct bearing on social challenges.

But economics is about much more than just the stock market. In fact, vast areas of the discipline deal with social issues – health, development, education and, yes, gender inequality.

For instance, labor economists study issues like family leave policies and the gender pay gap – areas that directly affect women’s lives.

It shouldn’t come as a surprise, then, that women have had a greater presence in labor economics than in other subfields.

Women have also historically been drawn to health economics, development economics and education economics. But those fields don’t get as much attention, and the public sometimes doesn’t even recognize them as being part of economics at all.

They may even get the short shrift in Econ 101. A study of introductory economics textbooks found that 75% of people named in them were men. Women weren’t even equally represented in hypothetical examples.

Where are the women?

Not only are women underrepresented as economists, economics as a field has historically ignored the role women play in the economy. Even as the study of family economics gained traction in the 1970s, the pivotal roles of women were often sidelined.

Traditional models often oversimplified households’ decision-making processes and overlooked women’s contributions. This led economists to undervalue the unpaid labor women provided in households and perpetuate stereotypical gender roles in their analyses.

Goldin has challenged these traditional male-centric narratives. Through her groundbreaking research – particularly on wage inequalities and the “motherhood penalty” – Goldin has turned the spotlight on women’s economic roles and challenges.

Her findings reveal the complexities of wage disparities, emphasizing issues like the challenges women face after childbirth. For instance, career interruptions such as maternity leave or reduced work hours to care for children and other relatives can reduce women’s earnings and job prospects in the long term.

It’s vital to note that Goldin’s research doesn’t attribute the gender pay gap to employer discrimination. Instead, her insights advocate for the establishment of robust support systems.

Strengthening child care facilities, improving parental leave policies, offering workplace flexibility and otherwise bolstering policies that support families with kids can play a pivotal role in addressing the wage gap, her findings suggest. In the absence of such supports, women are bound to keep earning less than men after they become parents.

A win for one, a victory for many

Goldin’s Nobel recognition isn’t merely an honor for her individual achievements. It serves as a beacon for women in economics and academia as a whole.

First, her win challenges the historical gender imbalance in such prominent awards, signaling a long-overdue recognition for women’s contributions to economics. It provides hope for young female economists that their work can also achieve such renown.

Beyond this, her Nobel nod underscores a crucial point: Economics is a rich and complex discipline that goes beyond traditional monetary and financial issues. It’s about parenthood. It’s about child care. It’s about people’s struggles. It’s about social change.

In essence, Goldin’s win shows the world just how expansive, inclusive, diverse and interconnected the field really is. Economics isn’t just the dismal science. It’s a human science.

About the Author:

Veronika Dolar, Associate Professor of Economics, SUNY Old Westbury

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Economics & Fundamentals Opinions

12 Oct

Oil prices are declining amid growing geopolitical risk in the Middle East. The FOMC minutes were mixed

By JustMarkets

At Wednesday’s close, the Dow Jones Index (US30) added 0.19%, while the S&P 500 Index (US500) was up by 0.43%. The NASDAQ Technology Index (US100) closed positive by 0.71% yesterday.

According to the FOMC minutes released on Wednesday last month, the Federal Reserve leadership considered the outlook for the US economy uncertain and said it would “proceed cautiously” in deciding whether to raise the benchmark interest rate further. Such caution is generally seen as an indication that the Fed is not inclined to raise rates in the near future. Economic data over the past few months have indicated that inflation is slowing, according to the September 19-20 meeting minutes. Policymakers added that more evidence of inflation slowing to the Fed’s 2% target is needed to be confident that inflation will slow to the Fed’s 2% target. Officials generally acknowledged that the risks to Fed policy are increasingly balanced between raising rates too high, which hurts the economy, and not raising them enough to contain inflation.

Late Tuesday, San Francisco Fed spokeswoman Daly said that tighter financial conditions could mean the Fed wouldn’t have to do as much in terms of interest rates. Also on Wednesday, Fed spokesman Waller said that the Fed finally got a very good hold on inflation and can now take an observational stance.

The US PPI for September rose by 0.5% m/m and 2.2% y/y, which was stronger than expectations of 0.2% m/m and 1.6% y/y. In addition, the Food & Energy Price Index rose by 0.3% m/m and 2.7% y/y, stronger than expectations of 0.2% m/m and 2.3% y/y.

Equity markets in Europe traded yesterday without any unified dynamics. German DAX (DE40) increased by 0.24%, French CAC 40 (FR40) declined by 0.44% on Wednesday, Spanish IBEX 35 (ES35) added 0.06%, and British FTSE 100 (UK100) closed negative by 0.11%.

The European currency retreated from its best levels amid dovish comments from ECB Governing Council representative and Bundesbank President Nagel, who said a pause could be an option for the ECB at its next policy meeting later this month.

WTI crude oil and gasoline prices fell sharply on Wednesday amid early signs that the war between Israel and Hamas will have a limited impact on oil flows in the Middle East. In addition, Wednesday’s US producer price index report came in stronger than expected, reinforcing speculation that the Federal Reserve will hold interest rates longer, which could dampen economic growth and energy demand.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) increased by 0.60%, China’s FTSE China A50 (CHA50) gained 0.37%, Hong Kong’s Hang Seng (HK50) added 1.29% and Australia’s ASX 200 (AU200) ended the day positive by 0.68%.

Hong Kong’s Hang Seng Index jumped by 1.8% on Thursday thanks to a 3% rise in banking stocks after China’s state fund Central Huijin Investment increased stakes in four major banks.

Japan’s September machine tool orders fell by 11.2% y/y, the ninth consecutive decline.

S&P 500 (F)(US500) 4,376.95 +18.71 (+0.43%)

Dow Jones (US30) 33,804.87 +65.57 (+0.19%)

DAX (DE40) 15,460.01 +36.49 (+0.24%)

FTSE 100 (UK100) 7,620.03 −8.18 (−0.11%)

USD Index 105.73 −0.10 (−0.09%)

News feed for 2023.10.12:

– Japan Producer Price Index (m/m) at 02:50 (GMT+3);
– UK GDP (m/m) at 09:00 (GMT+3);
– UK Industrial Production (m/m) at 09:00 (GMT+3);
– UK Manufacturing Production (m/m) at 09:00 (GMT+3);
– UK Trade Balance (m/m) at 09:00 (GMT+3);
– Eurozone ECB Monetary Meeting Accounts at 14:30 (GMT+3);
– US Consumer Price Index (m/m) at 15:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3);
– US Crude Oil Reserves (w/w) at 18:00 (GMT+3);
– US FOMC Member Bostic Speaks at 20:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

11 Oct

China is preparing a massive economic stimulus. The International Monetary Fund has lowered its GDP forecast for 2024

By JustMarkets

At Tuesday’s stock market close, the Dow Jones Index (US30) increased by 0.40%, while the S&P 500 Index (US500) added 0.52%. The NASDAQ Technology Index (US100) closed positive by 0.58% yesterday. All three indices hit their 2-week price highs. On Tuesday morning, stocks opened higher amid prospects of additional stimulus in China, which will favor global growth after Bloomberg reported that China is preparing for a new round of stimulus to support its economy. Stocks further extended gains after comments from FRB Atlanta President Bostic reinforced speculation that the Fed is about to take a pause in raising interest rates.

The International Monetary Fund (IMF) warned of persistent inflation and urged the world’s central banks to maintain tight policy until price pressures ease, lowering its 2024 global GDP forecast to 2.9% from July’s forecast of 3.0% and raising its 2024 global inflation forecast to 5.8% from July’s forecast of 5.2%.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) increased by 1.95%, France’s CAC 40 (FR40) gained 2.01% on Tuesday, Spain’s IBEX 35 (ES35) jumped by 2.19%, and the UK’s FTSE 100 (UK100) closed up by 1.82%. Eurozone economic news on Tuesday lent support to the euro after Italian industrial production unexpectedly rose by 0.2% m/m in August, exceeding expectations of a decrease by 0.3% m/m. ECB Governing Council spokesman Holzmann said yesterday that inflation needs to be kept under control, and supply shocks could force the ECB to raise interest rates one or two more times. This is a more hawkish stance than was previously the case.

Minutes from the Bank of England’s last monetary policy meeting showed that the UK Banking System remains strong enough to support households and businesses even if economic conditions are worse than we expect. The UK banking system has substantial capital reserves and other resources to cover potential losses or cash outflows. Participants believe that interest rates are likely to remain high for an extended period of time.

There was profit taking in crude oil after the IMF lowered its global GDP forecast for 2024. But losses in crude oil were limited by a weaker dollar and heightened fears that the conflict between Israel and Hamas could widen and disrupt crude oil supplies from the Middle East. In addition, the prospect of additional stimulus from China is supporting energy demand and oil prices.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was up by 2.43%, China’s FTSE China A50 (CHA50) decreased by 0.58%, Hong Kong’s Hang Seng (HK50) added 0.84%, and Australia’s ASX 200 (AU200) ended the day positive by 1.01%.

China is considering widening its budget deficit for 2023 as the government prepares for a new round of stimulus to help the economy reach its 5% growth target. Policymakers may issue an additional 1 trillion yuan ($137 billion) worth of government debt to finance infrastructure spending.

S&P 500 (F)(US500) 4,358.24 +22.58 (+0.52%)

Dow Jones (US30) 33,739.30 +134.65 (+0.40%)

DAX (DE40) 15,423.52 +295.41 (+1.95%)

FTSE 100 (UK100) 7,628.21 +136.00 (+1.82%)

USD Index 105.77 -0.31 (-0.29%)

News feed for 2023.10.11:

– US FOMC Member Daly Speaks at 01:00 (GMT+3);
– German Consumer Price Index (m/m) at 09:00 (GMT+3);
– US FOMC Member Bowman Speaks at 11:15 (GMT+3);
– US Producer Price Index (m/m) at 15:30 (GMT+3);
– Canada Building Permits (m/m) at 15:30 (GMT+3);
– US FOMC Member Bostic Speaks at 19:15 (GMT+3);
– US FOMC Meeting Minutes at 21:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

10 Oct

Oil rises amid concerns about lower supplies from the Middle East. Chinese stocks are showing weakness after the holidays

By JustMarkets

As of Monday’s stock market close, the Dow Jones Index (US30) added 0.59%, while the S&P 500 Index (US500) increased by 0.63%. The NASDAQ Technology Index (US100) closed positive by 1.60% yesterday. The S&P 500 (US500) and Nasdaq 100 (US100) indices rose to 2-week highs, while the Dow Jones Industrials (US30) reached a one-week-high. Stock indices rose on Monday amid dovish comments from the Federal Reserve, suggesting that the Fed may pause its rate hike cycle. Fed Vice Chairman Jefferson said policymakers are “in a position to proceed cautiously in assessing the degree of additional policy tightening that may be necessary” as the recent rise in Treasury bond yields acts as a potential additional constraint on the economy.

Another positive upside for equities is Monday’s 4% rise in crude oil prices, which sparked a rally in energy stocks. In addition, the surprise Hamas attack on Israel over the weekend contributed to a rally in defense stocks.

On Monday, the Bank of Israel announced its intention to sell up to $30 billion in foreign exchange reserves to support its national currency, which has fallen sharply since the weekend incursion by Hamas militants. The Israeli shekel traded at 3.90 against the US dollar yesterday, the weakest in seven years.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) decreased by 0.67%, France’s CAC 40 (FR40) fell by 0.55% on Monday, Spain’s IBEX 35 (ES35) lost 0.91% and the UK’s FTSE 100 (UK100) closed down by 0.03%. German industrial production for August fell by 0.2% m/m, weaker than expectations of 0.1% m/m.

Hamas’ attack on Israel drove crude oil prices up over 4% amid concerns that the conflict could widen and jeopardize Middle East oil supplies. The US has sent a group of warships to the eastern Mediterranean. The Wall Street Journal reports that Iranian intelligence services helped Hamas plan Saturday’s surprise attack, raising the risk of retaliation against Iran.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was not trading yesterday, China’s FTSE China A50 (CHA50) decreased by 0.69%, Hong Kong’s Hang Seng (HK50) added 0.18%, and Australia’s ASX 200 (AU200) ended the day positive by 0.23%.

Japan is unlikely to try to reverse the yen’s downtrend through currency intervention as the currency’s fall reflects real economic fundamentals, former chief currency diplomat Naoyuki Shinohara said yesterday. Shinohara said there are no set rules or general agreement among the G7 advanced economies on what currency movements are defined as “excessive volatility” that justifies intervention. The remarks contrast with the views of current chief foreign exchange diplomat Masato Kanda, who said last week that a sustained fall in the yen over a long period could be grounds for intervention.

S&P 500 (F)(US500) 4,335.66 +27.16 (+0.63%)

Dow Jones (US30) 33,604.65 +197.07 (+0.59%)

DAX (DE40) 15,128.11 −101.66 (−0.67%)

FTSE 100 (UK100) 7,492.21 −2.37 (−0.032%)

USD Index 106.09 +0.05 (+0.04%)

News feed for 2023.10.10:

– Australia NAB Business Confidence (m/m) at 03:30 (GMT+3);
– Norway Consumer Price Index (m/m) at 09:00 (GMT+3);
– UK FPC Meeting Minutes at 12:30 (GMT+3);
– US FOMC Member Bostic Speaks at 16:30 (GMT+3);
– US FOMC Member Kashkari Speaks at 22:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

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