Archive for Economics & Fundamentals – Page 96

05 Sep

The RBA kept interest rates unchanged. Swiss GDP unexpectedly slowed down

By JustMarkets

The US stock market did not trade yesterday due to the bank holiday.

Canada’s economy unexpectedly contracted in the second quarter, with consumer spending slowing sharply and residential investment falling. Combined with a cooling labor market, this should ease the Bank of Canada’s inflation concerns and keep interest rates unchanged at its September 6 meeting.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.10%, France’s CAC 40 (FR40) lost 0.24%, Spain’s IBEX 35 (ES35) decreased by 0.35%, and the UK’s FTSE 100 (UK100) closed negative by 0.16% yesterday.

Growth in the European construction sector is slowing due to weaker demand. High interest rates and soaring construction costs have sharply reduced demand for new buildings in Europe. So far, ongoing projects and increased focus on sustainability have kept construction volumes down, but analysts expect the construction sector to start to decline sharply in 2024.

Switzerland’s GDP was flat in the second quarter, but the economy slowed by 0.3% compared to the previous quarter. The country’s industry has been hit by the slowdown in the global economy. Although inflationary pressures continue to ease, the Swiss economy is likely to remain sluggish over the next few quarters. The slowdown is primarily due to the decline in manufacturing (-2.9% for the quarter), with cyclical industries suffering from the slowdown in the global economy. In addition, the chemical-pharmaceutical industry is contracting after several years of strong growth. This has a negative impact on Swiss merchandise exports (-1.2% for the quarter). At the same time, the construction sector is suffering from rising interest rates. Investment in construction declined over the quarter (-0.8%), as did investment in capital goods (-3.7%). Against this background, the outcome of the SNB monetary policy meeting scheduled for September 21 remains uncertain. It is possible that the SNB will decide on a final rate hike, focusing on the risks to inflation. However, with inflationary pressures easing and the economy slowing, the likelihood of a further rate hike has clearly diminished.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) increased by 0.70%, China’s FTSE China A50 (CHA50) gained 1.72%, Hong Kong’s Hang Seng (HK50) jumped by 2.51% on the day, and Australia’s S&P/ASX 200 (AU200) was positive by 0.56% on Monday.

Asian markets started the week quite positively after Friday’s US data, as well as some developments in China. Economists point to a surge in real estate transactions in Beijing and Shanghai over the weekend after mortgage rates and down payment ratios were cut, and the central government approved the creation of a special bureau within the NDRC to boost the private economy. All of this, combined with expectations of additional stimulus measures and news that distressed real estate developer Country Garden received lenders’ approval to extend payments on its onshore private bonds, helped improve market sentiment early in the week.

On Tuesday, the Reserve Bank of Australia, as expected, kept interest rates unchanged at 4.1% and said it would continue to consider further monetary tightening amid strong inflation and labor market activity. It was the last meeting for current chief Philip Lowe. Lowe’s term expires on September 18, after which the bank will be led by Deputy Governor Michelle Bullock. Governor Lowe said in a statement that containing inflation remains the bank’s top priority and that further monetary tightening may still be needed. At the same time, Lowe noted that he will be largely data-driven in the future, citing growing uncertainty about the outlook for the Australian and global economies.

S&P 500 (F)(US500) 4,515.77 +8.11 (+0.18%)

Dow Jones (US30) 34,837.71 +115.80 (+0.33%)

DAX (DE40)  15,824.85 −15.49 (−0.10%)

FTSE 100 (UK100) 7,452.76 −11.78 (−0.16%)

USD Index  104.12 −0.12 (−0.11%)

Important events for today:
  • – China Caixin Services PMI (m/m) at 04:45 (GMT+3);
  • – Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
  • – Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
  • – German Service PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Service PMI (m/m) at 11:00 (GMT+3);
  • – UK Service PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Producer Price Index (m/m) at 12:00 (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
05 Sep

Market Caution Returns On China Woes

By ForexTime

Asian markets were painted red on Tuesday with Chinese stocks leading losses as disappointing PMI services data fuelled concerns over the nation’s sluggish economic recovery.

European futures are pointing to a negative open amid the souring sentiment with investors focusing on final PMI data across the region, as well as a speech by ECB President Christine Lagarde. In the currency space, the dollar is advancing across the G10 space amid the cautious mood while Aussie bears are on a tear after the Reserve Bank of Australia kept rates on hold for a third time in the final meeting under Governor Philip Lowe. Regarding commodities, oil is hovering around levels not seen since November amid OPEC+ supply cuts while gold waits for a fresh fundamental spark.

Despite US markets being closed on Monday for the Labour Day holiday, this promises to be another eventful few days for global markets in the build-up to numerous central bank meetings in the weeks’ ahead. All eyes will be on the Bank of Canada rate decision on Wednesday which is expected to conclude with rates remaining at 5% amid the softening labour market and GDP growth.

Commodity Spotlight – Gold

Gold wobbled around $1935 on Tuesday morning, pressured by a stronger dollar and rising Treasury yields. Despite the choppy price action witnessed last Friday following the mixed US jobs report, gold seems to be searching for a fresh fundamental catalyst to trigger its next significant move. In the meantime, the precious metal is showing signs of exhaustion on the daily charts with weakness below the 50-day SMA opening a path back toward $1920. Should the $1935 level prove to be reliable support, prices could retest the 100-day SMA around $1953.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
04 Sep

Global stock markets poised for boost from China property revival plans

By George Prior

China’s efforts to kick-start a property sector revival are poised to have a substantial, positive  impact on international stock markets and delight global investors, says the founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The upbeat assessment from deVere Group’s Nigel Green comes as The People’s Bank of China eased borrowing rules and slashed the reserve requirement ratio for foreign exchange deposits from the current 6% to 4%. Some of the country’s largest banks also cut interest rates on yuan deposits.

He says: “Global stock markets are set to get a boost amid the rollout of steps being taken by the People’s Bank of China (PBOC) to revive the country’s beleaguered property sector.

“We expect the decision to ease borrowing rules and cut reserve requirements for foreign exchange deposits, plus the cutting of interest rates on deposits, will have a considerable positive impact on global stock markets as investors digest news that Beijing is being proactive on this critical economic issue.”

On Monday, Hong Kong’s Hang Seng Index gained 2.5%, while mainland markets were also in positive territory, with the benchmark CSI 300 up 1.33%.

Elsewhere, Japan’s Nikkei 225 also climbed 0.7%, in Australia the S&P/ASX 200 was up 0.56% and ended at 7,318.8, while South Korea’s Kospi traded 0.81% higher.

China’s property market had been facing a crisis marked by plummeting property prices, oversupply, and a debt-laden real estate sector.

This turmoil raised concerns not only for China’s domestic economy but also for global investors with exposure to Chinese assets.

“The global impact of China’s efforts to revive its property sector cannot be underestimated,” says Nigel Green.

“A healthy property market is a vital driver of economic growth. As China’s property sector stabilises, it will boost construction activities, create jobs, and stimulate related industries like cement, steel, and furniture. The resultant economic growth will have a positive spillover effect on global markets, especially for countries that rely on China as a major trading partner.”

He continues: “China’s property crisis had dented investor confidence in the country’s markets. Therefore, by addressing the issue, China is sending a reassuring message to international investors that it is committed to maintaining stability and promoting growth.

“Restored confidence will, we expect, lead to increased foreign investments in Chinese assets, benefiting both domestic and global portfolios.

“China’s property sector revival will offer new investment opportunities, both in the real estate market and related industries. Global investors looking for diversification and growth prospects can be expected to find China an appealing destination once again.”

Since the beginning of this year, Nigel Green has been publicly saying that Beijing will take the necessary measures to shore-up the world’s second-largest economy and that global investors “must not overlook the opportunities in China if they are serious about building long-term wealth.”

The deVere founder concludes: “Global financial markets will be buoyed by these measures that will stabilise the critically important Chinese property market, restore investor confidence, and stimulate economic growth.”

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
02 Sep

Jobs are up, wages less so – and lower purchasing power could still lead the US into a recession

By Christopher Decker, University of Nebraska Omaha 

Don’t be overly fooled by seemingly rosy jobs data heading into the Labor Day weekend.

Yes, the U.S. economy added 187,000 jobs in August 2023 – faster than the revised 157,000 increase for July and above most analysts’ expectations for the month. And yes, gains were seen across most industries, with health care and social assistance adding 97,300 positions, leisure and hospitality boosting numbers by 40,000, construction up by 22,000 jobs, and 16,000 additional general manufacturing jobs.

But there was also enough in the data released by Bureau of Labor Statistics on Sept. 1 to give comfort – of sorts – to the “Jeremiahs” among us economists. I’ll explain.

While jobs were up, so too was the unemployment rate, which ticked up a modest 0.3% from July to 3.8%. And average hourly earnings increased by just 0.2% in the month to US$33.82 – working out to a rather paltry 8 cent increase.

To me, rather than indicating that the job market is moving along at a healthy clip, as some suggest, it shows signs of something else: a continuing slowdown.

Look at the long-term trend

The fact that, overall, jobs expanded a bit faster than expected doesn’t suggest that the economy is ramping up and inflation is going to spike again soon. Rather, it mostly speaks to the difficulty in predicting month-to-month movements. There’s good reason, perhaps, that economics is sometimes called “the dismal science” – we aren’t always that good at saying with certainty what will happen over the short term.

Monthly data has its place in making assessments and guiding policy, for sure. But focusing on just one month can be misleading as the data can be quite volatile.

The underlying trends are what matter more. And that is where I see signs of a slowdown.

In 2022, labor demand – as measured by job openings plus nonfarm employment – exceeded labor supply, as measured by the labor force. In other words, there were more job openings than people willing to fill the positions.

As a result, we saw labor earnings increase by 5.1% relative to 2021. Great news for employees, but less so for the Federal Reserve: Higher wages combined with supply chain disruptions and the effect of war in Ukraine meant that the inflation rate, as measured by consumer price index growth, rose 7.7% in 2022.

To tame inflation, the Fed embarked on a program of aggressive interest-rate hikes. This resulted in a general economic slowdown by the beginning of 2023. The housing market cooled. Construction and related markets slowed.

But now labor supply is outpacing labor demand – there are more people looking for jobs than there are openings.

Based on the first seven months of data in 2023, wage growth has slowed to 3.4% compared to 2022, as has general inflation, slowing to 3.5%.

So where is the economy heading? The preponderance of the data is pointing to a general economic slowdown. As a result, some suggest the U.S. economy may be heading for a “soft landing,” where inflation rates reach 2% to 2.5% as the U.S. avoids recession.

But when it comes to the chances of recession, the economy is not quite out of the woods yet. True, inflation is trending down. But earnings have generally grown slower than inflation, resulting in a loss of purchasing power for consumers.

Less cash to spend on goods doesn’t appear to have hit the economy yet. Consumer spending in the first seven months of 2023 was up 1.9% on the previous year, by my calculations. However, there is evidence that a lot of this was due to consumers purchasing on credit. Credit card debt reached a staggering $1.3 trillion in the second quarter of 2023.

This is not sustainable. At some point soon, consumer spending will have to slow.
And given that consumer spending represents about two-thirds of total GDP, a recession could still occur.

My best guess at the moment is that a recession is most likely to occur in early 2024, after the usual spending spree that is the holidays. But fortunately, thanks to the Fed’s recent efforts to decelerate the economy gradually, a major contraction is unlikely.The Conversation

About the Author:

Christopher Decker, Professor of Economics, University of Nebraska Omaha

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

Economics & Fundamentals Opinions
01 Sep

Lithuania positioned to emerge as Baltic economic powerhouse?

By George Prior

Lithuania is the best-positioned country in its region to overcome the economic fallout from the war in Ukraine, affirms the founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.

The comments from deVere Group’s Nigel Green come as the war has intensified over the last week, again sending shockwaves through the economies of neighbouring countries.

He says: “The ongoing conflict in Ukraine has cast a long shadow over the economies of nearby countries, creating a ripple effect that demands immediate attention.

“Countries like Lithuania have not been spared from the repercussions of this crisis, with economic disruptions posing significant challenges.

“However, amid adversity lies the opportunity for strategic action to drive economic recovery and growth.”

Lithuania, a key player in the Baltic region, has experienced first-hand the economic consequences of the conflict in Ukraine. The prevailing uncertainty has dealt a blow to investor confidence, causing domestic and foreign investments to stagnate.

Trade, a vital engine of growth for Lithuania, has been hampered by the disruption of supply chains and the deterioration of trade routes.

One of the most pronounced effects has been the sharp increase in energy prices. Disruptions in natural gas pipelines traversing Ukraine have led to supply concerns, causing energy costs to soar in Lithuania. This rise not only impacts households but also places local industries at a competitive disadvantage.

“Lithuania recognises the need for proactive measures to counter the adverse effects of the conflict,” says Nigel Green. “This is why I believe it’s the best-positioned country in the region to stimulate economic growth.

“In light of disrupted trade with Ukraine, Lithuania is diversifying its trade portfolio. By establishing robust trade relationships with stable economies beyond its immediate region, Lithuania can buffer itself against future shocks and bolster economic resilience.”

He continues: “Acknowledging the vulnerability of traditional energy sources, Lithuania is turning towards renewable energy investments. This transition not only ensures energy security but also aligns with global sustainability goals, contributing to a more stable energy landscape.”

Lithuania plans to invest in its infrastructure and by creating well-connected transport networks, “the country seeks to position itself as a pivotal link between Eastern and Western Europe,” attracting trade and investment.

“Most importantly, Lithuania aims to attract foreign direct investment by encouraging a business-friendly environment. Streamlining bureaucracy, offering incentives, and showcasing the country’s potential can attract foreign companies to invest, thereby boosting economic activity and job and wealth creation.”

In addition, by promoting research, innovation, and technology-driven industries, “Lithuania aspires to become a hub for high-value, knowledge-based jobs,” and embracing cutting-edge technologies will “propel the nation towards economic rejuvenation.”

Nigel Green concludes: “By adopting a multi-pronged approach that encompasses trade diversification, renewable energy, infrastructure development, foreign direct investment attraction, innovation, and diplomatic engagement, Lithuania is poised to weather the storm and emerge stronger than before.

“This commitment to progress underscores Lithuania’s determination to turn adversity into an opportunity for sustainable growth.”

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 Financial News
31 Aug
What is the Secured Overnight Financing Rate (SOFR)?

Fed will lose public and market confidence with more rate rises

By George Prior

The US Federal Reserve will “lose the confidence of the public and financial markets” and have “disastrous” economic effects, if it continues raising rates any further, warns the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The stark warning from deVere Group’s Nigel Green comes ahead of the Personal Consumption Expenditures index, which comes out Thursday at 8:30 am EST.

The PCE price index measures changes in the prices paid by consumers for goods and services over time. It’s one of the key indicators used by the US central bank and other economic analysts to assess inflation trends and make monetary policy decisions.

The deVere CEO comments: “The PCE is being keenly watched as investors were cheered earlier in the week by the weaker-than-expected payrolls data and annual gross domestic product growth forecast – both of which strongly make the case that the Federal Reserve must now stop its most aggressive tightening campaign in decades.”

He continues: “The Fed’s battles against inflation, growth and jobs are being won.

“There are now genuine concerns that unless the Fed drops raising rates, it will drive the US economy into a major recession.

“As the world’s largest and most influential economy, this would potentially have disastrous global implications.”

Nigel Green also stresses that not only must the Federal Reserve abandon its tightening program because the program has been effective, but it must also do so because inflation is likely to fall quicker than many anticipate for three reasons.

“First, there’s unlikely to be a wage price spiral as real wages are typically going down despite the increases.  Employers now seem to be holding back from increasing salaries on demand, which will help stifle wage inflation.

“Second, the time lag for monetary policies is incredibly lengthy. It takes around 18 months for the full effect of rate hikes to make their way into the economy – and that’s where we are – and so financial conditions will get squeezed even harder in the near term.

“And third, although many economies are now likely to avoid a full-blown recession, economic growth is still expected to be weak for the foreseeable future.”

He concludes: “If the Fed does not stop its rate hiking agenda, it will lose the confidence of the public and financial markets which would have serious, far-reaching negative consequences for the US and the world.”

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
29 Aug

Wealthy investors convinced by alternative investments

By George Prior

High-net-worth investors “remain absolutely convinced” by alternative investments, including venture capital, cryptocurrencies, structured products, and hedge funds – despite a wider slowdown of inflows into the sector.

The assessment from Nigel Green, the chief executive and founder of deVere Group, comes as media reports cite research that suggests that inflows have dropped by hundreds of billions of dollars over the last year as institutional investors reassessed their exposure to ‘alts.’

He says: “While institutional investor inflows into alternative investments might have slowed, our experience worldwide shows that the opposite is true with individual investors.

“Interest from our high-net-worth individuals around the world is growing in ‘alts’; they remain absolutely convinced that less familiar, return-enhancing asset classes, which include venture capital, structured products, high dividend stocks, crypto, hedge funds and managed futures, and real estate, should be a part of their investment mix.”

Alternative investments are distinct from traditional asset classes like stocks, bonds, and cash, encompassing a diverse array of investment options that offer unique risk and return profiles.

While they require careful due diligence, their inclusion in a well-structured portfolio can offer opportunities for enhanced returns and exposure to non-traditional investment strategies.

Alts are characterised by their potential to deliver higher yields and increased capital appreciation, though they can also come with greater complexity and illiquidity.

“Savvy investors will be considering this temporary period of falling inflows or lower popularity as a buying opportunity.  They will be seeing the bigger picture,” affirms Nigel Green.

“These investors understand that alternative investments tend to have low correlations with traditional asset classes like stocks and bonds, meaning that their performance may not be closely tied to the movements of traditional markets. Diversification can help reduce overall portfolio volatility and mitigate the impact of market downturns. This can improve the overall risk-adjusted returns of a portfolio.”

He continues: “While alternative investments come with higher risks, they also offer the potential for higher returns compared to traditional investments, especially in periods of economic growth or when specific strategies are successful.

“They also provide flexibility in terms of investment strategies. Hedge funds, for instance, can employ a range of strategies to potentially profit from market inefficiencies.

“Potential for Alpha: Some alternative strategies aim to generate alpha, which is the excess return earned above the market’s benchmark. Skilled managers in areas like hedge funds or private equity may be able to capitalize on their expertise to outperform the broader market.”

For these important, strategic reasons, the deVere CEO predicts that “institutional investors will be back into alts in the near future”, adding, “the current slowdown of inflows by institutions is a blip.”

Investors considering alternative investments should conduct thorough due diligence, assess their risk tolerance, and consult with a financial advisor who understands the opportunities as well as complexities of these investments.

“Remaining steadfast in their strategy for wealth building success, ‘diversify and thrive’ would be high-net-worth individuals’ attitude towards alternative investments,” concludes Nigel Green.

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
29 Aug

China is trying to stimulate economic growth. The probability of another rate hike by the Fed rose to 67%

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.62%, while the S&P 500 Index (US500) added 0.63%. The NASDAQ Technology Index (US100) closed positive by 0.84% on Monday. Stocks rose on Monday while bond yields declined thanks to support provided by comments from US Federal Reserve Governor Powell on Friday that the Fed is prepared to continue raising interest rates if needed but “will proceed cautiously” on whether to raise rates again, opening the door for a potential pause in Fed operations. Currently, there is a 23% chance of a 25 bps rate hike at the September 20 FOMC meeting and a 67% chance of a 25 bps rate hike at the November 1 FOMC meeting.

Monday’s US economic news was positive for stocks after the August reading of the Dallas Fed’s measure of overall business activity in the manufacturing sector rose by 2.8 to a 5-month high of minus 17.2, which was stronger than expectations of minus 19.0.

Shares of 3M Co. rose more than 5% after it agreed to pay $5.5 billion to settle lawsuits related to military earplugs.

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) increased by 1.30%, France’s CAC 40 (FR40) added 1.32% yesterday, Spain’s IBEX 35 (ES35) jumped by 1.93%, and the UK’s FTSE 100 (UK100) was not trading due to the bank holiday.

Eurozone money supply unexpectedly declined by 0.4% y/y in July, weaker than expected and the sharpest rate of contraction in 13 years. ECB Governing Council spokesperson Holzmann said the following: “If there are no major surprises, I see grounds for continuing to raise rates without a pause.” The next ECB meeting will be held on September 14.

China’s actions over the weekend to stimulate its markets have sparked optimism about a possible resumption of economic growth, which is having a positive impact on energy demand and crude oil prices. In addition, gains in US stock markets on Monday boosted confidence in the economic outlook, supporting energy demand. But investors are refraining from taking large oil positions ahead of the release of key economic indicators from the US and China later this week.

Asian markets were also predominantly up yesterday. Japan’s Nikkei 225 (JP225) increased by 1.73%, China’s FTSE China A50 (CHA50) added 1.21%, Hong Kong’s Hang Seng (HK50) was up by 0.97% on Monday’s close, and Australia’s S&P/ASX 200 (AU200) was positive by 0.63% yesterday.

Asian equities were supported after China took a number of measures to stimulate its markets, including cutting the tax levied on share trading. The People’s Bank of China (PBOC) could potentially lower reserve requirement ratios sooner than expected, providing local markets with more liquidity. Chinese officials also talked about potential financial support for the economy.

S&P 500 (F)(US500) 4,433.31 +27.60 (+0.63%)

Dow Jones (US30) 34,559.98 +213.08 (+0.62%)

DAX (DE40)  15,792.61 +160.79 (+1.03%)

FTSE 100 (UK100) 7,338.58 0 (0%)

USD Index  104.02 -0.06 (-0.05%)

Important events for today:
  • – German GfK German Consumer Climate (m/m) at 09:00 (GMT+3);
  • – Australia RBA Gov-Designate Bullock Speaks at 10:40 (GMT+3);
  • – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
  • – US JOLTs Job Openings (m/m) at 17:00 (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
28 Aug

Fed chief hints at another rate hike. Oil may come under pressure in the coming weeks

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) increased by 0.73% (-0.53% for the week), while the S&P 500 Index (US500) added 0.67% (+0.58% for the week). The NASDAQ Technology Index (US100) closed positive by 0.94% (+1.82% for the week) on Friday. Fed Chairman Jerome Powell said on Friday that policymakers are prepared to raise interest rates further if necessary but also signaled that they may keep rates at current levels in September if economic data support it.

Key talking points from US Federal Reserve Chairman Jerome Powell’s speech at the conclusion of a conference in Jackson Hole:

  • We are attentive to signs that the economy may not be cooling as expected;
  • Evidence of sustained above-trend growth could jeopardize further progress in inflation and warrant further monetary tightening;
  • Evidence that labor market tightness is no longer easing could also warrant a monetary policy response.

According to analysts, despite the hawkish tones in Jerome Powell’s speech, the Fed is happy with current trends, and if they continue, they won’t change anything. But if the US Central Bank sees that these economic trends are fading or suddenly beginning to change, it will increase the likelihood of another rate hike because the Fed will be very sensitive to the data, and this sensitivity will be one-sided – in the direction of tightening.

Equity markets in Europe were mostly rising on Friday. German DAX (DE40) rose by 0.07% (week’s total +0.37%), French CAC 40 (FR40) rose by 0.38% (week’s total +0.90%), Spanish IBEX 35 (ES35) jumped by 0.15% (week’s total +0.76%), British FTSE 100 (UK100) closed up by 0.07% (week’s total +1.05%). Germany’s August business climate fell by 1.7 to a 10-month low of 85.7, below expectations of 86.8. ECB President Lagarde said at a symposium in Jackson Hole that the ECB “will set interest rates at a fairly restrictive level for as long as necessary to bring inflation back to the medium-term target of 2% in a timely manner.” For his part, Nagel of the ECB’s Governing Council said that with inflation still standing around 5%, “it is too early to think about a pause” in interest rate hikes. European inflation data will be released this week. Core inflation in Germany, as well as across the Eurozone, is expected to fall slightly, raising the possibility that the ECB may hit the pause button in September.

Oil was supported on Friday after Marathon Petroleum shut down its Garyville refinery in Louisiana, the third-largest refinery in the United States with a refining capacity of 596,000 BPD, due to a fire. In addition, Friday’s weekly report from Baker Hughes was upbeat for oil as the report showed that active oil rigs in the US fell to their lowest level in a year and a half. But analysts believe that against the backdrop of September, which is considered a seasonally weak month, there is a high probability of oil price declines in the coming weeks. Moreover, open interest is sharply declining, suggesting that oil bulls are taking profits after the rally.

Asian markets were also mostly up last week. Japan’s Nikkei 225 (JP225) increased by 0.23% for the week, China’s FTSE China A50 (CHA50) gained 0.04%, Hong Kong’s Hang Seng (HK50) ended the week up by 0.89%, and Australia’s S&P/ASX 200 (AU200) ended the week negative by 0.46%.

In Australia, seasonally adjusted retail sales for July rose by 0.5% month-over-month versus an expected 0.3%. Despite the increase, Australian Treasurer Jim Chalmers said he expects growth in the Australian economy to weaken significantly due to interest rate hikes by the Reserve Bank of Australia (RBA) and a slowdown in China.

A meeting between Bank of Canada Governor Kazuo Ueda and Japan’s Prime Minister last week sparked new rumors of monetary policy normalization. Traders are also wary of government intervention against the yen after it hit a nine-month low last week. The weak yen, which has helped Japanese stocks outperform global peers this year, is now pressuring the market, raising expectations that the Bank of Japan will be forced to move toward monetary tightening.

S&P 500 (F)(US500) 4,405.71 +29.40 (+0.67%)

Dow Jones (US30) 34,346.90 +247.48 (+0.73%)

DAX (DE40)  15,631.82 +10.33 (+0.07%)

FTSE 100 (UK100) 7,338.58 +4.95 (+0.07%)

USD Index  104.19 +0.21 (+0.20%)

Important events for today:
  • – Australia Retail Sales (m/m) at 04:30 (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
28 Aug

Lithuania should seize the foreign direct investment advantage

By George Prior

Lithuania needs to harness “the enormous power” of international investment to boost its economic opportunities in an increasingly globalised world, says serial global investor Nigel Green.

The European Union-based international entrepreneur, investor, and government advisor stresses that foreign direct investment (FDI) is a lifeline for economic growth and development.

He says: “Countries worldwide compete to attract foreign direct investment due to its ability to bring capital, technology, expertise, market access and large-scale job and wealth-building opportunities to a nation.

“All over the world, history proves that foreign direct investment ignites long-term, sustainable economic growth.”

As a long-term investor in and advocator of Lithuania, Nigel Green says that Lithuania should now “harness the power of foreign direct investment (FDI) and allow it to become a cornerstone of national economic development.”

He says: “I’m a huge believer in the potential of Lithuania and I think the time is right for Lithuania to seize the FDI advantage.

“By properly pushing the FDI programme, there will be a surge of capital into Lithuania, catalysing economic activity and driving growth.

“This influx of funds can be channelled into critical sectors such as infrastructure, technology, and manufacturing, creating jobs and improving the standard of living for the Lithuanian people.”

Nigel Green continues: “As I have seen around the world, foreign investors typically introduce different technologies, best practices, and management expertise.

“This transfer of knowledge enhances local innovation capacity and accelerates Lithuania’s progress toward becoming a knowledge-based, top-tier economy.”

Foreign direct investment would also help diversify Lithuania’s industrial landscape, reducing overreliance on specific sectors and fostering resilience against economic fluctuations.

“The establishment of new industries and sectors enhances economic stability and paves the way for a more balanced economy,” he notes.

“In addition, by going big on foreign direct investment, Lithuania gains more access to international markets through the establishment of export-oriented industries. These industries create products for global consumption, generating foreign exchange earnings and contributing to the country’s export revenue.”

Infrastructure development, from transportation networks to energy systems, would also receive a boost. Improved infrastructure not only attracts investors but also contributes to the overall development of the country for the long-term.

Additionally, as foreign investors seek local talent, Lithuania’s workforce is then exposed to global business practices, higher salaries, and skill enhancement, all of which creates a more competitive labour force.

Nigel Green concludes: “As Lithuania continues to assert itself on the global stage, the strategic use of foreign direct investment should take on greater significance.

“The transformative impact of a comprehensive FDI agenda on Lithuania’s economy, from innovation to job creation, would be undeniable.

“With the right approach, Lithuania can position itself as a beacon of opportunity, attracting investments from around the world that empower its people, enhance its economic resilience, and pave the way for a brighter and prosperous future.”

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.

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