InvestMacro

By JustForex

Major Wall Street indices fell on Tuesday as a surge in US job openings pointed to a strong labor market, adding to concerns about the Federal Reserve’s aggressive approach to lowering inflation. At the stock market’s close, the Dow Jones Index (US30) decreased by 0.96%, and the S&P 500 (US500) fell by 1.10%. The NASDAQ Technology Index (US100) was down by 1.12% yesterday. Traders raised their rates for the third straight 75 basis point increase in September to 76.5% from 70%. All investors are now focused on the Nonfarm Payroll data for August, which will be released on Friday.

European stocks were mostly down on Tuesday. German DAX (DE30) gained 0.53% yesterday, French CAC 40 (FR40) decreased by 0.19%, Spanish IBEX 35 (ES35) lost 0.12%, British FTSE 100 (UK100) was by 0.88% lower.

Inflation in Germany in August rose to 7.9% in annual terms, returning to the historical maximum recorded in May, which is the highest level in almost 50 years. Judging by the regional components of inflation, the biggest contributors to the rise in consumer prices come from rising gas and electricity prices, food prices, and higher prices for vacation tours. For the ECB, an increase in overall inflation in Germany will further fuel an internal debate about a more aggressive interest rate hike at the next meeting.

Carrefour’s CEO said French consumers are abandoning fish, buying cheaper meat, and rejecting organic products to save money on purchases. All the fault of high inflation, forcing consumers to save on food. Inflation has risen to record levels in major economies over the past year because of tight supply chains after COVID-19 and, more recently, soaring energy prices after Russia invaded Ukraine in February. France has shifted the cost of high inflation off consumers more aggressively than other eurozone countries, curbing gas and electricity prices and boosting revenues by raising wages for civil servants and pensioners, as well as through subsidies for the poor.

In Switzerland, the KOF economic barometer fell by 4.0 points in August and now stands at 86.5. This is well below the long-term average. Accordingly, the outlook for the Swiss economy in the near future seems less encouraging. The decline is primarily due to personal consumption, but negative signals come from the manufacturing and construction sectors.

Germany proposes to suspend the visa facilitation agreement with Russia. The Netherlands favors a complete ban on tourist visas for Russians.

Iran and the United States have reached an agreement on a nuclear deal, and it will be officially announced in the next two to three weeks, a former IAEA official told Iran International. The details of the agreement, as well as the IAEA official’s identity, are unknown, but the news triggered a wave of sales in the oil market. Oil fell by $6 yesterday. Analysts believe that with inflation approaching double-digit territory in many of the world’s biggest economies, that could prompt the US and European central banks to resort to more aggressive interest rate hikes, which could slow economic growth and affect fuel demand. Last week, Saudi Arabia raised the possibility of OPEC+ production cuts, which sources said could coincide with a resumption of supply from Iran if it closes a nuclear deal with the West. With most producers already operating at or above full capacity and signs that the global economy may be slowing, some supply cuts are becoming more likely in the coming months.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 1.14%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.37%, and Australia’s S&P/ASX 200 (AU200) closed at plus by 0.47%.

The Taiwanese military fired warning shots at a Chinese drone that flew over an island controlled by Taiwan. The situation in the region remains tense.

On Tuesday, August 30, several major Chinese cities tightened restrictions due to a new outbreak of COVID-19. Authorities have redoubled efforts to contain the coronavirus ahead of a key meeting of the ruling Communist Party this year. Nearly 4 million people in Hebei province, which surrounds Beijing, have been ordered to stay home for the rest of the week.

S&P 500 (F) (US500) 3,986.16 −44.45 (−1.10%)

Dow Jones (US30) 31,790.87 −308.12 (−0.96%)

DAX (DE40) 12,961.14 +68.15 (+0.53%)

FTSE 100 (UK100) 7,361.63 −65.68 (−0.88%)

USD Index 108.78 −0.06 (−0.06%)

• – Japan Industrial Production (m/m) at 02:50 (GMT+3);
• – Japan Retail Sales (m/m) at 02:50 (GMT+3);
• – New Zealand ANZ Business Confidence (m/m) at 04:00 (GMT+3);
• – China Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – China Non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – French Consumer Price Index (m/m) at 09:45 (GMT+3);
• – French GDP (q/q) at 09:45 (GMT+3);
• – German Unemployment Rate (m/m) at 10:55 (GMT+3);
• – Italian Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – US FOMC Member Mester Speaks at 15:00 (GMT+3);
• – US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+3);
• – Canada GDP (q/q) at 15:30 (GMT+3);
• – US Chicago PMI (m/m) at 16:45 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

By JustForex

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.

By JustForex

The decline in technology, which began on Friday, continued into the new trading week under pressure from rising Treasury bond yields. The Dow Jones Index (US30) decreased by 0.57% at Monday’s close of the stock market. The S&P 500 Index (US500) fell by 0.67%. The NASDAQ Technology Index (US100) lost 1.63% yesterday. The Jackson Hole document warns that without fiscal tightening, there will be a vicious cycle of rising nominal interest rates, inflation, economic stagnation, and debt.

On the other hand, high levels of federal debt and continued increases in government spending will contribute to the public perception that inflation will remain high. But according to analysts, because high inflation was driven by fiscal spending in response to the Covid-19 pandemic, simply raising interest rates will not be enough to lower inflation. Thus, the Fed can reduce inflation only when the national debt is successfully stabilized with credible future budget plans. New research shows that without limits on budget spending, raising rates will make the cost of debt more expensive and raise inflation expectations even more.

European stocks fell on Monday, with technology stocks leading the decline. At the same time, bond yields rose as central bank comments reinforced fears of aggressive measures to curb inflation amid rising recession risks. Germany’s DAX (DE30) decreased by 0.61% yesterday, France’s CAC 40 (FR40) fell by 0.83%, Spain’s IBEX 35 Index (ES35) lost 0.92%, Britain’s FTSE 100 (UK100) did not trade on Monday due to the bank holiday.

German 10-year bond yields rose by 10 bps to a two-month high. European Central Bank (ECB) governor Isabel Schnabel warned over the weekend that central banks must act decisively to fight inflation, even if it drags the economy into recession. Other representatives of the governing council, François Villeroy and politician Martins Kazaks, also signaled another significant rate hike in September. ECB chief economist Lane, considered one of the most dovish on the committee, also called for higher rates, but perhaps at a less aggressive pace. Currently, markets are counting on a 76% chance that the ECB will raise rates by 75 basis points in September, up from 24% last week.

Goldman Sachs Group, Inc. expects the UK economy to slip into recession later this year, with the risk of a deep recession amid a surge in energy prices. The UK gross domestic product is expected to fall about 1% by mid-2023.

The EU will hold an emergency meeting of energy ministers on September 9 to discuss rising energy prices.

Crude oil prices jumped about 4% on Monday as expectations of production cuts by the expanded OPEC+ cartel grow by the day. The Organization of Petroleum Exporting Countries, led by Saudi Arabia, and its ten oil-producing partners will meet on September 5. Nearly every country in the alliance, except Saudi Arabia and the United Arab Emirates, now produces less than its quota. Clearly, OPEC+ countries are getting greedy and trying to push oil prices back to this year’s highs.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.79%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.73%, and Australia’s S&P/ASX 200 (AU200) closed at 0.29%.

The Chinese yuan fell to its lowest level in two years as a hawkish Fed signaled further rate hikes. The Bank of Japan and the People’s Bank of China (PBOC) are the only two major central banks that are not on a tightening cycle. Because of this, the Japanese yen and Chinese yuan are under pressure.

S&P 500 (F) (US500) 4,030.61 −27.05 (−0.67%)

Dow Jones (US30) 32,098.99 −184.41 (−3.03%)

DAX (DE40) 12,892.99 −78.48 (−0.61%)

FTSE 100 (UK100) 7,427.31 −52.43 (−0.70%)

USD Index 108.79 −0.02 (−0.02%)

• – Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
• – German Consumer Price Index (m/m) at 15:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
• – US FOMC Member Williams Speaks at 18:00 (GMT+3).

By JustForex

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.

By Najmedin Meshkati, University of Southern California 

Russian forces occupy Europe’s largest nuclear power plant, the Zaporizhzhia Nuclear Power Station in the Ukrainian city of Enerhodar. Russian and Ukrainian forces are fighting nearby, and shelling has damaged power and communication lines to the plant, prompting fears for the plant’s safety and evoking painful memories in a country still scarred by the world’s worst nuclear accident, at Chernobyl in 1986.

In addition, Russian authorities have developed plans to disconnect the plant from Ukraine’s power grid – in the event of damage to the plant, according to the Russians, as a prelude to switching the plant to the grid in Russian-occupied territory, according to the Ukrainians. Disconnecting the plant from the grid is a risky operation.

The Conversation asked Najmedin Meshkati, a professor and nuclear safety expert at the University of Southern California, to explain the risks of warfare taking place in and around nuclear power plants.

How safe was the Zaporizhzhia power plant before the Russian attack?

The facility at Zaporizhzhia is the largest nuclear plant in Europe and one of the largest in the world. It has six pressurized water reactors, which use water to both sustain the fission reaction and cool the reactor. These differ from the RBMK reactors at Chernobyl, which used graphite instead of water to sustain the fission reaction. RBMK reactors are not seen as very safe, and there are only eight remaining in use in the world, all in Russia.

The reactors at Zaporizhzhia are of moderately good design, and the plant has a decent safety record, with a good operating background.

Ukrainian authorities tried to keep the war away from the site by asking Russia to observe a 30-kilometer (nearly 19-mile) safety buffer. But Russian troops surrounded the facility and seized it in March.

What are the risks to a nuclear plant in a conflict zone?

Nuclear power plants are built for peacetime operations, not wars.

The worst thing that could happen is if a site is deliberately or accidentally shelled. If a shell hit the plant’s spent fuel pool – which contains the still-radioactive spent fuel – or if fire spread to the spent fuel pool, it could release radiation. This spent fuel pool isn’t in the containment building, and as such is more vulnerable.

Containment buildings, which house nuclear reactors, are also not protected against deliberate shelling. They are built to withstand a minor internal explosion of, say, a pressurized water pipe. But they are not designed to withstand a huge explosion.

As to the reactors in the containment building, it depends on the weapons being used. The worst-case scenario is that a bunker-buster missile breaches the containment dome – consisting of a thick shell of reinforced concrete on top of the reactor – and explodes. That would badly damage the nuclear reactor and release radiation into the atmosphere, which would make it difficult to send in first responders to contain any resulting fire. It could be another Chernobyl.

What are the concerns going forward?

The safety problems I see are twofold:

1) Human error

The workers at the facility are working under incredible stress, reportedly at gunpoint. Stress increases the chance of error and poor performance.

There is a human element in running a nuclear power plant – operators are the first and last layers of defense for the facility and the public. They are the first people to detect any anomaly and to stop any incident. Or if there’s an accident, they will be the first to heroically try to contain it.

2) Power failure

The second problem is that the nuclear plant needs constant electricity, and that is harder to maintain in wartime.

Even if you shut down the reactors, the plant will need off-site power to run the huge cooling system to remove the residual heat in the reactor and bring it to what is called a cold shutdown. Water circulation is always needed to make sure the spent fuel doesn’t overheat.

Spent fuel pools also need constant water circulation to keep them cool, and they need cooling for several years before they can be put in dry casks. One of the problems in the 2011 Fukushima disaster in Japan was the emergency generators intended to replace lost off-site power got inundated with water and failed. In situations like that, you get “station blackout” – and that is one of the worst things that could happen. It means no electricity to run the cooling system.

In that circumstance, the spent fuel overheats and its zirconium cladding can create hydrogen bubbles. If you can’t vent these bubbles, they will explode, spreading radiation.

If there is a loss of outside power, operators will have to rely on emergency generators. But emergency generators are huge machines – finicky, unreliable gas guzzlers. And you still need cooling waters for the generators themselves.

My biggest worry is that Ukraine suffers from a sustained power grid failure. The likelihood of this increases during a conflict because power line pylons may come down under shelling, or gas power plants might get damaged and cease to operate. And though Ukrainian intelligence services claim that the Russians intend to stockpile diesel fuel to keep these emergency generators going, it is unlikely that Russian troops will have excess fuel given their need to fuel their own vehicles.

How else does a war affect the safety of nuclear plants?

One of the overarching concerns about the effects of war on nuclear plants is that war degrades safety culture, which is crucial in running a plant. I believe that safety culture is analogous to the human body’s immune system, which protects against pathogens and diseases. Safety culture is pervasive and has a widespread impact. “It can affect all elements in a system for good or ill,” according to psychologist James Reason.

The tragic situation at the Zaporizhzhia nuclear power plant violates every universally accepted tenet of healthy nuclear safety culture, especially the maintenance of an environment where personnel can raise safety concerns.

War adversely affects safety culture in a number of ways. Operators are stressed and fatigued and may be scared to death to speak out if something is going wrong. Then there is the maintenance of a plant, which may be compromised by lack of staff or unavailability of spare parts.

Governance, regulation and oversight – all crucial for the safe running of a nuclear industry – are also disrupted, as is local infrastructure, such as the capability of local firefighters. In war, everything is harder.

So what can be done to better protect Ukraine’s nuclear power plants?

The only solution is declaring a demilitarized zone around nuclear plants. However, Russia has so far rejected United Nations Secretary General António Guterres’ plea for declaring a demilitarized zone around the plant.

I believe an optimal though not ideal solution is to bring the two operating reactors to a cold shutdown before any further loss of off-site power and risk of station blackout, store more fuel for emergency diesel generators at different locations at the plant site, and keep only a skeleton caretaker staff to look after the spent fuel pools.

Admittedly, this is only a stopgap measure. In parallel with the International Atomic Energy Agency’s effort under the leadership of its Director, General Rafael Mariano Grossi, I believe that the U.N. Security Council should immediately empower a special commission to mediate between the warring parties. It could be modeled after the United Nations Monitoring, Verification and Inspection Commission in 2000, and appoint a prominent, senior international statesman as its head.

I believe the person should be of the caliber and in the mold of the legendary former director general of the IAEA, Hans Blix of Sweden. Blix led the agency at the time of the Chernobyl accident in 1986 and commands respect in today’s Russia and Ukraine.

War, in my opinion, is the worst enemy of nuclear safety. This is an unprecedented and volatile situation. Only through active, pragmatic engineering and nuclear diplomacy can an amenable and lasting solution to this vexing problem be found.

This is an updated version of an article originally published on March 4, 2022.

About the Author:

Najmedin Meshkati, Professor of Engineering and International Relations, University of Southern California

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