InvestMacro

By JustForex

In the US, weekly jobless claims hit a five-month high, while existing home sales declined for the fifth straight month. These are signs of problems in the labor and housing markets. According to some analysts, the US Federal Reserve may officially announce the beginning of the recession in the United States this week. The US economy is already down 1.6% in the first quarter, and the second quarter is also negative, so, technically, this recession is possible.

At the close of the stock market on Friday, the Dow Jones index (US30) decreased by 0.43% (+1.34% for the week) and the S&P 500 Index (US500) fell by 0.93% (+2.00% for the week). The NASDAQ Technology Index (US100) lost 1.87% on Friday (+2.36% for the week).

It will be a significant week for US stock indices. Besides the important US Federal Reserve meeting on Wednesday and US GDP data on Thursday, technology giants like Amazon (AMZN), Apple (AAPL), Alphabet (GOOG), Meta (META), and Microsoft (MSFT) will report this week as well.

Stock markets in Europe were mostly up on Friday. German DAX (DE30) gained 0.05% (+2.46% for the week), French CAC 40 (FR 40) added 0.25% (+2.42% for the week), Spanish IBEX 35 (ES35) increased by 0.49% (+0.56% for the week), British FTSE 100 (UK100) gained 0.08% (+1.64% for the week).

Last week, the European Central Bank joined many other central banks in raising interest rates as its focus was on fighting inflation rather than a potential economic slowdown. On Friday, ECB chief Christine Lagarde said that the ECB would raise rates as much as needed to bring inflation back to target levels. By narrowing the interest rate differential, the euro has temporarily strengthened. But it should be noted that the US Federal Reserve will raise interest rates by 0.75-1% this week, which will widen the spread again.

US benchmark WTI crude has fallen nearly 3% in the past week, extending its losses over the past three weeks by almost 13%. However, Brent crude jumped by 2.2%, breaking a five-day losing streak of 17%. The situation in the oil market remains very unstable. On the one hand, the White House is trying to lower the price of oil. On the other hand, sanctions against Russia and supply shortage with high demand — these factors do not allow the price to fall.

Last week, precious metal prices rose. “Gold is starting to act as a haven as weakening economic growth will force many central banks to abandon their aggressive tightening plans,” said Ed Moya, head of research US analytical company.

Russia’s war with Ukraine continues. Last week, Russia, Ukraine, Turkey, and UN officials signed an agreement to allow Ukraine to ship grain from a port in Odesa. Despite this, Russian missiles struck the port on Saturday. Russia proved once again that it is a terrorist state. President Vladimir Zelensky, as well as many European officials, condemned Saturday’s attack as “barbarism,” which showed that Moscow could not be trusted under any circumstances.

Asian markets traded lower last week. Japan’s Nikkei 225 (JP225) gained 4.41%, Hong Kong’s Hang Seng (HK50) added 0.63%, and Australia’s S&P/ASX 200 (AU200) increased by 2.81%. At the opening on Monday, the Asian indices are showing a decline. Investors should also pay attention to Inflation Data in Singapore. Analysts forecast consumer price growth to 6.2% (current 5.6%) on an annualized basis. If the data is worse than expected, it may boost the Singapore dollar but at the same time have a negative impact on Asian indices.

In the commodities market, natural gas futures (+18.37%), palladium (+11.05%), platinum (+4.00%), coffee (+2.98%), cotton (+2.75%), copper (+2.74%) and Brent oil (+2.42%) showed the biggest gains over the week. Lumber futures (-10.06%), soybeans (-9.57%), sugar (-7.17%), corn (-6.95%) and wheat (-2.74%) showed the biggest drops.

S&P 500 (F) (US500) 3,961.63 −37.32 (−0.93%)

Dow Jones (US30) 31,899.29 −137.61 (−0.43%)

DAX (DE40) 13,253.68 +7.04 (+0.053%)

FTSE 100 (UK100) 7,276.37 +5.86 (+0.081%)

USD Index 106.55 −0.37 (−0.34%)

• – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
• – Eurozone German Ifo Business Climate (m/m) at 11:00 (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 Vidhura S Tennekoon, Indiana University 

Sri Lanka has a new president and prime minister – but a change in who leads the crisis-hit South Asian nation alone will not solve the country’s severe economic problems.

Ranil Wickremesinghe – who on July 20, 2022, was voted in by lawmakers to replace fleeing former president Gotabaya Rajapaksa – and his appointed premier Dinesh Gunawardena inherit an economy grappling with record inflation as high as 59%, a currency that has lost almost half its value since March 2022 and severe shortages of daily necessities such as food and fuel. Nearly all economic activity in the country has ground to a halt.

The government’s deficit is so large it can’t afford to pay public workers, and the central bank has almost no foreign currency – needed to finance imports and pay back foreign debt.

In short, Sri Lanka is facing an unprecedented economic crisis, placing tremendous pressure on the new leaders to act fast to fix things.

As an economist and former official at the Central Bank of Sri Lanka, I believe the path forward will be difficult. The country will need to break with past policies and practices that put it in a financial hole while putting in place reforms to get the economy back on track. In particular, there are four key economic challenges the new government will have to address, though they’re all interconnected.

Addressing Sri Lankans’ immediate needs

To avoid the fate of his now exiled predecessor Gotabaya Rajapaksa, President Wickremesinghe will have to address the immediate needs of his people.

After being sworn in, Wickremesinghe said his priority was to ensure that people are able to eat three meals a day.

While food inflation has reached 76%, prices of many basic food items have increased by a higher margin – rice by 160%, wheat flour by 200% and sugar by 164%. To put that in context, a preschool teacher earning minimum wage would need more than a day’s wages to purchase a kilogram (2.2 pounds) of sugar and a kilogram of wheat flour or rice. A cylinder of cooking gas, if they were lucky to find one, would cost more than a half-month’s salary.

Cost of living ranks alongside other pressing issues. Reopening the shuttered schools and universities is another priority. The other urgent need is restoring transportation services. With no fuel to purchase, private bus services are in limbo and public transportation has become an adventure ride, with passengers dangling from the door and windows and even sitting inside the luggage box.

Restoring transportation and electricity services requires foreign currency to import fuel, but support from the International Monetary Fund, which provides financial help to struggling economies through loan packages, is months away. Unless the new president can persuade its regional powerhouses – India and China – to provide more help, economic hardships will continue and life in Sri Lanka will not be normal.

In the past, Sri Lanka has been able to rely on tourism to help bring revenue to the island nation. But this will be impossible while social unrest continues and shortages of essentials limit the country’s ability to serve visitors. Meanwhile, remittances from overseas Sri Lankans have also suffered because of a lack of confidence in the national currency, known as the rupee.

As Wickremesinghe has noted, things will get worse before they get better.

Balancing the budget

The next item on the president’s to-do list will likely be finding a way to bring the budget deficit down. Last year, expenses were 240% of revenue, and 91% more was needed to repay debt. Money printing covered a large portion of this gap but only exacerbated inflation.

The primary reason for Sri Lanka’s current crisis is decades of fiscal mismanagement, with too much spending and too little revenue.

Fixing this problem will require a combination of higher taxes and significant budget cuts. But the budget gap is too wide to eliminate completely the need for money printing. The best that can be hoped for is an aggressive reduction.

Restructuring Sri Lanka’s huge debt

Such budgetary reforms will likely be necessary to solve another challenge Sri Lanka faces: overseas debt.

Sri Lanka has amassed about US$51 billion in foreign debt over the past decades but has virtually no foreign currency with which to pay it back. The government suspended payments on foreign debt in April, sending it into default.

At the end of 2021, about 45% of the debt was owed to private investors, while the rest belonged to countries and multinational institutions. The Asian Development Bank owned the biggest share, at 16%, while Japan, China and the World Bank held 10% apiece.

For Sri Lanka to emerge from its crisis, it will need significant help from the IMF. But the IMF requires assurances that Sri Lanka’s debt sustainability be restored before lending it money.

And other international organizations, such as the World Bank, will not be willing to lend Sri Lanka more until the country signs an agreement with the IMF. And U.S. lawmakers have recently suggested IMF support will be contingent on Sri Lanka’s increasing the independence of its central bank, fighting corruption and doing more to promote the rule of law.

While G-7 countries, the group of leading economies, including Japan, appear willing to help Sri Lanka in its effort to restructure its debt, some bondholders – such as Caribbean-based Hamilton Reserve Bank, which holds just $250 million worth – have already taken legal action to claim their dues.

In May, Sri Lanka took a first step toward restructuring its debt, but it may take several months before the country is able to successfully negotiate with its creditors to ensure debt sustainability.

Garnering public support for reforms

Wickremesinghe’s biggest and most unenviable challenge, however, is less about the economy and more about the politics of fixing it.

He won’t be able to do much about Sri Lanka’s economy until he’s able to bring about political stability. And right now, Sri Lanka remains in turmoil.

Wickremesinghe, who previously served as prime minister appointed by his toppled predecessor, will need a wide mandate and support from opposition politicians if he is to drastically change Sri Lanka’s policies. Upon election, he immediately urged his rivals to join him and “work together to bring the country out of the crisis,” adding, “Our divisions are now over.”

He will also need to address protesters’ demands over reducing executive powers while bringing in strong anti-corruption measures and strengthening democratic institutions.

Yet many doubt Wickremesinghe’s ability to unite Sri Lanka and question his mandate to serve out the remaining term of the presidency. He has been a target of protesters since being appointed president. And a confrontation between armed forces and protesters soon after Wickremesinghe took power doesn’t bode well.

Turning around an economy so deep in crisis will take time. Inflation in Sri Lanka is not believed to have peaked yet, and people will continue to face economic hardships for some time.

But political stability will be needed before Sri Lanka can get out of its economic mess. The fiscal reforms expected by the IMF will be painful and will be viable only with public support, and that of all major political parties in Sri Lanka’s Parliament.

About the Author:

Vidhura S Tennekoon, Assistant Professor of Economics, Indiana University

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

By Stacy Morford, The Conversation 

Fifty years ago, U.S. scientists launched a satellite that dramatically changed how we see the world.

It captured images of Earth’s surface in minute detail, showing how wildfires burned landscapes, how farms erased forests, and many other ways humans were changing the face of the planet.

The first satellite in the Landsat series launched on July 23, 1972. Eight others followed, providing the same views so changes could be tracked over time, but with increasingly powerful instruments. Landsat 8 and Landsat 9 are orbiting the planet today, and NASA and the U.S. Geological Survey are planning a new Landsat mission.

The images and data from these satellites are used to track deforestation and changing landscapes around the world, locate urban heat islands, and understand the impact of new river dams, among many other projects. Often, the results help communities respond to risks that may not be obvious from the ground.

Here are three examples of Landsat in action, from The Conversation’s archive.

Tracking changes in the Amazon

A river meanders through the Amazon Basin, seen from Landsat.
NASA

When work began on the Belo Monte Dam project in the Brazilian Amazon in 2015, Indigenous tribes living along the Big Bend of the Xingu River started noticing changes in the river’s flow. The water they relied on for food and transportation was disappearing.

Upstream, a new channel would eventually divert as much as 80% of the water to the hydroelectric dam, bypassing the bend.

The consortium that runs the dam argued that there was no scientific proof that the change in water flow harmed fish.

But there is clear proof of the Belo Monte Dam project’s impact – from above, write Pritam Das, Faisal Hossain, Hörður Helgason and Shahzaib Khan at the University of Washington. Using satellite data from the Landsat program, the team showed how the dam dramatically altered the hydrology of the river.

“As scientists who work with remote sensing, we believe satellite observations can empower populations around the world who face threats to their resources,” Das and his colleagues write.

It’s hot in the city – and even hotter in some neighborhoods

Landsat’s instruments can also measure surface temperatures, allowing scientists to map heat risk street by street within cities as global temperatures rise.

“Cities are generally hotter than surrounding rural areas, but even within cities, some residential neighborhoods get dangerously warmer than others just a few miles away,” writes Daniel P. Johnson, who uses satellites to study the urban heat island effect at Indiana University.

Neighborhoods with more pavement and buildings and fewer trees can be 10 degrees Fahrenheit (5.5 C) or more warmer than leafier neighborhoods, Johnson writes. He found that the hottest neighborhoods tend to be low-income, have majority Black or Hispanic residents and had been subjected to redlining, the discriminatory practice once used to deny loans in racial and ethnic minority communities.

“Within these ‘micro-urban heat islands,’ communities can experience heat wave conditions well before officials declare a heat emergency,” Johnson writes.

Knowing which neighborhoods face the highest risks allows cities to organize cooling centers and other programs to help residents manage the heat.

The making of ghost forests

Satellites that scan the same areas year after year can be crucial for spotting changes in hard-to-reach regions. They can monitor snow and ice cover, and, along U.S. Atlantic coast, dying wetland forests.

These eerie landscapes of dead, often bleached-white tree trunks have earned the nickname “ghost forests.”

Emily Ury, an ecologist now at the University of Waterloo in Ontario, used Landsat data to spot wetland changes. She then zoomed in with high-resolution images from Google Earth – which includes Landsat images – to confirm that they were ghost forests.

“The results were shocking. We found that more than 10% of forested wetland within the Alligator River National Wildlife Refuge [in North Carolina] was lost over the past 35 years. This is federally protected land, with no other human activity that could be killing off the forest,” Ury writes.

As the planet warms and sea levels rise, more salt water is reaching these areas, increasing the amount of salt in the soil of coastal woodlands from Maine to Florida. “Rapid sea level rise seems to be outpacing the ability of these forests to adapt to wetter, saltier conditions,” Ury writes.

Many more stories can be found in Landsat’s images, such as an overview of the war’s effects on Ukraine’s wheat crop, and how algae blooms have spread in Florida’s Lake Okeechobee. Countless projects are using Landsat data to track global change and possibly find solutions to problems, from deforestation in the Amazon to the fires that have put Alaska on pace for another historic fire season.

About the Author:

Stacy Morford, Environment + Climate Editor, The Conversation

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