Tuesday 18 June 2024

Stocks Hit New High. Another US Recession Indicator Hit. 1930s Return?

Baltic Dry Index. 1948 +00      Brent Crude  84.14

Spot Gold 2322             US 2 Year Yield 4.75 +0.08

In the run up to the UK General Election on July 4, the LIR will play its part.

The trouble with our Liberal friends is not that they're ignorant; it's just that they know so much that isn't so.

Ronald Reagan.

The great stocks disconnect AI tech bubble, largely bubbles on, but raises the question, to me at least, just how bad will the fallout be when it bursts?

Hopefully, not a question to be answered today, but one day it will be answered.

Today, another worrying dose of global reality in the LIR.

Rising global trade tariffs push the global economy towards a return to the 1930s.

Yet another recession signal for the US economy.

Now, even buy now pay later debt traps are starting to fail.

What else could possibly go wrong?

Your Evening Briefing: S&P 500 Hits 30th Record of 2024 as Megacaps Rally

June 17, 2024 at 10:27 PM GMT+1

A rally in several large technology companies drove stocks to all-time highs, with some prominent Wall Street strategists rushing to boost their targets even as many hedge funds grow increasingly cautious.

The S&P 500 hit its 30th record this year, defying concerns about narrow breadth that could make the market more vulnerable to surprises. As traders geared up for retail-sales data and a slew of Federal Reserve speakers, Treasuries fell amid a flurry of high-grade corporate bond sales that exceeded $21 billion, led by Home Depot. That’s ahead of Wednesday’s holiday. Here’s your markets wrap.

More

Bloomberg Evening Briefing: S&P 500 Hits 30th Record of 2024 as Megacaps Rally - Bloomberg

 

Asia-Pacific markets rebound as Wall Street rallies overnight; Australia rate decision on tap

Asia-Pacific markets rebounded on Tuesday as Wall Street surged overnight, with investors awaiting the Reserve Bank of Australia’s interest rate decision.

The RBA is expected to hold rates at 4.35%, but investors will be watching the language used in its monetary policy statement.

In a preview note, ING stated that “inflation more broadly is heading in the wrong direction, and that inflation is broadly based.” Australia’s headline inflation crept up to 3.8% in April, from a low of 3.4% in December 2023.

“Above all, we need to see month-on-month inflation rising at a significantly slower pace, or inflation is going to veer further off course over the second half of the year,” the analysts add.

Australia’s S&P/ASX 200 gained 0.96% ahead of the RBA decision.

Japan’s Nikkei 225 rose 1.05% after plunging almost 2% on Monday, while the Topix was 0.74% higher.

On Tuesday, Reuters reported that Bank of Japan Governor Kazuo Ueda told the country’s parliament that the central bank could raise rates in July, depending on the economic data available at the time.

Japanese automaker Toyota has re-elected Akio Toyoda as its board chairman, disregarding two proxy advisers’ recommendation to vote against his re-election.

South Korea’s Kospi climbed 0.84%, led by gains in chipmakers Samsung Electronics and SK Hynix, which rose about 2.3% and 3%, respectively.

Automaker Hyundai also hit a fresh record, gaining about 3.05% on news that it plans to list its India unit in Mumbai.

Hong Kong’s Hang Seng index advanced 0.29%, while mainland China’s CSI 300 inched up 0.22%.

Overnight in the U.S., the S&P 500 rose to close at a fresh record as Wall Street looked to build on last week’s gains.

The index added 0.77% to finish at 5,473.23, while the Nasdaq Composite surged 0.95%. The Dow Jones Industrial Average added 0.49%, to snap a four-day losing streak.

Asia stock markets live: RBA decision, S&P record high (cnbc.com)

 

S&P 500 futures are little changed as investors await May retail sales data: Live updates

UPDATED TUE, JUN 18 2024 8:47 PM EDT

S&P 500 futures are near flat Monday night after a winning day on Wall Street as investors gear up for May retail sales data.

Futures linked to the broad market index inched higher by 0.05%, while Nasdaq 100 futures ticked down by 0.07%. Dow Jones Industrial Average futures rose 59 points, or 0.15%.

Those moves follow a positive session on Wall Street that propelled the S&P 500 higher by nearly 0.8%, while the Nasdaq Composite finished with a gain of almost 1%. Both indexes reached all-time highs during the session and closed at records. The 30-stock Dow advanced about 0.5% to end four days of losses.

“Investors are basically feeling the trend is my friend until it ends,” said Sam Stovall, chief investment strategist at CFRA Research. “They don’t really see anything at this point that is going to cause this upward move to end.”

Tech stocks performed well in the session, helping the tech-heavy Nasdaq outperform and aiding the broader S&P 500′s rise. Notably, Broadcom climbed more than 5%, while Apple jumped around 2%.

Nvidia touched an all-time intraday record as State Street said the chipmaker would likely see a weighting of more than 20% in the rebalance of its popular exchange-traded fund focused on tech. But the stock rolled over, ending the day down 0.7%. Despite that pullback, shares are still up nearly 165% on the year.

Looking ahead, investors will closely watch retail sales data for May due Tuesday morning for insights into the health of the consumer. Economists polled by Dow Jones forecasted growth of 0.2% from April.

Other economic reports on topics like industrial production and business inventories are also expected in the morning. Several Federal Reserve officials including Boston Fed President Susan Collins and Richmond Fed President Tom Barkin are expected to speak at events across the country throughout the day.

Stock market today: Live updates (cnbc.com)

In other news, even buy now pay later is starting to fail.


‘Heartbroken’: Major buy-now pay-later firm collapses after failing to find a buyer

MONDAY 17 JUNE 2024 3:35 PM

Buy-now pay-later firm Laybuy has collapsed into receivership today after efforts to find a rescue buyer failed.

The Kiwi fintech firm, which launched in 2017 and once boasted around 766,000 customers across the UK, Australia and New Zealand, put itself up for sale in April and was looking to delist from the New Zealand’s junior stock exchange CatalistCity A.M. previously revealed.

However, in a statement today founder and managing director Gary Rohloff confirmed a buyer had failed to emerge and the payments company had voluntarily called in receivers in New Zealand.

“I am absolutely heartbroken at today’s decision to request the appointment of receivers to the Laybuy Group,” Rohloff said.

“This is a devastating time for the Laybuy team, and I will be doing everything I can to support them as we go through this process.”

Rohloff pointed to the “economic downturn” and a subsequent squeeze on the retail sector in New Zealand and the UK as the reasons for the firm’s collapse.

A source said the process was being run separately in the UK and a decision had yet to be made on who would handle the winding up of the company. Filings on Friday show law firm Pinsent Masons was handling the process of appointing an administrator.

The move is likely to leave Laybuy’s 70 global staff without jobs and marks a sharp fall for a company which was plotting expansion in the UK as recently as 18 months ago. 

Speculation had been swirling around the future of the company after it disabled all of its payment products to users last Wednesday, with a statement on its website claiming it is “undergoing maintenance and will be back soon”. 

It is unclear how the collapse will now impact customers that have borrowed through the platform in order to pay for goods.

The company was a beneficiary of the boom in buy-now pay-later through the pandemic and fetched a value of some $358m (£184m) when it raised $80m (£40m) on the Aussie stock market in 2020.

Last January, the company scrapped its Sydney listing after a slump in its share price and said it would swap to the small business-focused market Catalist.

---- BNPL firms have also been embroiled in a wider slowdown across the tech sector amid rising costs and a dearth of funding.

Swedish fintech Klarna is the UK’s largest BNPL provider with some 18m customers, followed by Clearpay and Zilch. Big banks like HSBC, Natwest and Virgin Money have also attempted to cash in on the boom in demand for interest-free instalment loans.

Moody’s analysts warned in a report last November that “few BNPL companies will remain independent” as some are acquired and others cease operations due to the growing headwinds.

'Heartbroken': Major buy-now pay-later firm collapses after failing to find a buyer (cityam.com)

Finally, in commodities and EU tariff news, China says anything  EU can do, we can do too. Madness leading to a return of the 1930s.


China opens tit-for-tat anti-dumping probe into European pork

By Joe Cash 

BEIJING, June 17 (Reuters) - China has opened an anti-dumping investigation into imported pork and its by-products from the European Union, a step that appears mainly aimed at Spain, the Netherlands and Denmark, in response to curbs on its electric vehicle exports.

The investigation announced by China's commerce ministry on Monday will focus on pork intended for human consumption, such as fresh, cold and frozen whole cuts, as well as pig intestines, bladders and stomachs. The probe will begin on June 17.

It was prompted by a complaint submitted by the China Animal Husbandry Association on June 6 on behalf of the domestic pork industry, the ministry said.

Following the European Commission's June 12 announcement that it would impose anti-subsidy duties of up to 38.1% on imported Chinese cars from July, global food companies have been on high alert for retaliatory tariffs from China.

The state-backed Global Times newspaper first reported late last month that Chinese firms planned to ask authorities to open an anti-dumping investigation into some European pork products, citing an unidentified "business insider".

That was followed by a second report in the same outlet on June 8 requesting officials look into European dairy imports.

Chinese authorities have previously hinted at possible retaliatory measures through state media commentaries and interviews with industry figures.

A spokesperson for the European Commission said the bloc was not worried about China opening its investigation and told reporters the EU would intervene appropriately to ensure the investigation complied with all relevant World Trade Organisation rules.

Spain, however, called for negotiations to avoid tariffs on its pork exports to China.

The EU accounts for more than half the roughly $6 billion worth of pork China imported in 2023, according to customs data, around a quarter of which was from Spain alone.

Second- and third-ranking, the Netherlands and Denmark last year exported to China pork products worth $620 million and $550 million respectively.

More

China opens tit-for-tat anti-dumping probe into European pork | Reuters

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

This spot-on recession indicator is flashing red

June 15, 2024

A “recession is underway,” and we’re just waiting for corroboration by the National Bureau of Economic Research, the semi-official arbiter of when recessions begin.

That’s the confident prediction I received a few days ago from Jack Schannep, former editor of the TheDowTheory.com investment newsletter. He bases his conviction on an indicator he created in 2000 called the “Schannep Recession Indicator” (SRI), which corresponds to trends in the U.S. unemployment rate.

According to Manuel Blay, Schannep’s successor, in the U.S. since 1946 there have been 12 recessions; “all of them were spotted by the SRI.” Blay adds that the SRI issued only one false signal — in October 1959, six months prior to the recession that commenced in April 1960. (The SRI’s track record since the late 1940s is summarized here.)

The SRI is based on the three-month moving average of the unemployment rate. A recession signal is triggered when it rises by at least 0.4 percentage points from that moving average’s prior cyclical low. The SRI’s latest signal was triggered on June 7 with the report of May’s unemployment rate of 4.0%, which brought the three-month moving average to 3.9%. That’s 0.4 percentage point higher than where the moving average stood in April of last year.

Schannep says he developed his indicator after investigating news media reports that a recession occurs whenever the U.S. unemployment rate rises by more than three-tenths of a percentage point. Schannep found this to be close, with the provisions that the threshold is 0.4 of a percentage point; the focus is on the unemployment rate’s three-month moving average, and the comparison is to that moving average’s prior cyclical low.

There is a similarity between the SRI and the so-called Sahm Rule, introduced in 2019 by Claudia Sahm, a former Federal Reserve economist. There are two major differences, however: first, the Sahm Rule doesn’t trigger until the three-month moving average rises by at least 0.5 of a percentage point, in contrast to 0.4 for the SRI. Second, the Sahm Rule compares the latest three-month average to its trailing 12-month low, while the SRI compares it to the most recent cyclical low — which could be more than 12 months in the past. The Sahm Rule has not indicated a recession is imminent or underway. Still, if a U.S. recession is not already here, it’s near.

You might wonder why we even need an indicator to predict when the National Bureau of Economic Research will declare that a recession has begun. Why not just rely on the NBER to tell us? The answer is that the NBER often takes many months, sometimes more than a year, to determine when a recession has begun. Sometimes the recession has been over by the time the NBER verifies that it began — the recessions of 1990-1991 and 2001, for example.

More

This spot-on recession indicator is flashing red (msn.com)

The cyclical 3-month average low of 3.5% for the unemployment rate was during Feb (3.6%)- Mar (3.5%)- Apr (3.4%) of 2023.  The current 3-month average rose to 3.9% during Mar (3.8%)- Apr (3.9%)- May (4.0%) of 2024 for a 0.4% INCREASE
The Current Status: is that the threshold if a 0.4% gain now signals that a recession is underway.  The May 2024 level was 4.0%. Expect the NBER to report later this year that the recession was underway in May of 2024.

Schannep.com

Covid-19 Corner

This section will continue until it becomes unneeded.

Today, interesting news from the southern hemisphere winter respiratory season. A hint for the northern winter to come?

Wellington Hospital opens first Covid-19 ward in three years, warns of spike in respiratory bugs

June 17, 2024

Wellington Regional Hospital has warned the respiratory bug season is putting demand on its services after opening a Covid-19 ward for the first time in three years.

Health New Zealand Te Whatu Ora Capital, Coast and Hutt Valley has reported an increase in Covid-19 cases in recent weeks.

Hospital and specialist services group director operations Jamie Duncan said a dedicated ward was opened to accommodate Covid-19 inpatients from May 31 to June 11.

This is the first time the hospital has had a dedicated Covid-19 clinical area since 2021, Duncan said.

“While a dedicated ward for Covid-19 inpatients is no longer required, we continue to see increasing numbers of people testing positive for respiratory illnesses.

“Respiratory bug season places additional demand on our services every year, and our services - particularly our child health services - plan accordingly.”

Covid-19 modeller Professor Michael Plank has said the country’s sixth wave is likely close to its peak but a tricky new variant already accounting for a third of cases could see it roll on into winter.

The latest Ministry of Health figures showed there were 5230 reported cases of the virus nationally over the week to June 9, along with 354 cases in hospital and 20 virus-attributed deaths.

Duncan recommended that all New Zealanders take precautions over the winter months to protect themselves and others, particularly anyone over the age of 65, from getting Covid-19.

“This includes receiving an additional Covid-19 vaccine for those who are eligible, staying away from vulnerable friends and family if you are unwell, wearing a face mask in closed, crowded, or confined spaces, staying home if you feel sick and testing for Covid-19 and isolating for five days if you test positive.”

Duncan said antivirals were free for people over the age of 65, Māori and Pacific people over the age of 50, people with compromised immune systems and those with long-term health conditions.

More

Wellington Hospital opens first Covid-19 ward in three years, warns of spike in respiratory bugs (msn.com)

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Energy prices in France turn negative as surging renewable output takes nuclear plants offline

June 15, 2024

Day-ahead energy prices in France fell into negative territory amid surging renewable power production, Bloomberg reported.

The prices, which are locked in before their operating day, fell to a four-year low of -€5.76 a megawatt-hour in an Epex Spot auction.

While soaring wind and solar generation are to blame, demand is also expected to fall between through the weekend. The imbalance has pressured a state-owned utility company Electricite de France to shut off a number of nuclear reactors. Already, three plants were halted, with plans to take three others offline.

According to Bloomberg, this isn't infrequent and can commonly occur on weekends in France. It's also a pan-European phenomenon, with reactor shutdowns occurring in Spain and the Scandinavian region.

Across the continent, a push to decarbonize energy grids has accelerated a boom in renewable infrastructure. Yet, without the battery technology and investment to store the energy surplus, it's creating pricing inefficiencies.

Negative prices have also hit Germany, where solar inventory has outpaced demand, SEB Research reported in May.

The situation in France is different in that the rollout of renewable power has been slower than in other countries in the region, Reuters said. Paris has installed around 45 gigawatts of wind and solar capacity, and is behind European Commission targets.

A bigger slowdown could be on the horizon amid recent political headwinds, as France's far-right looks set to win in domestic elections.

If the National Rally party wins, it has pledged to slash renewable subsidies and end the wind power industry's expansion.

Energy prices in France turn negative as surging renewable output takes nuclear plants offline (msn.com)

Next, our latest new section, the world global debt clock. Nations debts to GDP compared.   

World Debt Clocks (usdebtclock.org)

Compromise: An agreement between two men to do what both agree is wrong.

Lord Edward Cecil.

Monday 17 June 2024

China Tries To Woo Oz. France, UK Near Elections. BoE’s Turn.

Baltic Dry Index. 1948 +06     Brent Crude  82.35

Spot Gold 2323             US 2 Year Yield 4.67 -0.01

In the run up to the UK General Election on July 4, the LIR will play its part.

Truth is relative. Truth is what you can make the voter believe is the truth. If you're smart enough, truth is what you make the voter think it is. That's why I'm a Democrat. I can make the Democratic voters think whatever I want them to.

James Carville.

In the stock casinos, a mixed start to the week. In the USA, a holiday shortened trading week.

In Europe, France is just 13 days out from round 1 of their Parliamentary elections.  Th UK just 17 days out from the General Election which polls forecast to be a landslide for the hard left.

It’s the Bank of England’s turn on interest rates this week on Thursday, but no change is expected with a General Election this close.

In Australia, China’s Prime Minister is on a visit to reset trade and other relations. So today we focus on China and how China is increasingly dominating global trade.

Hong Kong stocks reverse losses as investors assess key China data; Nikkei tumbles almost 2%

Asia-Pacific markets are mixed on Monday as the region assesses key economic data out from China.

The world’s second-largest economy released May numbers for its retail sales, industrial output and urban unemployment rate.

China’s retail sales beat expectations in May, climbing 3.7% compared with a year ago, beating expectations of a 3% rise from a Reuters poll of economists.

However, other economic metrics, such as industrial output and fixed asset investment, missed Reuters forecasts. Industrial output grew by 5.6% year-on-year, compared to the 6% increase expected, while fixed asset investment rose 4% compared to last May, just shy of the 4.2% forecast by the Reuters poll.

The urban unemployment rate held steady at 5% in May, unchanged from April, and 0.2 percentage points lower than that of May last year.

Separately, the People’s Bank of China held its one-year medium term lending facility rate at 2.5% on 182 billion yuan ($25.09 billion) worth of loans, as expected.

The central bank also injected 4 billion yuan through seven-day reverse repurchase operations and kept the seven day interest rate steady at 1.8%.

Hong Kong Hang Seng index reversed losses and was up 0.71% after the MLF and data announcement, while the CSI 300 on mainland China slid 0.1%.

Japan’s Nikkei 225 tumbled 1.82%, dragged by energy and real estate stocks, while the Topix also saw a similar loss of 1.49%.

South Korea’s Kospi fell 0.31%, and the small-cap Kospi also was down 0.45%, reversing earlier gains.

Australia’s S&P/ASX 200 slipped 0.13%. Traders will be bracing for the Reserve Bank of Australia’s rate decision on Tuesday.

On Friday in the U.S., the Nasdaq Composite notched a fifth straight winning session, adding 0.12%, while the S&P 500 inched lower by 0.04%, to snap a four-day winning streak.

The Dow Jones Industrial Average slipped 0.15%, to mark four straight days of losses.

Asia stock markets live: PBOC MLF, China retail sales, unemployment (cnbc.com)

Stock futures are little changed ahead of a holiday-shortened trading week: Live updates

UPDATED SUN, JUN 16 2024 6:58 PM EDT

Stock futures were little changed on Sunday evening ahead of a holiday-shortened week.

Futures tied to the Dow Jones Industrial Average hovered under the flat line. S&P 500 futures and Nasdaq 100 futures added 0.03% and 0.1%, respectively.

Last week, the Dow slipped 57 points on Friday, while the S&P edged lower by 0.04% and the Nasdaq Composite eked out a 0.12% gain to close at a record for the fifth session in a row. For the week, the major averages were mixed, with the blue-chip Dow posting its third losing week in four, while the S&P and Nasdaq notched their seventh up week in the last eight, buoyed by the recent rally in tech.

In the week ahead, investors will wonder if that rally can continue, with cracks emerging in the market outlook.

“There’s really these two themes … investors are trying to play this year,” NB Private’s Shannon Saccocia told CNBC’s “Closing Bell” on Friday. “One has been the secular AI theme and then one has been this idea of manufacturing, reshoring and, frankly, continued strong economic growth.”

“We are seeing a little bit of weaker economic data and maybe you’re getting a breather or a sigh that perhaps this … reacceleration from a manufacturing and industrial perspective is slower to move than what we’re seeing from an AI standpoint,” she added.

This week will be a holiday-shortened week, with markets closed Wednesday for the Juneteenth holiday.

Investors are monitoring May retail sales data, due out on Tuesday, as well as home sales and housing starts data later in the week. Lennar, Kroger, Darden Restaurants and CarMax will report quarterly earnings.

Stock futures are little changed ahead of a holiday-shortened trading week: Live updates (cnbc.com)

In other news, mixed news out of China as China and Australia reset relations.

 

China May retail sales beat expectations, but industrial output and fixed asset investment missed

China’s retail sales beat expectations in May, climbing 3.7% compared with a year ago, beating expectations of a 3% rise from a Reuters poll of economists.

However, other economic metrics, such as industrial output and fixed asset investment, missed Reuters forecasts.

Industrial output grew by 5.6% year-on-year, compared to the 6% increase expected, while fixed asset investment rose 4% compared to last May, just shy of the 4.2% forecast by the Reuters poll.

The country’s National Bureau of Statistics elaborated that the total retail sales of consumer goods reached 3.92 trillion yuan ($540.32 billion), with sales in urban areas up 3.7% year on year and sales in rural areas climbing by 4.1%.

On the other hand, the miss in fixed asset investment was dragged by a steeper drop in real estate investment. NBS said that excluding real estate, total fixed asset investment was 8.6% higher compared to last May.

Separately, the urban unemployment rate held steady at 5% in May, unchanged from April, and 0.2 percentage points lower than that of May last year.

China’s exports have held up, growing by 7.6% year-on-year in May in U.S. dollar terms, beating the Reuters’ forecast for a 6% increase. But imports missed expectations, rising by 1.8% during that time.

Loan data released Friday pointed to continued lackluster demand. Outstanding yuan loans rose by 9.3% in May from a year ago, the slowest increase on record since 1978, according to Wind Information.

M1 money supply, which includes cash in circulation and demand deposits, fell by 4.2% year-on-year in May, the most on record since 1986, according to Wind Information.

Goldman Sachs analysts pointed out that a state media outlet affiliated with China’s central bank attributed the slowdown in M1 growth to a crackdown on fake loans and outflows related to wealth management products.

Inflation data for May previously showed that consumer prices, excluding food and energy, rose by 0.6% from a year ago.

China May retail sales beat expectations, other metrics miss (cnbc.com)

 

Chinese automakers overtake U.S. rivals in sales for the first time, report shows

 Automotive companies in China sold more cars than their U.S. counterparts for the first time last year, boosted by BYD and growth in emerging markets, researcher Jato Dynamics said in a report published Thursday. 

Chinese brands, led by Shenzhen-based BYD, sold 13.4 million new vehicles last year, while American brands sold about 11.9 million, the data showed. Japanese brands led with 23.59 million sales.

China’s sales growth also outpaced that of the U.S., up 23% from the previous year compared with the U.S.’s 9%, according to the report.

“Negligence from legacy automakers, which has resulted in consistently high car prices, has inadvertently driven consumers toward more affordable Chinese alternatives,” Jato senior analyst Felipe Munoz said in the report.

Chinese carmakers, like its leading car brand BYD, have expanded globally as an electric-vehicle price war at home has pushed down prices and weighed on profit margins.

Brands from China have made particular inroads in emerging economies, where Jato said one in five new car sales were made last year amid increased global demand.

“Over 17.5 million new cars were sold in the emerging economies in 2023. That is more than the total sales in the U.S. or Europe during the year,” said Munoz.

Chinese carmakers picked up a sizable market share across the Middle East, Eurasia and Africa while also posting growth in Latin America and Southeast Asia, the report said. 

Meanwhile, some Chinese brands also picked up share in developed economies, including Europe, Australia, New Zealand and Israel.

The growth came despite increased trade animosity between China and the West and other factors, such as conflicts in Europe, high interest rates and high vehicle prices, Munoz said. 

According to the report, sales grew in every region, except Africa, with Europe growing the fastest due to booming demand in Turkey.

But the industry faces increased trade headwinds in 2024, with more countries enacting measures to protect local industry from cheap Chinese exports. 

This week, the EU announced an increase in tariffs on Chinese EVs of up to 38%. That comes after the U.S. quadrupled tariffs on Chinese EVs to 100%.  

Turkey also reportedly announced 40% additional tariffs on vehicles from China on Saturday, signaling that some emerging markets may follow suit. 

Chinese automakers overtake U.S. rivals in sales for the first time (cnbc.com)

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Fed’s Kashkari says it’s ‘reasonable’ to predict a December rate cut

Minneapolis Federal Reserve President Neel Kashkari on Sunday said it’s a “reasonable prediction” that the U.S. central bank will cut interest rates once this year, waiting until December to do it.

“We need to see more evidence to convince us that inflation is well on our way back down to 2%,” Kashkari said in an interview with CBS’ “Face the Nation” program.

The Fed last week held its benchmark policy rate in the 5.25%-5.50% range, where it has been since last July, to keep continued pressure on the economy so as to cool inflation. It also published projections that showed the median forecast from all 19 U.S. central bankers was for a single interest rate cut this year.

“We’re in a very good position right now to take our time, get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions,” Kashkari said. “We’re in a strong position, but if you just said there’s going to be one cut, which is what the median indicated, that would likely be toward the end of the year.”

Kashkari, who has been more cautious about the possibility of easing monetary policy than many of his colleagues, did not say how many rate cuts he personally expects.

He said he has been surprised by how well the U.S. job market has performed even as the Fed raised borrowing costs aggressively in 2022 and 2023, but that he expects more cooling ahead.

“I hope it’s modest cooling, and then we can get back down to more of a balanced economy,” he said.

Inflation by the Fed’s targeted measure, the year-over-year change in the personal consumption expenditures price index, registered 2.7% in April. The Fed has a 2% target.

The unemployment rate in May ticked up to 4%, the highest since just before the Fed launched its rate hiking campaign in March 2022 but still below what most of its policymakers see as sustainable.

Asked about the barrier high borrowing costs pose for people trying to buy a home, Kashkari said the best thing the Fed can do for the housing market is to bring inflation back down to target.

More

Fed's Kashkari says it's 'reasonable' to predict a December rate cut (cnbc.com)

Consumer sentiment hits lowest level in 7 months

June 15, 2024

Consumer sentiment tumbled in June, despite largely resilient growth in the US economy, as higher prices remained a pain point for Americans.

The latest University of Michigan consumer sentiment survey released Friday showed sentiment hit its lowest level in seven months during June. The index reading for the month came in at 65.6, down from 69.1 in May and lower than the 72 economists had expected. 

"Assessments of personal finances dipped due to modestly rising concerns over high prices as well as weakening incomes," Survey of Consumers director Joanne Hsu said in a statement. "Overall, consumers perceive few changes in the economy from May."

The current conditions index fell from to 62.5 from 69.6 the month prior, contributing to the decline in June's headline index. Capital Economics North America economist Olivia Cross said Friday's reading shows "households are now struggling more under the weight of higher interest rates and still-elevated consumer prices."

Year-ahead inflation expectations were flat at 3.3% from the month prior. However, most respondents likely didn't have time to factor in recent positive inflation readings from May. The interview window for the survey spanned from May 22 to June 12. 

This means the last day consumers could submit survey responses was the same day that May's Consumer Price Index (CPI) was released. Headline CPI rose 3.3% over the prior year in May, the lowest monthly headline reading since July 2022.

On Thursday, after the survey window was closed, the Producer Price Index showed wholesale prices unexpectedly declined from the month prior in May.

"The press release noted that consumers were still concerned about high prices, and year-ahead inflation expectations remained at 3.3%," Cross wrote in a note on Friday. "That is at odds with price developments for essentials, given that gasoline prices have eased back and we learned this week that the CPI food at home index was unchanged in May."

Broadly, the decline in the index represents a continued trend among consumers who are fed up with higher prices regardless of whether inflation is cooling and the labor market remains on solid footing. 

More

Consumer sentiment hits lowest level in 7 months (msn.com)

Why the Fed's rate-cutting agenda could spark a recession, according to top economist Mohamed El Erian

June 14, 2024

 

The Federal Reserve's path of rate cuts could be what ends up causing a US recession, according to top economist Mohamed El-Erian.

El-Erian, who has been flagging the risk of a US recession for the past several years, cast another warning about the state of the economy after central bankers opted to keep interest rates level at their last policy meeting.

Fed officials said they needed more confidence that inflation was on track to fall back to its 2% target before loosening monetary policy.

Officials also dialed back their projection for rate cuts by the end of the year, with median central bank estimates calling for just one 25 basis-point cut in 2024, according to projections released by the Fed.

Central bankers suggested that their most likely move would be to issue one rate cut in December, El-Erian said in an interview with Yahoo Finance on Thursday, but a rate cut by the end of the year would be "too late," he warned, given that the economy already faces an elevated risk of recession.

"In my opinion, 'too late' is what was reflected in yesterday's SEP or dot plot," El-Erian said, referring to the Fed's Summary of Economic Projections. "By that time, the lagged effects of what was a significant increase in rates would be biting even more."

US consumers are already grappling with the higher cost of living. The pile of excess cash that's cushioned small businesses and lower-income households has likely already been spent, with pandemic savings estimated to have run out in March, according to the San Francisco Fed.

Household debt levels have also climbed to an all-time high of $17.6 trillion, while a growing number of auto and credit card loans have transitioned into late-payment status, according to New York Fed data.

"I worry that if they carry through on what is in the SEP, that will be too late," El-Erian added, though he noted that the Fed may choose to further loosen monetary policy when factoring in soft May inflation data. Consumer and producers prices rose less than expected last month.

Though the Fed has signaled just one cut, investors still see two to three cuts by year-end, according to the CME FedWatch tool.

More

Why the Fed's rate-cutting agenda could spark a recession, according to top economist Mohamed El Erian (msn.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

COVID-19: Investigation reveals how American military undermined Chinese vaccine

According to the report, the campaign aimed to sow doubt about the efficacy and safety of the Chinese vaccine and neutralise China's rising influence in Asia and the world.

 June 15, 2024

In what could be described as a war for market control, a new investigative report by Reuters has exposed how the United States Department of Defence, Pentagon, secretly carried out an anti-vaccine campaign to discredit the Sinovac vaccine, which China produced.

The report states that the campaign ran specifically in the Philippines between 2020 and 2021, at the height of the pandemic, which shook the world, claiming thousands of lives and paralysing the global economy.

Inside report

Published on Friday, the report revealed that American officials coordinated a clandestine effort during the administration of former President Donald Trump. The campaign against Sinovac ran for many months into the administration of Mr Trump’s successor, Joe Biden.

According to the report, the campaign aimed to sow doubt about the efficacy and safety of the Chinese vaccine and neutralise China’s rising influence in Asia and the world. At the same time, the American government quietly rolled out vaccines to its citizens.

The report states that the officials launched a disinformation programme using over 300 fake social media accounts, especially on X (formerly Twitter), to impersonate Filipinos, warning others to avoid China’s vaccine.

These bot accounts reportedly posted a handful of purported gripes over the quality of face masks, test kits, and China’s Sinovac vaccine with the hashtag “Chinaangvirus” (“China is the virus” in Tagalog).

“COVID came from China and the VACCINE also came from China, don’t trust China!” one typical tweet from July 2020 reportedly read in Tagalog. The words were said to have been placed beside a syringe photo beside a Chinese flag and a soaring chart of infections.

Another post reads: “From China PPE, Face Mask, Vaccine: FAKE. But the Coronavirus is real.” COVID came from China and the VACCINE also came from China, don’t trust China!”

In the report, Reuters said the phoney accounts used by the US military had tens of thousands of followers during the programme.

Reuters could, however, not determine how widely the anti-vax material and other Pentagon-planted disinformation were read or the extent of COVID deaths it might have caused.

More

COVID-19: Investigation reveals how American military undermined Chinese vaccine (premiumtimesng.com)

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Twisted Graphene Hints at New Path for Room-Temperature Superconductors

June 15, 2024

The Science

In an isolated atom, electrons occupy orbitals with different energy levels. When the orbitals come together in a solid form, they merge into energy bands. The dispersion in energy of these bands depends on the arrangement of the atoms and the way the electrons move and interact with each other. A small energy dispersion, also called flat band, indicates electrons that have very low velocity but that interact very strongly through their Coulomb repulsion. This type of band structure can be found when two layers of graphene are twisted relative to each other. At precise twist angles, known as magic angles, the layers of graphene will exhibit flat bands and unconventional electronic properties, including superconductivity. However, theory says these flat bands should be incompatible with superconductivity. In fact, electrons that move so slowly should not conduct electricity at all.

The Impact

In this work, researchers investigated what causes superconductivity in twisted bilayer graphene. The current theory of superconductivity, the Bardeen-Cooper-Schrieffer (BCS) theory, cannot explain materials that are superconducting at temperatures far above absolute zero degrees. This is a great unsolved problem in physics. The presence of superconductivity in twisted bilayer graphene, with its very slow electrons, shows that scientists need to modify the BCS equations. The equations must include the geometry of the space where the quantum electrons live. This finding offers new directions in the search for materials that superconduct at high temperatures. These superconductors would enable important real-world applications, such as electric transmission lines that lose almost no power.

More

Twisted Graphene Hints at New Path for Room-Temperature Superconductors (msn.com)

Next, our latest new section, the world global debt clock. Nations debts to GDP compared.   

World Debt Clocks (usdebtclock.org)

If everybody in this town connected with politics had to leave town because of chasing women and drinking, you would have no government.

Barry Goldwater.