Monday 22 April 2024

Hot War Over? Oil Eases. Stocks Rebound. Tesla/EV Gloom.

Baltic Dry Index. 1919 +18     Brent Crude  86.54

Spot Gold 2369                US 2 Year Yield 4.97 -01

 

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Adam Smith.

Was that it? The hot war between Israel v Iran that is. Well, it’s over, at least for now. But how long is now?

In the stock casinos a rebound of sorts, but with higher for longer interest rates and food price inflation rising again, plus the EV boom turning to bust and the AI bubble no longer inflating, is the stock casino rebound, just a dead cat bounce?

Nothing is so admirable in politics as a short memory.

John Kenneth Galbraith.

Nor in the stock casinos.

Asia markets rebound from Friday’s sell-off; China leaves benchmark loan prime rates unchanged

UPDATED MON, APR 22 2024 12:24 AM EDT

Asia-Pacific markets rebounded from Friday’s sell-off as investors look to fresh data points out of China, Japan and South Korea this week.

On Friday, markets in the region tumbled after Israel launched a strike at Iran, causing stocks to fall and safe-haven assets to climb.

On Monday, China’s one-year and five-year loan prime rates were left unchanged at 3.45% and 3.95% respectively. The five-year LPR acts as the peg for most property mortgages.

Hong Kong’s Hang Seng index popped 1.74%, while mainland China’s CSI 300 was trading 0.2% lower after the LPR announcement.

Japan’s Nikkei 225 rose 0.36%, with the broad based Topix seeing a larger gain of 0.85%.

South Korea’s Kospi also rose 0.88%, while the small cap Kosdaq advanced 0.36%.

In Australia, the S&P/ASX 200 started the week 0.82% higher.

On Friday in the U.S., the Nasdaq Composite and S&P 500 fell for a sixth straight session, notching their longest losing streak since October 2022.

The downtrend comes as Nvidia dived, adding to recent market woes tied to geopolitical conflicts and sticky inflation.

In contrast, the Dow Jones Industrial Average rose 0.56%, lifted by a rally of more than 6% in American Express following earnings.

Asia markets live updates: China LPR, Israel strikes, oil, gold prices (cnbc.com)

Stock futures rise slightly with S&P 500, Nasdaq on six-day losing streak

UPDATED MON, APR 22 2024 7:21 PM EDT

Stock futures pushed higher on Sunday evening as Wall Street looks to find its footing following a steep sell off for tech companies.

Futures the S&P 500 rose 0.3%. Nasdaq 100 futures gained 0.4%, while those for the Dow Jones Industrial Average added 97 points, or 0.3%.

The S&P 500 and Nasdaq Composite tell 3.05% and 5.52% last week, and are each on six day losing streaks. The Nasdaq fell 2% on Friday alone, with chip giant Nvidia sinking 10%.

The Dow, which has less tech exposure than the other two benchmark averages, was little changed on the week.

The struggles for equities come as recent inflation readings have diminished hopes that the Federal Reserve will cut rates several times in 2024.

“Large weekly losses in SPY and QQQ showed that investors are finally waking up to the reality of the long-promised ‘higher for longer’ interest rate scenario they refused to believe,” Rick Bensignor of Bensignor Investment Strategies said in a note to clients Sunday, referring to major index funds.

This week will deliver several major economic updates, with GDP due out on Thursday and a key inflation reading on Friday.

Corporate earnings could also be a factor in the coming days, with names like TeslaMeta PlatformsAmerican AirlinesMicrosoft and Alphabet all set to report in the week ahead.

Stock futures rise slightly with S&P 500, Nasdaq on six-day losing streak (cnbc.com)

Wall St Week Ahead 'Crowded' megacap trade in US stocks awaits earnings test

By Lewis Krauskopf 

NEW YORK, April 19 (Reuters) - Next week’s earnings reports from some of the market’s biggest technology and growth companies could prove an important test for the U.S. stock rally, which has flagged as expectations for interest cuts fade.

Tesla (TSLA.O), opens new tab, Meta Platforms (META.O), opens new tab, Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab - all set to report next week - are part of the group of companies that had been dubbed the Magnificent Seven as they led the S&P 500 to a 24% gain last year.

The companies are seen as important bellwethers due to dominant positions atop their industries, while heavy index weightings give their share price moves an outsize influence on benchmarks such as the S&P 500. Though the market’s rally has broadened this year, megacap stocks remain a portfolio staple, with fund managers in the latest BofA Global Research survey once again naming them the market’s “most crowded” trade.

Many believe their results could be especially important to markets this time around. The S&P 500 has slid in recent weeks, roughly halving its year-to-date gain to 5% as stickier-than-expected inflation erodes the prospects for the Federal Reserve to cut rates this year.

Additionally, the monthslong rally in stocks has made the index expensive relative to history at a time when rising Treasury yields are pressuring equity valuations. Disappointing earnings from the market’s heavyweights could give investors less reason to hold stocks.

"Psychologically, the companies coming in at or above expectations is important," said David Katz, chief investment officer with Matrix Asset Advisors. "There's a lot of good news built into a lot of these companies."

Investors will also focus on next Friday's release of the monthly Personal Consumption Expenditures Price index, a crucial piece of inflation data before the Fed's April 30-May 1 meeting. Fed funds futures late Thursday were pricing in less than 40 basis points in rate cuts this year, down from 150 bps expected at the start of 2024, according to LSEG data.

More

Wall St Week Ahead 'Crowded' megacap trade in US stocks awaits earnings test | Reuters

Oil prices retreat as Iran-Israel tensions ease

By Colleen Howe and Jeslyn Lerh 

SINGAPORE, April 22 (Reuters) - Oil prices fell on Monday, dragged down by a renewed focus on market fundamentals as Israel and Iran played down the risks of an escalation of hostilities in the Middle East after Israel's apparently small strike on Iran.

Brent futures fell 67 cents, or 0.77%, to $86.62 a barrel by 0415 GMT. The front-month U.S. West Texas Intermediate (WTI) crude contract for May , which expires on Monday, fell 63 cents, or 0.76%, to $82.51 a barrel, while the more active June contract dropped 64 cents to $81.58 a barrel.

"Brent crude prices failed to retain its initial surge, with broad expectations that geopolitical tensions between Israel and Iran may fizzle off given Iran's tamed response," said Yeap Jun Rong, market strategist at IG.

"With that, markets continue to unwind the geopolitical risk premium tied to potential supply disruptions, which seems more unlikely at current point in time," he added.

Both benchmarks had spiked more than $3 a barrel early on Friday, after explosions were heard in the Iranian city of Isfahan in what sources described as an Israeli attack, though gains were capped after Tehran played down the incident and said it did not plan to retaliate.

"Higher-than-expected build in US crude inventories did not help matters as well, with near-term price movement seeming more of a supply-side story than demand," Yeap told Reuters.

U.S. crude inventories rose by 2.7 million barrels, Energy Information Administration data showed last week, nearly double analysts' expectations of a 1.4 million barrel rise.

"Economic concerns again become a bearish factor of the crude market," with prices "under pressure due to a large build in the U.S. stockpile and a hawkish Fed that led to a strong dollar," said independent market analyst Tina Teng.

Chicago Federal Reserve President Austan Goolsbee on Friday became the latest central banker to signal a longer timeline for interest rate cuts because progress on inflation had "stalled".

On Saturday, the U.S. House of Representatives passed an aid package for Ukraine and Israel containing measures that would let the federal government expand sanctions against Iran and its oil production.

But markets shrugged off the news as the impact of the measures, if passed, would depend on how they are interpreted and implemented. Senate consideration of the bill is set to begin on Tuesday.

More

Oil prices retreat as Iran-Israel tensions ease | Reuters

Finally, more bad news from EV land.

Tesla Is Recalling Thousands of Cybertrucks Over Scary Accelerator Fault

Fri, April 19, 2024 at 1:40 PM GMT+1

Tesla is recalling thousands of its Cybertrucks over a problem with the accelerator pedal, the National Highway Traffic Safety Administration announced Friday.

The auto safety regulator said the pedals in certain Cybertruck vehicles have a pad that “may dislodge and become trapped by the interior trim,” in turn causing the truck to “accelerate unintentionally, increasing the risk of a crash.” A total of 3,878 Cybertrucks are being recalled to fix the issue.

Part of a safety recall report said the fault on Cybertrucks manufactured between November 2023 and April 2024 said the accelerator pad can become dislodged when “high force” is applied to the pedal. If the pad then becomes trapped in the interior trim, “the performance and operation of the pedal will be affected, which may increase the risk of a collision.”

An “unapproved change” in the production of the pedal—namely the use of a “lubricant” in its assembly—was blamed as the cause of the fault, with the lubricant reducing how well the pad stuck to the pedal. The report also notes that the vehicle can be brought to a stop if drivers press the brake pedal, which will override the accelerator.

“There were no injuries or accidents because of this,” Tesla CEO Elon Musk wrote in a post earlier this week. “We are just being very cautious.” The NHTSA said Tesla will repair the fault at no charge to owners.

The recall comes after videos purporting to show an issue with Cybertruck accelerators went viral on social media. It also follows a Monday announcement from Musk that the electric automaker will lay off over 10 percent of its global workforce following a sharp fall in sales in first quarter of 2024. The company’s stock has plummeted almost 40 percent so far this year.

Tesla Is Recalling Thousands of Cybertrucks Over Scary Accelerator Fault (yahoo.com)

Design Flaw: Cybertruck’s Accelerator Pedal Getting Stuck!

Design Flaw: Cybertruck’s Accelerator Pedal Getting Stuck! (youtube.com)

Tesla cuts prices in China, Germany and around globe after US cuts

Updated 

BEIJING/FRANKFURT (Reuters) -Tesla has cut prices in a number of its major markets, including China and Germany, following price cuts in the United States, as it grapples with falling sales and an intensifying price war for electric vehicles (EVs), especially against Chinese EVs.

The price cuts come after Tesla, led by its billionaire CEO Elon Musk, reported this month that its global vehicle deliveries in the first quarter fell for the first time in nearly four years.

"Tesla prices must change frequently in order to match production with demand," Musk posted on X on Sunday.

Tesla, the EV market leader, ignited an EV price war over a year ago by aggressively cutting prices at the expense of profit margins.

Tesla cut the starting price of the revamped Model 3 in China by 14,000 yuan ($1,930) to 231,900 yuan ($32,000), its official website showed on Sunday.

In Germany, the price of the Model 3 rear-wheel-drive was trimmed to 40,990 euros ($43,670.75) from 42,990 euros, where the price had been since February.

There were also price cuts in many other countries in Europe, the Middle East and Africa, a Tesla spokesperson said.

U.S. prices of the Model Y, Model X and Model S vehicles were cut by $2,000 on Friday. On Saturday Tesla slashed the price of its Full Self-Driving driver assistant software to $8,000 from $12,000 in the United States.

More

Tesla cuts prices in China, Germany and around globe after US cuts (yahoo.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.

Here’s what 12 European Central Bank members said about interest rates this week

PUBLISHED FRI, APR 19 2024 11:13 AM EDT

·         CNBC spoke to 12 members of the European Central Bank’s Governing Council, which votes on interest rate moves, in New York this week.

·         There were two clear messages: expect a June cut, but beware of spillover effects from the Middle East.

A host of economists and monetary policymakers gathered in New York this week for the International Monetary Fund’s Spring Meetings — including numerous decision-makers from the European Central Bank.

CNBC spoke to 12 members of the ECB’s Governing Council at the event to unpack their latest views on the interest rate outlook and inflationary pressures, after euro zone price rises cooled to 2.4% in March.

The ECB opted to hold rates steady in April and next meets to vote on monetary policy on June 6.

More

Here's what 12 ECB members said about interest rates this week (cnbc.com)

UK retail sales stagnate despite easing inflation

April 19, 2024

LONDON (Reuters) -British retail sales stagnated in March despite high inflation easing recently, representing the first time that they have not grown in monthly terms since December, the Office for National Statistics said on Friday.

Economists polled by Reuters had mostly forecast sales volumes would increase by 0.3% on the month.

But the ONS said sales volumes showed no growth after rising by an upwardly revised 0.1% in February.

Rises in automotive fuel sales - which were the highest since May 2022 - and non-food store sales were offset by falls in food stores and online and other non-store retailers, the ONS said.

Sales volumes excluding fuel sales were down 0.3% on the month.

"What is clear is that the first quarter of the year has been disappointing for many retailers," said Lisa Hooker, leader of industry for consumer markets at PwC. "Lower inflation and the first 2% cut to National Insurance, which was felt in January’s pay packets, has yet to translate into a sustained recovery in spending."

Finance minister Jeremy Hunt - hoping to boost the chances of the ruling Conservative Party in an election expected this year - introduced a second social security tax cut in April after the initial January cut.

There have been some encouraging signs recently from leading UK retailers.

Tesco, the country's biggest supermarket group, and clothing group Next both highlighted an improving consumer outlook and forecast profit growth for 2024. Home improvement retailer Kingfisher warned on profit but said its UK operations were performing better than in France.

Sterling fell briefly against the U.S. dollar and the euro immediately after the retail figures were published.

British consumer price inflation was its slowest in two and a half years in March although it fell by less than expected as motor fuel prices rose, tempering market expectations about the scale of Bank of England interest rate cuts this year.

Friday's figures contrasted with some business surveys that showed a pick-up in retail sales in March.

Compared with a year ago, the ONS data showed sales volumes were 0.8% higher. They rose by 1.9% from the previous three months, the biggest such increase since mid-2021, boosted by a leap in sales in January.

UK retail sales stagnate despite easing inflation (msn.com)

UK inflation could stay near 2% target for three years, says BoE rate-setter

Dave Ramsden’s comments suggest he does not need much more evidence of price growth falling before backing rate cuts

April 19, 2024

UK inflation could hold around the Bank of England’s 2 per cent target for the next three years, according to an interest rate-setter, making the country “less of an outlier and more of a laggard” in terms of price growth.

Dave Ramsden, BoE deputy governor, said on Friday that “the balance of domestic risks to the outlook for UK inflation” had “tilted to the downside” since the central bank published its latest monetary policy report in February.

This created “a scenario where inflation stays close to the 2 per cent target over the whole forecast period at least as likely” and left the UK “as less of an outlier and more of a laggard in terms of recent inflation performance, and one that is now catching up quickly”, Ramsden told an audience in Washington.

The policymaker’s comments suggest he does not need much more evidence of falling inflation he begins voting for interest rate cuts, even as some MPC members have suggested they are not ready to do the same.

Last month Andrew Bailey, BoE governor, told the Financial Times that cuts to the benchmark rate — which stands at a 16-year high of 5.25 per cent — were “in play” at future MPC meetings. But since the last meeting Megan Greene and Jonathan Haskel, both external members of the MPC, have warned that reductions should be “a way off” because of inflation persistence.

Sterling fell slightly following Ramsden’s speech, trading 0.4 per cent lower against the US dollar at $1.239. The Monetary Policy Committee’s forecast showed price growth falling to the 2 per target in the second quarter of this year, before returning to roughly 3 per cent by the end of March 2025.

UK inflation could stay near 2% target for three years, says BoE rate-setter (ft.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

Pandemic policies under scrutiny: American voters question COVID-19 measures

By Brigham Tomco, Deseret News | Posted - April 20, 2024 at 5:30 p.m

SALT LAKE CITY — A majority of American voters believe COVID-19 public health measures infringed on personal freedoms, according to a new Deseret News poll.

The poll also found that a significant plurality of registered voters judge pandemic-related restrictions to have had an overall negative impact on their lives.

This gloomy view reflects missteps by institutions like the Centers for Disease Control and Prevention and state governments as well as the general pain associated with natural disasters, according to public health insiders and outside analysts.

A fair accounting of the nation's COVID-19 reaction is unlikely in today's polarized environment, they said. But four years after being hit by a wave of impromptu pandemic policies, many Americans still look back on lockdowns, mandates and the organizations that recommended them with distrust — a fact that could impede future public health responses.

----A Deseret News/HarrisX poll, which was conducted among 1,010 U.S. registered voters between March 25-26, found that voters do not have a net positive perception of any COVID-19 closures or restrictions.

Half of respondents (49%) said closures of non-essential retail businesses, like restaurants and department stores, had some or a strong negative impact on them personally. One-fifth (20%) said it had some or a strong positive effect on their lives and 30% said it had no impact. Respondents felt similarly about stay-at-home orders, work office closures and having to wear masks.

A plurality of voters said school closures did not impact them personally, likely because only 30% of respondents had at least one child living at home. But among those who said they were personally impacted, 64% said it was negative.

Dissatisfaction with pandemic policies was mostly uniform across race, education and income but diverged sharply between voters with different political affiliations. Self-identified Republicans were consistently more likely to have negative views of COVID-19 restrictions than Democrats by 20 to 30 percentage points, with independents hovering between the two.

More

Pandemic policies under scrutiny: American voters question COVID-19 measures | KSL.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.

Mess is best: Disordered structure of battery-like devices improves performance

Date:  April 18, 2024

Source:  University of Cambridge

Summary:  The energy density of supercapacitors -- battery-like devices that can charge in seconds or a few minutes -- can be improved by increasing the 'messiness' of their internal structure. Researchers used experimental and computer modelling techniques to study the porous carbon electrodes used in supercapacitors. They found that electrodes with a more disordered chemical structure stored far more energy than electrodes with a highly ordered structure.

Researchers led by the University of Cambridge used experimental and computer modelling techniques to study the porous carbon electrodes used in supercapacitors. They found that electrodes with a more disordered chemical structure stored far more energy than electrodes with a highly ordered structure.

Supercapacitors are a key technology for the energy transition and could be useful for certain forms of public transport, as well as for managing intermittent solar and wind energy generation, but their adoption has been limited by poor energy density.

The researchers say their results, reported in the journal Science, represent a breakthrough in the field and could reinvigorate the development of this important net-zero technology.

Like batteries, supercapacitors store energy, but supercapacitors can charge in seconds or a few minutes, while batteries take much longer. Supercapacitors are far more durable than batteries, and can last for millions of charge cycles. However, the low energy density of supercapacitors makes them unsuitable for delivering long-term energy storage or continuous power.

"Supercapacitors are a complementary technology to batteries, rather than a replacement," said Dr Alex Forse from Cambridge's Yusuf Hamied Department of Chemistry, who led the research. "Their durability and extremely fast charging capabilities make them useful for a wide range of applications."

A bus, train or metro powered by supercapacitors, for example, could fully charge in the time it takes to let passengers off and on, providing it with enough power to reach the next stop. This would eliminate the need to install any charging infrastructure along the line. However, before supercapacitors are put into widespread use, their energy storage capacity needs to be improved.

While a battery uses chemical reactions to store and release charge, a supercapacitor relies on the movement of charged molecules between porous carbon electrodes, which have a highly disordered structure. "Think of a sheet of graphene, which has a highly ordered chemical structure," said Forse. "If you scrunch up that sheet of graphene into a ball, you have a disordered mess, which is sort of like the electrode in a supercapacitor."

Because of the inherent messiness of the electrodes, it's been difficult for scientists to study them and determine which parameters are the most important when attempting to improve performance. This lack of clear consensus has led to the field getting a bit stuck.

Many scientists have thought that the size of the tiny holes, or nanopores, in the carbon electrodes was the key to improved energy capacity. However, the Cambridge team analysed a series of commercially available nanoporous carbon electrodes and found there was no link between pore size and storage capacity.

More

Mess is best: Disordered structure of battery-like devices improves performance | ScienceDaily

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

World Debt Clocks (usdebtclock.org)

What Are Mises' Six Lessons?

SATURDAY, APR 20, 2024 - 09:05 PM

Ludwig von Mises’s Economic Policy: Thoughts for Today and Tomorrow has become quite popular recently. The Mises Book Store has sold out of its physical copies, and the PDF, which is available online for free, has seen over 50,000 downloads in the past few days.

This surge in interest in Mises’s ideas was started by UFC fighter Renato Moicano, who declared in a short post-fight victory speech, “I love America, I love the Constitution...I want to carry...guns. I love private property. Let me tell you something. If you care about your...country, read Ludwig von Mises and the six lessons of the Austrian economic school.”

The “six lessons” he is referring to is Mises’s book, Economic Policy: Thoughts for Today and Tomorrow, which was republished by our friends in Brazil under the title “As Seis Lições” (“The Six Lessons”).

If you are interested in what Mises has to say in this book, which is a transcription of lectures he gave in Argentina in 1959, here’s a brief preview, which I hope inspires you to read the short book in full. As a side note, if you are an undergraduate student who is interested in these ideas, the Mises Institute’s next Mises Book Club is on this text (pure coincidence!).

Lecture One: Capitalism

More

What Are Mises' Six Lessons? | ZeroHedge

The key insight of Adam Smith's Wealth of Nations is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.

Milton Friedman.