Baltic Dry Index. 2498 -167 Brent Crude 74.23
Spot Gold 1803
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 17/12/21 World 273,250,760
Deaths 5,353,476
“Why,
sometimes I've believed as many as six impossible things before breakfast.”
Fed Chairman Powell, with apologies to Alice in Wonderland
Yesterday, the
Bank of England boldly went where no central bank dared go before,
raised their key interest rate slightly. Few noticed or cared, more below.
In the Asian stock casinos this morning, the return of nervousness about the coming year.
Suppose omicron isn’t more benign than delta? Well, over the next six weeks we are about to find out.
What if the BOE’s interest rate hike is just the start of a round of general interest rate hikes?
What if President Biden can’t get his “social infrastructure” extra two trillion dollar Magic Money Tree spending bill passed.
And that’s not all. President Biden has declared economic war on China and is threatening more economic war on Russia over his son’s favourite country in Europe, the Ukraine.
A troubling Christmas and New Year seems to lie ahead, even if omicron turns out to be mild.
Asia-Pacific markets trade mostly lower following overnight losses on Wall Street
SINGAPORE — Asia-Pacific markets traded mostly lower on Friday, following overnight losses on Wall Street, as investors assessed monetary policy decisions from two key central banks.
Japan’s Nikkei 225 fell 0.92% while the Topix index slid 0.7%. Chinese mainland shares also tumbled, with the Shanghai composite falling 0.59% while the Shenzhen component shed 1%.
In Hong Kong, the Hang Seng index slipped 0.79% while the tech-focused Hang Seng Tech Index dropped 2.14%.
Hong Kong-listed shares of Chinese tech companies sold off sharply: Alibaba shares fell 3.07%, JD was down 3.65%, Meituan declined 3.27%, search engine giant Baidu tumbled 1.01% and Tencent slipped 2.25%.
The United States on Thursday said it was imposing trade restrictions on more than 30 Chinese research institutes and entities over human rights violations and the alleged development of technologies, such as brain-control weapons, that undermine U.S. national security.
South Korea’s Kospi traded near flat, up just 0.06% after erasing earlier losses.
In Australia, shares bucked the downward trend with the benchmark ASX 200 gaining 0.68%.
Friday’s session follows overnight declines on Wall Street where weakness among large tech stocks dragged down major market averages.
Central banks in focus
Elsewhere, the Bank of England hiked interest rates on Thursday for the first time since the pandemic started. It raised its main interest rate from a historic low of 0.1% to 0.25% amid mounting inflation pressure.
The European Central Bank further cut its bond purchases overnight but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022. It left the benchmark refinancing rate unchanged at 0%, while the rate on its marginal lending facility remained at 0.25%.
Decisions from Bank of England and European Central Bank followed after earlier in the week, the U.S. Federal Reserve said it will accelerate the reduction of its monthly bond purchases, after which, the central bank expects to start raising interest rates.
The Bank of Japan is due to announce its monetary policy decision today and analysts say they do not expect any substantive changes.
More
https://www.cnbc.com/2021/12/17/asia-markets-central-bank-decisions-boj-dollar.html
After almost raising their key interest rate last month before wimping out at the last minute, the Old Lady of Threadneedle Street finally pulled the trigger on Thursday, raising their rigged interest rate by a whopping 15 basis points to 0.25 percent.
With UK inflation running at over 5 percent and rising, the BOE is only a massive 4.85 percent behind rising UK inflation. There, that showed them!
Bank of England defies expectations and hikes rates for first time in three years
Thursday 16 December 2021 12:03 pm
The Bank of England today defied City expectations and hiked interest rates for the first time in three years.
The Bank’s rate setting committee voted 8-1 in favour of lifting rates 15 basis points from a record low 0.1 per cent to 0.25 per cent.
The move to hike comes as inflation has soared to over half the Bank’s target, hitting 5.1 per cent, the highest level in over 10 years and up from 4.2 per cent, according to the Office for National Statistics (ONS).
The pound rallied sharply on the news, strengthening 0.63 per cent against the dollar to buy $1.3352.
The decision to raise rates was driven by the Bank raising its forecasts for inflation. Threadneedle Street now expects the cost of living to hit six per cent next spring.
Inflation hits 10-year high as energy, fuel and clothing costs jump
By Russell Hotten Business reporter, BBC News 15 December 2021
The cost of living surged by 5.1% in the 12 months to November, up from 4.2% the month before, and its highest level since September 2011.
Higher transport and energy costs drove the rise, which was above forecasts of a 4.7% increase, the Office for National Statistics (ONS) said.
Its chief economist Grant Fitzner said more expensive fuel, energy, clothing and second hand cars were big factors.
The cost of raw materials also rose significantly, he added.
More
https://www.bbc.co.uk/news/business-59663947
Finally, about that Fed promised soft landing next year, don’t count on it says David Rosenburg, a financial expert with an enviable track record.
David Rosenberg: Investors should be skeptical of the Fed's 'surreal' positive outlook
Remember, in the past it has been too bullish on growth two-thirds of the time
Publishing date: Dec 16, 2021
The stock market surged on Wednesday’s United States Federal Reserve statement and revisions as well as chair Jay Powell’s commentary. It seemed a little surreal, but he was so emphatically positive on the economic outlook that it stands to reason the typical equity investor would be enthused.
Sure, rates may go up, but, hey, growth is going to be great. As for bonds, yields were unchanged, even with the Fed sneaking more rate hikes into its projections. Again, sure, the Fed says it will take the “carry” away, but its vigilance will reverse this inflationary experience and take the core PCE deflator back down (a year later for the two-per-cent target to be achieved).
Talk about nirvana.
Let me say this, please. I’ve been in the business for 35 years and have seen a whole lot. I know these Fed forecasts and dot plots mean nothing. We are still in a pandemic and the Fed has admitted it no longer has model-based policy rules. Gut feel. Intuition. Make it up as we go along.
Look at how Powell has pivoted since September — just three months ago. Think he won’t pivot again? The Fed is forecasting a return to 3.5-per-cent unemployment and hints at rate hikes when the same central bank was cutting rates in 2018 with the same unemployment rate. Yes, yes, inflation was lower then, but we weren’t in a global pandemic that doesn’t have a light at the end of the tunnel.
An ill-timed series of rate hikes will raise recession risks unnecessarily
Powell could have simply come out and said we are in a bog, there is tremendous uncertainty, that living with this current supply-side inflation is a price we have to pay, but an ill-timed series of rate hikes will raise recession risks unnecessarily. I know the promoters on Wall Street agree with Powell that growth is strong, but as now we enter a less accommodative monetary and fiscal policy regime, the pace of economic activity is set to slow.
We have no clue how the economy fares with the ongoing pandemic (Did Powell realize Cornell and Princeton are going back to remote exam taking? Or that Broadway shows are being upended again? Or that cases in the NFL are spreading fast and complicating the playoff picture?) and with no more policy stimulus. Rather, forecasts are of restraint and more yield curve flattening. And my moles in Washington say Joe Biden’s US$2-trillion social infrastructure boondoggle is dead, at least for this year.
----We have long been skeptical of the Fed’s forecasts, even though investors treat them (and the dot plots) as gospel. Look at the accuracy of the Fed’s forecasts (a total of 110 data points back to 2012):
- Funds rate: accurate 37 per cent of the time;
- Core inflation: accurate 29 per cent of the time;
- Unemployment rate: accurate 24 per cent of the time;
- Real GDP growth: accurate 17 per cent of the time.
The vast tendency from the Fed has been to be biased towards a higher funds rate and stronger economic growth than we end up seeing.
More
“Chairman
Powell asked the Cheshire Cat, who was sitting in a tree, “What road do I
take?”
The cat asked, “Where do you want to go?”
“I don’t know,” Powell answered.
“Then,” said the cat, “it really doesn’t matter, does it?”
Alice's Adventures In Wonderland
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
German wages barely grew in 2021 despite skyrocketing inflation
December 16, 2021 8:30 AM GMT
BERLIN, Dec 16 (Reuters) - German collectively agreed wages barely grew this year despite soaring inflation, data showed on Thursday, effectively leaving consumers with less money in their wallets, which could hurt future household spending in Europe's largest economy.
The Federal Statistics Office said the negotiated wages of unionised employees rose by an average of 1.3% on the year in 2021, the smallest increase recorded since the office began compiling the data in 2010.
With consumer prices projected to rise by 3% this year, workers suffered an actual drop in real wages.
Central bankers and policymakers are watching wage developments in the euro zone very closely. They are looking for any hints as to whether rising consumer prices lead to higher wages which could mark the start of a wage price spiral and lead to higher inflation also in the medium term.
The decline in real wages bodes ill for future household spending which was the sole driver of gross domestic product growth in the third quarter in light of supply bottlenecks and production problems in the industrial sector.
Restrictions to break a fourth wave of coronavirus infections are likely to hurt retail sales and business in the services sector, knocking away Germany's last pillar of growth in the final quarter this year.
The new chancellor, Olaf Scholz from the centre-left Social Democrats, has vowed to raise the national minimum wage by around 25% to 12 euros an hour next year.
Euro zone business growth slipped in December as Omicron rose
December 16, 2021 11:25 AM GMT
LONDON, Dec 16 (Reuters) - Euro zone business growth slowed more than expected this month as renewed restrictions imposed to curb the Omicron coronavirus variant curtailed the recovery in the bloc's dominant services industry, a survey showed on Thursday.
Europe is facing a fourth wave of infections and many governments have been encouraging citizens to stay home and avoid unnecessary social contact.
IHS Markit's Flash Composite Purchasing Managers' Index, a good indicator of overall economic health, dropped to 53.4 in December from 55.4 in November, its lowest since March and below the 54.0 predicted in a Reuters poll.
That headline number was dragged down by the services PMI, which sank to an eight-month low of 53.3 from 55.9. While above the 50-mark separating growth from contraction it missed the Reuters poll estimate for 54.1.
"The renewed decline in the Composite PMI in December suggests growth slowed to a crawl as tighter restrictions and growing consumer caution are taking their toll on economic activity, with the service sector bearing the brunt," said Michael Tran at Capital Economics.
Growth in demand for services dropped to its lowest since April - when it contracted - with the new business index falling to 52.6 from 54.2.
In the German private sector growth evaporated as restrictions hit the services sector in Europe's largest economy, earlier data showed. read more
Meanwhile, in France - the euro zone's second biggest economy and the only other country in the bloc to report flash data - activity expanded at a slower pace, a trend partly due to the new COVID-19 variant. read more
More
UK, Australia sign deal forecast to create 10 billion pounds in extra trade
December 17, 2021 3:22 AM GMT
LONDON/SYDNEY Dec 17 (Reuters) - Britain and Australia have signed a free trade deal projected to eventually boost bilateral trade by over 10 billion pounds ($13.3 billion), eliminating tariffs, opening up sectors like agriculture and allowing freer movement for service-sector professionals.
The elimination of tariffs on Australian wine, and a tariff-free quota for beef will help exporters hit by sanctions in China to pivot to British sales. British cars, whiskey, confectionary and cosmetics will see tariffs phased out in Australia.
"This is the most comprehensive and ambitious free trade agreement that Australia has concluded, other than with New Zealand," Australia's Prime Minister Scott Morrison and Trade Minister Dan Tehan said in a joint statement.
China is Australia's largest trading partner, but a diplomatic dispute led to Beijing imposing sanctions on a raft of Australian agricultural products last year. This prompted the Morrison government to urge exporters to reduce their reliance on China. read more
The agreement with Britain would "further strengthen the special relationship between our two countries", Morrison said.
More
Oil prices head for weekly loss on Omicron coronavirus uncertainty
December 17, 2021 5:34 AM GMT
SINGAPORE, Dec 17 (Reuters) - Oil prices dipped on Friday, putting the market on track for a weekly loss, as surging cases of the Omicron coronavirus variant raised fears new curbs may hit fuel demand, while a weaker dollar supported commodity markets broadly.
Brent crude futures fell 74 cents, or 1%, to $74.28 a barrel at 0530 GMT while U.S. West Texas Intermediate (WTI) crude futures dropped 81 cents, or 1.1%, to $71.57 a barrel. Brent is headed for a 1.2% loss this week, while WTI is poised to finish the week down 0.1%.
"Look at what's happening with Omicron - that's a negative which people are trying to digest. Are we going to be in line for some new restrictions? That's what the market's trying digest," said Commonwealth Bank commodities analyst Vivek Dhar.
In Denmark, South Africa and the United Kingdom, the number of new Omicron cases has been doubling every two days. Denmark's Prime Minister Mette Frederiksen on Thursday warned the government may impose further curbs to limit the spread of Omicron. read more
In the United States, the rapid spread of the Omicron variant has led some companies to pause plans to get workers back into offices. read more
----The Organization of the Petroleum Exporting Countries, Russia and allies, together known as OPEC+, have said they could meet ahead of their scheduled Jan. 4 meeting if changes in the demand outlook warrant a review of their plan to add 400,000 barrels per day of supply in January.
Despite the Omicron threats to demand, Goldman Sachs said on Friday the new variant has had a limited impact on mobility or oil demand, adding it expects oil consumption to hit record highs in 2022 and 2023. read more
More
https://www.reuters.com/markets/commodities/oil-heads-flat-week-omicron-uncertainty-2021-12-17/
Covid-19 Corner
This section will continue until it becomes unneeded.
Eight heart inflammation cases among young kids who got COVID-19 shot - U.S. CDC
December 16, 2021 5:52 PM GMT
Dec 16 (Reuters) - The U.S. Centers for Disease Control and Prevention said on Thursday it had received reports of eight cases of myocarditis, a type of heart inflammation, in children aged 5-11 years who received Pfizer (PFE.N) and BioNTech's COVID-19 vaccine.
The CDC had previously said that reporting rates of myocarditis for boys aged 16 to 17 could be more than 69 cases per million second doses administered and around 40 cases per million second doses in boys aged 12-15 years old.
The CDC did not say whether it believes there is a link between the myocarditis cases and the vaccine, or disclose the rate of myocarditis in the age group without vaccination.
The agency said there had been over 7 million vaccine doses in the 5-11 age group at the time it examined the data, with 5.1 million first doses and 2 million second doses. The cases had a mild clinical course, the CDC said.
The cases were reported in the U.S. Vaccine Adverse Event Reporting System and presented by the CDC to a panel of its expert advisers.
Latest statistics on England mortality data suggest systematic mis-categorisation of vaccine status and uncertain effectiveness of Covid-19 vaccination
December 2021 DOI:10.13140/RG.2.2.14176.20483 Project: Covid-19
The risk/benefit of Covid vaccines is arguably most accurately measured by an all-cause mortality rate comparison of vaccinated against unvaccinated, since it not only avoids most confounders relating to case definition but also fulfils the WHO/CDC definition of "vaccine effectiveness" for mortality.
We examine the latest UK ONS vaccine mortality surveillance report which provides the necessary information to monitor this crucial comparison over time. At first glance the ONS data suggest that, in each of the older age groups, all-cause mortality is lower in the vaccinated than the unvaccinated. Despite this apparent evidence to support vaccine effectiveness-at least for the older age groups-on closer inspection of this data, this conclusion is cast into doubt because of a range of fundamental inconsistencies and anomalies in the data.
Whatever the explanations for the observed data, it is clear that it is both unreliable and misleading. While socio-demographical and behavioural differences between vaccinated and unvaccinated have been proposed as possible explanations, there is no evidence to support any of these. By Occam's razor we believe the most likely explanations are systemic miscategorisation of deaths between the different categories of unvaccinated and vaccinated; delayed or non-reporting of vaccinations; systemic underestimation of the proportion of unvaccinated; and/or incorrect population selection for Covid deaths.
More
Omicron Infects 70 Times Faster But Is Less Severe, Study Says
By Chris Kay15 December 2021, 11:46 GMT
The omicron variant infects around 70 times faster than delta and the original Covid-19 strain, though the severity of illness is likely to be much lower, according to a University of Hong Kong study that adds weight to the early on-ground observations from South African doctors.
The supercharged speed of omicron’s spread in the human bronchus was found 24 hours following infection, according to a Wednesday statement from the university. The study, conducted by a team of researchers led by Michael Chan Chi-wai, found that the newest variant of concern replicated less efficiently -- more than 10 times lower -- in the human lung tissue than the original strain which may signal “lower severity of disease.”
Apple temporarily closes three stores in response to rising Covid rates
Published Wed, Dec 15 2021 3:23 PM EST Updated Wed, Dec 15 2021 6:34 PM EST
Apple temporarily shut three stores on Wednesday as Covid-19 cases rise.
A store in Miami is closed through Thursday, and a store in Ottawa, Ontario, and a third in Annapolis, Md., are closed through Friday, according to Apple’s website.
The closures raise questions about the impact of the Covid pandemic on the holiday-shopping season amid concerns from public health authorities about the impact of the omicron variant, which appears to be more transmissible.
“We regularly monitor conditions and we will adjust our health measures to support the wellbeing of customers and employees,” an Apple spokesperson said in a statement. “We remain committed to a comprehensive approach for our teams that combines regular testing with daily health checks, employee and customer masking, deep cleaning and paid sick leave.”
Apple said that store employees will take Covid-19 tests before reopening, so the closures could be delayed beyond Thursday and Friday, depending on the results. Apple’s retail employees have had access to weekly at-home tests provided by the company since earlier this year.
Apple also announced this week that it will require face masks for customers at all stores in the United States.
More
Next, some vaccine links kindly sent along from a LIR reader in Canada. The links come from a most informative update from Stanford Hospital in California.
World Health Organization - Landscape of COVID-19 candidate vaccines. https://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines
NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus resource centre
https://coronavirus.jhu.edu/map.html
Rt Covid-19
Centers for Disease Control Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The Spectator Covid-19 data tracker (UK)
https://data.spectator.co.uk/city/national
Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported.
Exotic quantum particles — less magnetic field required
Research paves the way for future quantum devices and applications
Date: December 15, 2021
Source: Harvard John A. Paulson School of Engineering and Applied Sciences
Summary: Researchers have observed exotic fractional states at low magnetic field in twisted bilayer graphene for the first time.
Exotic quantum particles and phenomena are like the world's most daring elite athletes. Like the free solo climbers who scale impossibly steep cliff faces without a rope or harness, only the most extreme conditions will entice them to show up. For exotic phenomena like superconductivity or particles that carry a fraction of the charge of an electron, that means extremely low temperatures or extremely high magnetic fields.
But what if you could get these particles and phenomena to show up under less extreme conditions? Much has been made of the potential of room-temperature superconductivity, but generating exotic fractionally charged particles at low-to-zero magnetic field is equally important to the future of quantum materials and applications, including new types of quantum computing.
Now, a team of researchers from Harvard University led by Amir Yacoby, Professor of Physics and of Applied Physics at the Harvard John A. Paulson School of Engineering and Applied Sciences (SEAS) and Ashvin Vishwanath, Professor of Physics in the Department of Physics, in collaboration with Pablo Jarillo-Herrero at the Massachusetts Institute of Technology, have observed exotic fractional states at low magnetic field in twisted bilayer graphene for the first time.
The research is published in Nature.
"One of the holy grails in the field of condensed matter physics is getting exotic particles with low to zero magnetic field," said Yacoby, senior author of the study. "There have been theoretical predictions that we should be able to see these bizarre particles with low to zero magnetic field, but no one has been able to observe it until now."
The researchers were interested in a specific exotic quantum state known as fractional Chern insulators. Chern insulators are topological insulators, meaning they conduct electricity on their surface or edge, but not in the middle.
In a fractional Chern insulator, electron interactions form what's known as quasiparticles, a particle that emerges from complex interactions between large numbers of other particles. Sound, for example, can be described as a quasiparticle because it emerges from the complex interactions of particles in a material. Like fundamental particles, quasiparticles have well defined properties like mass and charge.
In fractional Chern insulators, electron interactions are so strong within the material that quasiparticles are forced to carry a fraction of the charge of normal electrons. These fractional particles have bizarre quantum properties that could be used to create robust quantum bits that are extremely resilient to outside interference.
To build their insulator, the researchers used two sheets of graphene twisted together at the so-called magic angle. Twisting unlocks new and different properties in graphene, including superconductivity, as first discovered by Jarillo-Herrero's group at MIT, and states known as Chern bands, which hold great potential to generate fractional quantum states, as shown theoretically by Vishwanath's group at Harvard.
Think of these Chern bands like buckets that fill up with electrons.
"In previous studies, you needed a large magnetic field in order to generate these buckets, which are the topological building blocks you need to get these exotic fractional particles," said Andrew T. Pierce, a graduate student in Yacoby's group and co-first author of the paper. "But magic-angle twist bilayer graphene already has these useful topological units built in at zero magnetic field."
---- "The discovery of low magnetic field fractional Chern insulators in magic angle twisted bilayer graphene opens a new chapter in the field of topological quantum matter," said Jarillo-Herrero, the Cecil and Ida Green Professor of Physics at MIT and senior author of the study. "It offers the realistic prospect of coupling these exotic states with superconductivity, possibly enabling the creation and control of even more exotic topological quasiparticles known as anyons."
The research was co-authored by Jeong Min Park, Daniel E. Parker, Eslam Khalaf, Patrick Ledwith, Yuan Cao, Seung Hwan Lee, Shaowen Chen, Patrick R. Forrester, Kenji Watanabe, Takashi Taniguchi.
It was supported in part by the U.S. Department of Energy, Basic Energy Sciences Office, Division of Materials Sciences and Engineering under award DE-SC0001819, Gordon and Betty Moore Foundation, National Science Foundation, and the Simons Foundation.
Another weekend and a weekend to ponder on how high inflation will be this time next year. With our central banksters deliberately promoting inflation and politicians everywhere issuing new Magic Money Tree fiat money by the trillions, 2022 is shaping up to be a year of financial disaster. Have a great weekend everyone.
Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation.
Warren
Buffett.
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