Baltic Dry Index. 3343 -80 Brent Crude 74.21
Spot Gold 1778
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 09/12/21 World 268,740,534
Deaths 5,302,968
“If everything seems under control, you're not going fast enough.”
Today’s stock casinos action is likely to be dominated by the US Consumer Price Index figure and the Wall Street spin meisters attempt at a bullish spin on the number.
The current spin is for a CPI figure coming in about 6.7 percent year on year, so look for a stock rally if it comes in below 6.5 percent. Look for a sharp late sell-off if it comes in above 7 percent.
Of course, like
most modern statistics nowadays, it’s open to a degree of manipulation and
doesn’t give a true reflection of the kind of everyday inflation most ordinary
families experience in everyday life, but for the regular investors
gamblers in the stock casinos it’s a close enough proxy to trigger buying and
selling.
With a Fed meeting coming up next week the casino punters are more nervous than usual over today’s CPI release.
With a Bank of England meeting also next week, will it trigger the BOE into being the first major central bank into an interest rate hike?
Asia-Pacific markets decline broadly as investors await U.S. inflation data
SINGAPORE — Asia-Pacific markets declined on Friday as investors assess risks associated with the new omicron Covid variant and look ahead to key inflation data in the U.S.
Japan’s Nikkei 225 extended losses from the previous session and was down 0.51%. The Topix index traded 0.33% lower.
In South Korea, the Kospi fell 0.5% while the Kosdaq was down 0.52%.
Australian shares also traded lower. The ASX 200 fell 0.47%, with the energy subindex dropping 1.88% after oil prices declined overnight.
Energy names in Australia sold off: Santos shares fell 2.57%, Oil Search was lower by 2.42% and Woodside Petroleum declined 1.31%.
----Shares on the Chinese mainland also traded lower, with the Shanghai composite down 0.33% while the Shenzhen component dropped 0.43%.
In Hong Kong, the Hang Seng index fell 0.3%.
Friday’s session in Asia follows overnight declines on Wall Street.
“The more cautious tone in risk market probably has as much or more to do with apprehension ahead of tonight’s US CPI report,” Ray Attrill, head of foreign-exchange strategy at the National Australia Bank, said in a morning note.
U.S. inflation data
Stateside, the Labor Department is set to release November’s consumer price index Friday morning local time, which measures the cost of dozens of items.
Estimates suggest the reading could mark its highest year-over-year level since 1982.
While a jump in inflation is hardly news to the market, investors will look to see how hot the level is and what kind of a reaction that might trigger from the U.S. Federal Reserve.
“We expect the data will reinforce that underlying inflation in the US is both broad and high,” said Kim Mundy, senior economist and currency strategist at the Commonwealth Bank of Australia, in an early morning note. “Importantly, another strong print will reinforce FOMC Chair Jay Powell’s hawkish turn last week.”
Last week, the Fed chair said it was “probably a good time to retire” the word “transitory” to describe inflation and promised that the central bank would be vigilant in controlling inflation.
At its policy meeting next week, the Fed is expected to say that it will speed up the pace of its bond purchase taper, while also likely hint at a more aggressive path for interest rate hikes in 2022.
More
https://www.cnbc.com/2021/12/10/asia-markets-us-inflation-data-china-oil-prices.html
Investors brace for the highest inflation reading in nearly 40 years
If the consensus is correct, the last time inflation was this high was in the early years of the Reagan administration – as the U.S. found itself amid a steep and persistent recession.
The Labor Department on Friday morning will release November’s consumer price index, a gauge that measures the cost of dozens of items. The index covers common goods including gasoline and ground beef, but extends into more detailed purchases such as frozen vegetables, indoor plants and flowers and pet supplies.
Wall Street expects the the index to reflect a 0.7% gain for the month, which would translate into a 6.7% increase from a year ago, according to Dow Jones estimates. Excluding food and energy, so-called core CPI is projected to rise 0.5% on a monthly basis and 4.9% on an annual basis.
If those estimates are correct, it would be the highest year-over-year reading for headline CPI since June 1982, when the index surpassed 7% after topping out at over 14% in both March and April 1980, a record that still stands. On core, the level would be the highest since June 1991.
The jump in inflation, though, is hardly news to the market. Investors have watched a variety of data points in recent months show their highest levels in decades. In fact, some economists think the headline increase could exceed 7%.
What the market will care about is just how hot the level is, and what reaction it might trigger from the Federal Reserve.
“I don’t think it would be good for stocks,” said Tom Graff, head of fixed income at Brown Advisory. “The most likely reason stocks would correct in the next several months would be that inflation is viewed as so problematic that the Fed is going to have to get aggressive much sooner.”
Fed reaction on tap
The Fed already is reacting to inflation and is soon to do more.
At its meeting next week, the central bank is expected to speed up the pace at which it is withdrawing economic support. In practice, that means likely doubling the taper in bond purchases to $30 billion a month.
That would bring a program that had seen $120 billion a month in purchases to an end by around March 2022. After that, the Fed could start raising interest rates if inflation is still a problem.
----Current market pricing is for the Fed to enact its first 25-basis point rate hike in May or June. There’s about a 61% chance of three hikes coming by December, according to the CME’s Fed Watch tracker.
However, TS Lombard chief U.S. economist Steven Blitz thinks the Fed’s first hike likely will come as soon as March, the same month tapering likely will end.
More
IMF chief economist sees inflationary pressures, risks from Omicron
December 9, 2021 4:14 PM GMT
GENEVA, Dec 9 (Reuters) - Central banks do not have the space to keep monetary policy loose and interest rates low, the International Monetary Fund's chief economist said on Thursday, also warning that the pandemic could turn out far more costly than estimated.
Gita Gopinath, IMF chief economist, said that it had estimated that a more transmissible SARS-CoV-2 variant such as Omicron could cost the global economy a further $5.3 trillion, in addition to the current projected loss of $12.5 trillion.
She was speaking to an event organised by the World Health Organization (WHO) which seeks $23.4 billion for vaccines and other tools against the COVID-19 pandemic through the ACT (Access to COVID Tools) Accelerator, co-run with the GAVI Vaccine Alliance.
"We are now in the phase where countries around the world just don't have the space to keep monetary policy very loose, to kind of keep interest rates extremely low. We are seeing inflationary pressures building up around the world," she said.
"And so think of a situation where you could have this pandemic last longer, you have longer supply disruptions that are putting inflationary pressures, and then we have the real risk of something we have avoided so far, which is stagflationary concerns," Gopinath added.
More
https://www.reuters.com/business/imf-chief-economist-sees-inflationary-pressures-2021-12-09/
Finally, in the great commodity Supercycle, China’s out hunting for aluminium, (and virtually every other metal) for the great inflationary century ahead.
In the China real estate sector, the ratings agencies are calling time. What will this weekend bring?
China Steps Up Overseas Hunt for Ore Needed to Make Aluminum
Thu, December 9, 2021, 8:37 AM
(Bloomberg) -- China’s aluminum industry, the world’s biggest, is becoming increasingly dependent on overseas supplies of the ore needed to make the metal, another sign of the nation’s chronic reliance on raw-material imports.
The aluminum used in everything from aircraft to drinks cans is made from alumina, an intermediate material produced from bauxite ore. Some 49% of China’s alumina capacity will be fed by overseas bauxite next year, up from 47% in 2021 and 30% in 2015, according to state-owned researcher Beijing Antaike Information Development Co. Bauxite imports may climb to 130 million tons in 2022 from around 110 million tons this year.
Depletion of local resources, falling ore grades and tighter environmental regulations have constrained domestic mining, and led to a decline in local bauxite production since 2018. Chinese alumina makers are renovating production lines to take more foreign bauxite and investing in major mining economies like Guinea and Indonesia to secure supply.
Supply Risks
Hangzhou Jinjiang Group is planning to boost imports of bauxite to 12 million tons next year from 8 to 9 million tons this year, said Guo Chunqiao, an analyst with the alumina producer. That should ensure the company will continue to operate near full capacity. The producer will source the material directly from miners in Guinea, Indonesia, Australia, Jamaica and Malaysia to reduce purchase costs, Guo added.
As dependence on overseas ore increases, the suppliers of bauxite aren’t diverse enough, and this poses risks for the future, said Yan Jin, an analyst with Beijing Antaike. Imports from Guinea, Australia and Indonesia represented 47%, 33% and 17% respectively of the country’s total inbound shipments in 2020. A coup in Guinea in September roiled the aluminum market and showed how rapidly concerns can erupt over raw material supplies.
Aluminum fell 0.2% to $2,622 a ton on the London Metal Exchange as of 8:15 a.m. That’s a 32% advance this year, leaving it as the best performing base metal after tin. Futures were down 0.5% in Shanghai.
More
https://www.yahoo.com/news/china-steps-overseas-hunt-ore-044604615.html
Evergrande, Kaisa cut by Fitch to default after missed payment deadlines
December 9, 2021 12:17 PM GMT
HONG KONG/LONDON, Dec 9 (Reuters) - Ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group on Thursday, saying they had defaulted on offshore bonds, while a source said Kaisa had started work on restructuring its $12 billion offshore debt.
The downgrades to so-called "restricted default" status come even though Evergrande (3333.HK) and Kaisa (1638.HK) have not officially announced defaults that could result in drawn-out debt restructuring processes.
The fate of Evergrande, which has more than $300 billion in liabilities, and other indebted Chinese property companies has gripped financial markets in recent months amid fears of knock-on effects around the world, although Beijing has repeatedly sought to reassure investors.
In its note on Evergrande, Fitch said the developer did not respond to its request for confirmation on coupon payments worth $82.5 million that were due last month, with the 30-day grace period ending this week, and so assumed "they were not paid."
Evergrande and Kaisa did not immediately respond to Reuters' requests for comment on Fitch's decision.
"The defaults of Evergrande and Kaisa move us to the second step of this China Property downturn, with systemic risk being gradually replaced by idiosyncratic risk," said Robin Usson, credit analyst at Federated Hermes.
"It will be interesting to see the role played by SOEs (state-owned enterprises) in the restructuring process, the level of 'control' exerted by the government over this 'marketed-oriented approach'," Usson added.
----Fitch defines a restricted default as indicating an issuer has experienced a default or a distressed debt exchange, but has not begun winding-up processes such as bankruptcy filings and remains in operation.
The non-payment has triggered an "event of default" on Evergrande's bonds and its other U.S. dollar notes will become due immediately and payable if the bond trustee or holders of at least 25% in aggregate amount declare so, Fitch said.
More
“Who is wise? He that learns from everyone. Who is powerful? He that governs his passions. Who is rich? He that is content. Who is that? Nobody.”
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
Japan's wholesale inflation hits record high as price pressure broadens
December 10, 2021 1:22 AM GMT
TOKYO, Dec 10 (Reuters) - Japan's wholesale inflation hit a record 9.0% in November, pushing gains for a ninth straight month, a sign upward pressure on prices from supply bottlenecks and rising raw material costs were broadening.
The rising cost pressures, coupled with a weak yen that inflates the price of imported goods, add to pain for the world's third-largest economy as it emerges from a consumption slump caused by the coronavirus pandemic.
"Japan imports a lot of goods, so prices may rise for a range of products. That could dent consumption," said Takeshi Minami, chief economist at Norinchukin Research Institute.
The year-on-year rise in the corporate goods price index (CGPI), which measures the prices companies charge each other for their goods and services, was the fastest pace since comparable data became available in 1981.
It exceeded a median market forecast for an 8.5% gain and a revised 8.3% rise in October, Bank of Japan data showed on Friday.
An index measuring yen-based import prices rose a record 44.3% in November from a year earlier in a sign a weak yen was inflating input costs for Japan, which relies heavily on imports for energy and food products.
Oil and coal prices spiked 49.3% in November from a year earlier, accelerating from a 44.4% gain in October. Other key drivers were steel goods, which rose 23.9%, and chemical goods, which were up 14.1%, the data showed.
In a sign the upward pressure was broadening, wholesale prices also crept up for food and machinery goods as more companies passed on rising input costs, it showed.
But the pass-through remains modest for final goods. While raw material costs spiked 74.6% in November from a year earlier, final goods prices were up just 4.6%.
More
U.S. workers are about to see their biggest pay increase in more than a decade
Wed, December 8, 2021, 3:24 PM
WASHINGTON - Americans are in line for their biggest wage increase in more than a decade, according to a report released Wednesday, as companies struggle against a tight labor market and high inflation.
Businesses are expected to bump up pay an average 3.9% in 2022, according to the Conference Board report. That's the fastest wage growth since 2008.
Higher pay for new hires was the most commonly cited reason for the uptick, according to the nonprofit business group, suggesting labor shortages and high turnover across industries could be giving employees more leverage. Inflation, which is higher than it has been in about 30 years, was the second most commonly cited factor.
The Conference Board's survey asks human resources executives about their compensation plans for the coming year. Their plans can change, but the surveys nonetheless hint at where wages might be going.
The projections come as overall wage growth "dramatically accelerated" during the past six to eight months, the report says. Wage increases are most substantial among those younger than 25 and those who recently changed jobs. The increased willingness of many people to leave jobs for greener pastures may be persuading companies they need to pay more, the group said.
"Employers faced with extensive departures of experienced workers will raise wages faster for current employees in order to maintain an effective workforce," the report states.
Meanwhile, inflation has surged to the highest levels since 1982, according to the Conference Board, noting that the consumer price index jumped 7.8% from February to October.
The organization predicted that labor shortages are likely to continue throughout 2022, likely pushing wage growth well above 4%.
https://www.yahoo.com/news/u-workers-see-biggest-pay-152403833.html
Central Bank stocks up on gold as inflation climbs
Purchase of 2 tonnes of gold ended decade- long period of unchanged holdings
Wed, Dec 1, 2021, 16:11
The Central Bank of Ireland has been adding to its gold reserves as inflation in the euro area runs far ahead of the European Central Bank target.
The bank’s purchase of 2 tonnes of gold in recent months has ended a more than decade-long period of unchanged holdings of the precious metal.
When asked about the reasoning behind the purchases, a spokesperson said that the central bank’s gold transactions “are commercially sensitive and no further comment can be made at this time.”
While the institution has given no reason for the increase in its stockpile, the Governor Gabriel Makhlouf last week warned that policy makers cannot afford to be complacent on inflation.
Central bankers’ appetite for gold grew in the first half of the year, with global reserves expanding 333.2 tonnes, 39 per cent higher than the five-year average for the period, according to the World Gold Council, which noted strong purchases by Thailand, Hungary and Brazil.
Singapore increased its gold reserves by about 20 per cent earlier this year in a largely under-the-radar move the central bank says will ensure the resiliency of its portfolio. – Bloomberg
“I can
calculate the motion of heavenly bodies but not the madness of people.”
Covid-19 Corner
This section will continue until it becomes unneeded.
The AP Interview: CDC chief says omicron mostly mild so far
ATLANTA (AP) — More than 40 people in the U.S. have been found to be infected with the omicron variant so far, and more than three-quarters of them had been vaccinated, the chief of the CDC said Wednesday. But she said nearly all of them were only mildly ill.
In an interview with The Associated Press, Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention, said the data is very limited and the agency is working on a more detailed analysis of what the new mutant form of the coronavirus might hold for the U.S.
“What we generally know is the more mutations a variant has, the higher level you need your immunity to be. ... We want to make sure we bolster everybody’s immunity. And that’s really what motivated the decision to expand our guidance,” Walensky said, referencing the recent approval of boosters for all adults.
She said “the disease is mild” in almost all of the cases seen so far, with reported symptoms mainly cough, congestion and fatigue. One person was hospitalized, but no deaths have been reported, CDC officials said.
Some cases can become increasingly severe as days and weeks pass, and Walensky noted that the data is a very early, first glimpse of U.S. omicron infections. The earliest onset of symptoms of any of the first 40 or so cases was Nov. 15, according to the CDC.
The omicron variant was first identified in South Africa last month and has since been reported in 57 countries, according to the World Health Organization.
The first U.S. case was reported on Dec. 1. As of Wednesday afternoon, the CDC had recorded 43 cases in 19 states. Most were young adults. About a third of those patients had traveled internationally.
More than three-quarters of those patients had been vaccinated, and a third had boosters, Walensky said. Boosters take about two weeks to reach full effect, and some of the patients had received their most recent shot within that period, CDC officials said.
Fewer than 1% of the U.S. COVID-19 cases genetically sequenced last week were the omicron variant; the delta variant accounted for more than 99%.
More
South Africa upbeat as battle of the Covid mutations rages: Omicron deaths still zero despite new coronavirus variant spreading twice as fast as deadly Delta
By: Michiel Willems Wednesday 08 December 2021 7:00 am
Scientists and policy makers in South Africa and across the region are cautiously optimistic that the rapidly spreading Omicron variant is not going to cause a bloodbath as, so far, no deaths have been linked to the new Covid mutation.
Despite a record number of new infections – more than 40,000 people tested positive in the last five days – a new study reported in South Africa media this morning further confirms Omicron is a relatively mild variant.
The research, conducted by the Steve Biko/Tshwane District Hospital in Pretoria, found that Omicron-linked patients merely experience mild symptoms, with Dr Fareed Abdullah, who led the study, explaining to several media, including the New York Times, that by far most patients did not need supplemental oxygen.
Other hospitals and medics are reporting similar findings and, so far, no deaths have directly been linked to the new Omicron variant.
Moreover, Dr Abdullah’s team found that the average time they stayed at the hospital was only three days, far below the average 8.5 days for Covid patients throughout the pandemic so far.
The World Health Organisation also acknowledged it has, so far, been unable to link any Covid deaths to the new variant. The health body confirmed Omicron cases have been detected in 38 countries but, so far, none of have reported deaths as a result of the Covid mutation.
WHO chief scientist Soumya Swaminathan urged people no longer to panic over the emergence of the Omicron coronavirus variant and stressed it was “too early to say” if Covid-19 vaccines need to be modified.
Swaminathan said during an interview at the Reuters Next conference over the weekend that “the right response is to be prepared and cautious and not to panic in face of the new variant.”
---- In fact, a new analysis, published over the weekend, showed that Omicron is spreading twice as quickly as the Delta variant.
Scientists of the South African Covid-19 Modelling Consortium team, led by Carl Pearson, a mathematical modeller at the London School of Hygiene and Tropical Medicine, found that – by looking at Covid cases across South Africa’s nine provinces – the Omicron variant’s R value is nearly 2.5 times higher than that of Delta.
More
COVID cases spike even as US hits 200M vaccine milestone
PROVIDENCE, R.I. (AP) — The number of Americans fully vaccinated against COVID-19 reached 200 million Wednesday amid a dispiriting holiday-season spike in cases and hospitalizations that has hit even New England, one of the most highly inoculated corners of the country.
New cases in the U.S. climbed from an average of nearly 95,000 a day on Nov. 22 to almost 119,000 a day this week, and hospitalizations are up 25% from a month ago. The increases are due almost entirely to the delta variant, though the omicron mutation has been detected in about 20 states and is sure to spread even more.
Deaths are running close to 1,600 a day on average, back up to where they were in October. And the overall U.S. death toll less than two years into the crisis could hit another heartbreaking milestone, 800,000, in a matter of days.
The situation is not as dire as last year’s holiday-season surge, before the public had access to COVID-19 vaccines, but the 60% of the U.S. population that is fully vaccinated has not been enough to prevent hot spots.
The cold weather, Thanksgiving gatherings and a big rebound in holiday travel are all believed to be playing a role, along with public weariness with pandemic restrictions.
-----Demand for the vaccine — with recent approval of boosters for all adults and shots for elementary school children — has been high amid the surge and the emergence of the omicron variant, whose dangers are still not fully understood. On Wednesday, Pfizer said that the initial two shots of its vaccine appear significantly less effective against omicron but that a booster dose may offer important protection.
Nearly 48 million people have received a booster, according to the Centers for Disease Control and Prevention. White House officials noted the U.S. administered 12.5 million shots last week, the highest weekly total since May.
https://apnews.com/article/coronavirus-pandemic-health-pandemics-dc8943700b4a65fe1031a7f6ab40026d
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.
Roll-Royce's hybrid-electric propulsion system passes 1-MW milestone
Nick Lavars December 08, 2021
With a view to providing clean powertrains for future aircraft, Roll-Royce is developing a 2.5-megawatt hybrid-electric propulsion system, billed as the most powerful of its kind. Engineers began putting it through its paces a few weeks ago, and are already celebrating a notable milestone, with the system delivering more than a megawatt of power for the first time.
Rolls-Royce's demonstrator Power Generation System 1 (PGS1) is designed as a versatile solution for next-generation aircraft, designed primarily with hybrid planes in mind but with a generator than can be adapted for those relying more heavily on electric systems. The PGS1 includes a thermal management system, purpose-made controls, a keg-sized generator and an AE2100 turbo-shaft engine to turn it.
Back in July, it was delivered to the recently renovated Testbed 108 facility in Bristol, UK, where engineers are now working toward the grand ambition of using it to deliver 2.5 megawatts. In a matter of weeks since testing began, the team has taken some impressive strides, now passing the one-megawatt milestone.
“We’ve made a tremendous start to testing – reaching a megawatt is a great achievement," says Adam Newman, Chief Project Engineer. "Now we want to go further and see what we can ultimately achieve. Our generator is about the size of a beer keg, yet it has already produced enough electricity to continuously power around 1,000 homes – that is really taking technology to new levels. When future hybrid-electric aircraft opportunities emerge in the megawatt and above class we want to be as prepared as we can be to offer a ready-made solution.”
Source: Rolls-Royce
Another weekend and another weekend of retail madness, or a weekend of omicron madness killing off the Christmas shopping season? But has the supply chain distortion already damaged the year end 2021 retail and party season? Have a great weekend everyone.
“Be wiser than other people if you can; but do not tell them so.”
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