Baltic Dry Index. 1865 +77 Brent Crude 91.75
Spot
Gold 1721 US 2 Year Yield
4.10 -0.02
Coronavirus
Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 05/10/22 World 624,277,667
Deaths 6,553,119
Faced with the choice between changing one's mind and proving
that there is no need to do so, almost everyone gets busy on the proof.
John Kenneth Galbraith
After a two day bear market exit rally, hopium that the bottom was in ruled the airwaves yesterday.
But the reality is still of a rising interest rate new era, plus a global economy sliding into stagflation, or more likely the next recession.
In the USA, the mid-term elections are now about four weeks away and it’s anyone’s guess as to the outcome. Will abortion trump the cost of living crisis? Will the new Congress and Senate swing hard right or hard left?
Below, reasons to think that this week’s two day boom has faded.
European markets
set to fall at the open, reversing positive trend
UPDATED WED, OCT 5 2022 12:18 AM EDT
European
stocks are heading for a lower open on Wednesday, bucking a positive trend seen
in the previous session.
The declines expected on
Wednesday come after European markets rallied yesterday, with the pan-European Stoxx 600 closing
3% higher. Travel and leisure stocks jumped 6.1% to lead gains as all sectors
and major bourses entered positive territory.
Overnight in Asia-Pacific
markets, shares traded higher after U.S. stocks rallied for a second
day Tuesday.
The two straight days of gains
came on the back of a pullback in bond yields, with the 10-year Treasury yield
falling below 3.6% at one point after topping 4% briefly last week.
A weakening in the most recent job
openings data had prompted some investors to consider whether
the Federal Reserve would slow the pace of interest rate hikes.
Dollar index falls
back to 110
One factor helping
equity markets on Tuesday could be a slightly weaker dollar, which is falling
for the fifth-straight day.
The DXY US Dollar
Currency Index was down 1.5% in afternoon trading at 110.06. The index was
trading as high as 114.78 last week, when there was concern about a failure of
the UK government bond market.
More
European
markets: Open to close, stocks, data, earnings and news (cnbc.com)
Stock futures
fall following a sharp two-day rally on Wall Street
UPDATED WED, OCT 5 2022 12:19 AM EDT
U.S. stock
futures fell on Wednesday morning after the S&P 500 posted its best two-day
gain in roughly two years.
Dow Jones Industrial Average
futures declined by 150 points, or 0.49%. S&P 500 and Nasdaq 100 futures
dipped 0.53% and 0.55%, respectively.
During the regular session
Tuesday, the Dow jumped about 825 points, or 2.8%. The S&P 500 gained
nearly 3.1%, while the Nasdaq Composite advanced 3.3%.
The two straight days of gains
came on the back of a pullback in bond yields, with the 10-year Treasury yield
falling below 3.6% at one point after topping 4% briefly last week.
Meanwhile, a weakening in the most recent job
openings data had some investors considering whether the
Federal Reserve will slow the pace of interest rate hikes.
Market participants wondered
whether those signs could mean markets have finally priced in a bottom after
the sharp declines in the prior quarter.
“I don’t think you have to worry
about a recession until the second half of ’23,” Stifel chief equity strategist
Barry Bannister said Tuesday on CNBC’s “Closing Bell: Overtime.” “So there is
room for a rally as you go into the early part of next year.”
Traders are expecting a raft of
economic reports on Wednesday. Data on weekly mortgage applications is
expected. September’s ADP private payrolls report is due out at 8:15 a.m. ET.
The latest international trade reading is due at 8:30 a.m. ET, while the ISM
services index is set to be released at 10 a.m. ET.
Stock
futures fall following a sharp two-day rally on Wall Street (cnbc.com)
Stock
markets will drop another 40% as a severe stagflationary debt crisis hits an
overleveraged global economy
Nouriel Roubini October 3, 2022
NEW YORK (Project Syndicate)—For a year now,
I have argued that
the increase in inflation would be persistent, that its causes include not only
bad policies but also negative supply shocks, and that central banks’ attempt
to fight it would cause a hard economic landing.
When the recession comes, I warned, it will be severe and protracted,
with widespread financial distress and
debt crises. Notwithstanding
their hawkish talk, central bankers, caught in a debt trap, may still wimp out and settle for above-target inflation. Any portfolio of risky equities and less risky fixed-income bonds
will lose money on the bonds, owing to higher inflation and inflation
expectations.
Roubini’s predictions
How do these predictions
stack up? First, Team Transitory clearly lost to Team Persistent in the
inflation debate. On top of excessively loose monetary, fiscal, and credit
policies, negative supply shocks caused price growth to surge. COVID-19
lockdowns led to supply bottlenecks, including for labor. China’s “zero-COVID”
policy created even more problems for global supply chains. Russia’s invasion
of Ukraine sent shock waves through energy and other commodity markets.
And the broader sanctions regime—not least the
weaponization of the dollar and other currencies—has further balkanized the
global economy, with “friend-shoring” and trade and immigration restrictions
accelerating the trend toward deglobalization.
Everyone now recognizes that
these persistent negative supply shocks have contributed to inflation, and the
European Central Bank, the Bank of England, and the Federal Reserve have begun
to acknowledge that a soft landing will be exceedingly difficult to pull off.
Fed Chair Jerome Powell now speaks of a “softish landing” with at least “some pain.” Meanwhile, a hard-landing scenario is becoming the
consensus among market analysts, economists, and investors.
It is much
harder to achieve a soft landing under conditions of stagflationary negative supply
shocks than it is when the economy is overheating because of excessive demand.
Since World War II, there has never been a case where the Fed achieved a soft
landing with inflation above 5% (it is currently above 8%) and unemployment below 5% (it is currently 3.7%).
And if a hard landing is the
baseline for the United States, it is even more likely in Europe, owing to the
Russian energy shock, China’s slowdown, and the ECB falling even further behind
the curve relative to the Fed.
More
Nouriel Roubini, professor emeritus of economics at New York
University’s Stern School of Business, is chief economist at Atlas Capital Team
and author of the forthcoming “MegaThreats: Ten Dangerous Trends That
Imperil Our Future, and How to Survive Them” (Little, Brown and Company,
October 2022).
OPEC+
heads for deep supply cuts, clash with U.S.
October
5, 2022 12:03 AM GMT+1 Last Updated 6 hours ago
VIENNA/LONDON,
Oct 4 (Reuters) - OPEC+ looks set for deep oil output cuts when it meets on
Wednesday, curbing supply in an already tight market despite pressure from the United States and other
consuming countries to pump more.
The
potential OPEC+ cut could spur a recovery in oil prices that have dropped to
about $90 from $120 three months ago due to fears of a global economic
recession, rising U.S. interest rates and a stronger dollar.
OPEC+, which
includes Saudi Arabia and Russia, is working on cuts in excess of 1 million
barrels per day, sources told Reuters this week. One OPEC source said on
Tuesday the cuts could amount to up to 2 million barrels per day.
Sources
said it remained unclear if reductions could include additional voluntary cuts
by members such as Saudi Arabia or if cuts could include existing
under-production by the group.
OPEC has been
under-producing over 3 million bpd and the inclusion of those barrels would
dilute the impact of new cuts.
"Higher
oil prices, if driven by sizeable production cuts,
would
likely irritate the Biden Administration ahead of U.S. midterm elections,"
Citi analysts said in a note.
"There
could be further political reactions from the U.S., including additional
releases of strategic stocks along with some wildcards including further
fostering of a NOPEC bill," Citi said referring to a U.S. anti-trust bill
against OPEC.
Saudi Arabia and
other members of the Organization of the Petroleum Exporting Countries and
allied producers (OPEC+) have said they seek to prevent volatility rather than
to target a particular oil price. read more
On
Tuesday, international benchmark Brent crude rose 3% above $91 per barrel.
More
OPEC+
heads for deep supply cuts, clash with U.S. | 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.
Today,
more red flags from the USA and UK.
Manufacturing PMI® at
50.9%
September 2022
Manufacturing ISM® Report
On Business
New
Orders and Employment Contracting
Production and Backlogs Growing
Supplier Deliveries Slowing at a Slower Rate
Raw Materials Inventories Growing; Customers’ Inventories Too Low
Prices Increasing at a Slower Rate; Exports Contracting; Imports Growing
----“The
September Manufacturing PMI® registered 50.9 percent, 1.9
percentage points lower than the 52.8 percent recorded in August. This figure
indicates expansion in the overall economy for the 28th month in a row after
contraction in April and May 2020. The Manufacturing PMI® figure
is the lowest since May 2020, when it registered 43.5 percent. The New Orders
Index returned to contraction territory at 47.1 percent, 4.2 percentage points
lower than the 51.3 percent recorded in August. The Production Index reading of
50.6 percent is a 0.2-percentage point increase compared to August’s figure of
50.4 percent. The Prices Index registered 51.7 percent, down 0.8 percentage
point compared to the August figure of 52.5 percent. This is the index’s lowest
reading since June 2020 (51.3 percent).
More
U.S.
construction spending posts biggest drop in 1-1/2 years in August
October
3, 2022
WASHINGTON (Reuters) - U.S. construction spending fell by the most in
1-1/2 years in August, pulled down by a sharp decline in outlays on
single-family homebuilding amid surging mortgage rates.
The Commerce Department said on
Monday that construction spending dropped 0.7% in August, the largest decline
since February 2021, after decreasing 0.6% in July.
Economists polled by Reuters had
forecast construction spending would slip 0.3%. Construction spending increased
8.5% on a year-on-year basis in August.
Spending on private construction
projects fell 0.6% after dropping 1.2% in July. Investment in residential
construction declined 0.9%, with spending on single-family projects plunging
2.9%. Outlays on multi-family housing projects rose 0.4%.
The Federal Reserve's
aggressive monetary policy tightening, marked by oversized interest rate
increases, has weighed heavily on the housing market, with homebuilding and
sales weakening significantly in recent months.
----The U.S. central bank has hiked its policy rate from near
zero to the current range of 3.00% to 3.25% since March. The 30-year fixed
mortgage rate averaged 6.70% last week, the highest since July 2007, from 6.29%
in the prior week, according to data from mortgage finance agency Freddie Mac.
Residential spending contracted at
its steepest pace in two years in the second quarter. That contributed to gross
domestic product declining at an annualized rate of 0.6% last quarter after
shrinking at a 1.6% pace in the January-March quarter.
More
U.S. construction
spending posts biggest drop in 1-1/2 years in August (msn.com)
17,000
construction firms risk collapsing any minute as high inflation is ‘destroying
entire sector’
TUESDAY 04 OCTOBER 2022 8:58
AM
The number of UK construction companies at
significant risk of closure has jumped 54 per cent to 16,755 this quarter, up
from 10,686, according to fresh data shared with City A.M. this morning.
Construction companies are struggling to cope with
spiralling construction costs, inflation and rising interest rates on their
debt.
In the last quarter alone 5,900 more construction
businesses have been added to the “at significant risk of insolvency” category,
the data from audit and tax firm Mazars shows.
Surging prices for essential materials have had a
significant impact on the construction sector.
According to the UK’s latest Government’s Building
Materials and Component Index, material prices increased 24.1 per cent in the
past year.
The sector had exited the pandemic in a weakened
state, with supplies of essential materials such as bricks, timber, and cement
already severely disrupted. These costs are now continuing to rise due to the
conflict in Ukraine.
“The construction sector has been one of the
hardest hit by inflation. Prices rises for construction materials have had a
huge impact on the ability of a construction company to control costs on a
project,” explained Rebecca Dacre, Partner at Mazars.
“They are now faced with the dilemma of how they recover costs soaring away on a fixed price contract,” she told City A.M.
“Poor cashflow is an endemic problem
in the construction industry so it doesn’t take much to undermine the solvency
of many construction companies,” Dacre continued.
More
Below,
why a “green energy” economy may not be possible, and if it is, it won’t be
quick and it will be very inflationary, setting off a new long-term commodity
Supercycle. Probably the largest seen so far.
The
“New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines,
Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An
Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As
The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM
Covid-19
Corner
This
section will continue until it becomes unneeded.
With Covid-19 starting to become only endemic,
this section is close to coming to its end.
Covid-19
deaths remain on downwards trend despite rise in infections
A
total of 235 deaths registered in the seven days to September 23 mentioned
coronavirus on the death certificate, according to the ONS.
October 04 2022 09:33 AM
The number of
deaths involving Covid-19 registered each week in England and Wales remains on
a downwards trend despite the recent rise in infections, new figures show.
A total of 235
deaths registered in the seven days to September 23 mentioned coronavirus on
the death certificate, according to the Office for National Statistics (ONS).
This is down 22% on
the previous week and is the lowest total since the start of June.
The figures will
have been affected by the bank holiday on September 19 for the Queen’s funeral,
when most register offices were closed.
This means fewer
deaths were registered than would normally be the case.
But the size of the
drop in the latest figures suggests deaths are still on a broadly downwards
path.
It is too soon to
see any impact in death registrations of the recent rise in Covid-19 infections
in England and Wales.
This is because the
trend in deaths always lags behind the equivalent trend in infections, due to
the length of time between someone catching the virus and becoming seriously
ill, as well as the time it takes for deaths to be registered.
Registrations
climbed during much of June and July following the wave of infections caused by
the BA.4 and BA.5 Omicron subvariants of Covid-19.
The figures peaked
at 810 deaths in the week to July 29, since when they have been on a downwards
trend.
The peak was well
below the level seen during the Alpha wave in January 2021, when weekly deaths
reached nearly 8,500.
High levels of
Covid antibodies among the population – either from vaccination or previous
infection – mean the number of people seriously ill or dying from the virus
this year has stayed low.
More
Covid-19
deaths remain on downwards trend despite rise in infections -
BelfastTelegraph.co.uk
Next, some vaccine links
kindly sent along from a LIR reader in Canada.
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
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, among other things, I’ve added this
section. Updates as they get reported.
Oil-eating microbes excrete the world's cheapest
"clean" hydrogen
Loz Blain October 03, 2022
Texan
company Cemvita is promising clean hydrogen at less than US$1/kg, after testing
a fascinating new technique in the lab and the field. The idea is to pump
specially developed microbes into depleted oil wells, where they'll eat oil and
excrete hydrogen.
Humans have
been harnessing tiny single-celled and multicellular organisms to perform work
for much longer than we've known what they were. The earliest beers known to
history were brewed some 13,000 years ago, making systematic use of a
microscopic fungus called yeast, and its habit of eating sugars and starches
and excreting carbon dioxide and ethanol. That's about 7,000 years before recorded
history was known to history.
Microbes can be incredibly
hard workers – Louis Pasteur once described yeast's work on glucose as the equivalent of a 200-pound person chopping
two million pounds of wood in two days. But their ability to party is critical
as well; in two days under the right conditions, 100 yeast cells can multiply
into 400 billion.
Now that humans are beginning
to get a handle on genetic engineering, a huge
range of other possibilities are
opening up. And with the rise of artificial intelligence, it's becoming easier
than ever before for scientists to identify which bits of the genetic code are
responsible for a microbe's desirable behaviors, and repeat those sections to
juice these little creatures up for higher and higher performance.
More
Oil-eating
microbes excrete the world's cheapest "clean" hydrogen (newatlas.com)
In any
great organization it is far, far safer to be wrong with the majority than to
be right alone.
John Kenneth
Galbraith.
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