Tuesday 31 January 2023

Fed Day One. The IMF Sees Better Times. Germany.

 Baltic Dry Index. 680 +04             Brent Crude 84.85

Spot Gold 1913               US 2 Year Yield 4.25 +0.06

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,103

Coronavirus Cases 31/01/23 World 675,033,179

Deaths 6,760,922

January 31, 1943. German Field Marshal Friedrich Paulus surrenders at Stalingrad.

With Soviet armies closing in as part of Operation Ring (begun January 10, 1943), the situation was hopeless. The Sixth Army was surrounded by seven Soviet armies. On January 31 Paulus disobeyed Hitler and agreed to give himself up. Twenty-two generals surrendered with him, and on February 2 the last of 91,000 frozen starving men (all that was left of the Sixth and Fourth armies) surrendered to the Soviets.

Battle of Stalingrad | History, Summary, Location, Deaths, & Facts | Britannica

It is the last trading day of the first month of 2023. Typically a day to dress up the stock casinos and boost money manager bonuses.

It is day one of the US central bank’s two day meeting. Tomorrow they will let us in on their new interest rate for the next few weeks and the economic future as seen by Chairman Powell and his team of entrail readers at the Temple of Mammon.

Coincidentally or not, the IMF chose yesterday to come out with a rosier forecast of the global economy. No pressure intended on the Fed, the BOE or ECB, all holding interest rate setting meetings this week.

All are expected to increase their key interest rates by a quarter of one percent, although some at the ECB have posited that a half of one percent is really needed. But with the German economy flirting with recession if not actually entering recession, my guess is that the ECB will follow the Fed’s lead and stick to a quarter of one percent rate increase.


Asia-Pacific shares trade mixed; China manufacturing activity shows growth

UPDATED TUE, JAN 31 2023 12:08 AM EST

Asia-Pacific shares traded mixed on Tuesday as investors digested a range of economic data and a potential interest rate hike from the Federal Reserve.

Hong Kong’s Hang Seng index fell 0.93%. Mainland China’s Shanghai Composite dipped 0.39% and the Shenzhen Component was down 0.64% as China’s official manufacturing PMI reported a reading of 50.1, above the 50-point mark separating growth from contraction.

Australia’s S&P/ASX 200 was up 0.33% as investors await retail sales data for December. Japan’s Nikkei 225 traded slightly above the flatline and the Topix gained 0.28% as Japan reported an unemployment rate of 2.5% for December, in line with expectations.

South Korean benchmark Kospi dipped 0.4%, while the Kosdaq shed 0.72% after South Korea logged a 7.3% drop for December’s year-on-year industrial output, steeper than Reuters’ expectations of a 5.1% fall.

The International Monetary Fund also revised upward its global growth projections for2023, but cautioned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.

Investors are also looking ahead towards trade data from Thailand.

Overnight in the U.S., major indexes fell, bracing for the busiest week of earnings season and the Federal Open Market Committee’s meeting on Tuesday and Wednesday, where the Fed is expected to hike rates by one-quarter of a percentage point.

Asia-Pacific shares, Fed, earnings, economic data (cnbc.com)

IMF hikes global growth forecast as inflation cools and household spending surprises

PUBLISHED MON, JAN 30 2023 8:31 PM EST

The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.

In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.

It also revised its projection for 2024 down to 3.1%.

“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.

The outlook turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.

In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging market countries that hold debt in foreign currency.

---- The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s protracted invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.

More

IMF hikes global growth forecast as inflation cools (cnbc.com)

 

Stock futures inch higher as S&P 500 heads for best January since 2019

UPDATED MON, JAN 30 2023 7:00 PM EST

Stock futures rose slightly in overnight trading as the S&P 500 looks to cap off its best January since 2019.

Futures tied to the S&P 500 added 0.26%, while futures connected to the Dow Jones Industrial Average inched 0.15%, or 49 points, higher. Nasdaq-100 futures gained 0.28%.

The overnight moves followed a pause in what’s been a stellar January for stocks. During regular trading the Dow declined 260.99 points, or 0.77%, while the S&P and Nasdaq Composite fell 1.30% and 1.96%, respectively.

Stocks have rallied to start the year after a brutal 2022 — and the worst year for stocks since 2008. As of Monday’s close, the S&P and Dow are up 4.64% and 1.72% in January, respectively, and headed for their third positive month in four. The Nasdaq Composite has risen 8.86% this month, putting it on pace for its best monthly performance since July.

---- A solid January could be a good sign for the market, and potentially foreshadow a continued uptick in the months that follow. Of the five instances in which the S&P gained more than 5% in January after a negative year, the benchmark index rose 30% for the year on average, said Carson Group’s Ryan Detrick in a tweet.

However, a busy week of earnings, with reports from the likes of McDonald’s, Meta Platforms and Amazon, could put this recent rally in jeopardy. Investors are watching closely for comments on how some of the largest companies are faring amid high inflation and fears of slowing consumer spending.

Attention also turns to the latest interest rate decision due out of the Federal Reserve’s latest policy meeting kicking off Tuesday. Traders widely expect a 25 basis point increase, but will monitor commentary for clues into how much further the Fed intends to hike, or when it plans to cut rates.

Companies reporting earnings Tuesday include McDonald’s, Caterpillar, General Motors, Pfizer and Advanced Micro Devices.

Stock futures inch higher as S&P 500 heads for best January since 2019 (cnbc.com)

 

Bubbles R-Us

January 30, 2023  david stockman

The Wall Street Journal today brings word that a professor Efraim Benmelech of the finance department at Northwestern University thinks the Fed is hurting housing and the consumer too much. Opined he,

…….those higher interest rates are making mortgages more expensive and leading to fewer home sales. That leads to less spending on appliances, paint and other home goods, because people commonly buy those items ahead of a sale and after moving.

“The actions of the Fed are leading to lower consumption,” he said.

You don’t say!

Then again, has it occurred to the good professor that the years and years of ultra low mortgage rates engineered by the Fed were totally unnatural, uneconomic and not sustainable?

The evidence for that is in the chart below. It shows that for most of the last three decades, the Fed drove the after-inflation or “real” interest rate on 30-year mortgages steadily lower until it actually turned negative.

That’s right. There was a whole lot of appliances, paint and other building supplies being sold because mortgage investors were getting fleeced by the Fed’s negative real rate regime. But now it’s time to pay the piper.

Stated differently, the unfolding recession is a long overdue and necessary purge of artificial economic activity stimulated and subsidized by the central bank’s own financial repression policies.

The Fed’s belated attempt to “normalize” interest rates, therefore, is not a mean-spirited policy to deliberately cause labor, manufacturing capacity and other economic resources to be idled. To the contrary, it’s a belated attempt to unshackle markets from the excesses, bubbles, malinvestments, inefficiencies and unsustainabilities that were the inherent results of decades of reckless money-printing.

More, subscription required.

Bubbles R-Us - David Stockmans Contracorner (substack.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.

German economy unexpectedly shrinks in Q4, reviving spectre of recession

BERLIN, Jan 30 (Reuters) - The German economy unexpectedly shrank in the fourth quarter, data showed on Monday, a sign that Europe's largest economy may be entering a much-predicted recession, though likely a shallower one than originally feared.

Gross domestic product decreased 0.2% quarter on quarter in adjusted terms, the federal statistics office said. A Reuters poll of analysts had forecast the economy would stagnate.

In the previous quarter, the German economy grew by an upwardly revised 0.5% versus the previous three months.

A recession - commonly defined as two successive quarters of contraction - has become more likely, as many experts predict the economy will shrink in the first quarter of 2023 as well.

"The winter months are turning out to be difficult - although not quite as difficult as originally expected," said VP Bank chief economist Thomas Gitzel.

"The severe crash of the German economy remains absent, but a slight recession is still on the cards."

German Economy Minister Robert Habeck said last week in the government's annual economic report that the economic crisis triggered by the Russian invasion of Ukraine was now manageable, though high energy prices and interest rate rises mean the government remains cautious.

The government has said the economic situation should improve from spring onwards, and last week revised up its GDP forecast for 2023 -- predicting growth of 0.2%, up from an autumn forecast of a 0.4% decline.

As far as the European Central Bank goes, interest rate expectations are unlikely to be affected by Monday's GDP figures as inflationary pressures remain high, said Helaba bank economist Ralf Umlauf.

The ECB has all but committed to raising its key rate by half a percentage point this week to 2.5% to curb inflation.

Monday's figures showed falling private consumption was the primary reason for the decrease in fourth-quarter GDP.

More

German economy unexpectedly shrinks in Q4, reviving spectre of recession | Reuters

Philips to cut 13% of jobs in safety and profitability drive

AMSTERDAM, Jan 30 (Reuters) - Dutch health technology company Philips (PHG.AS) will scrap another 6,000 jobs worldwide as it tries to restore its profitability and improve the safety of its products following a recall of respiratory devices that knocked off 70% of its market value.

Half of the job cuts will be made this year, the company said on Monday, adding that the other half will be realised by 2025.

The new reorganisation brings the total amount of job cuts announced by new Chief Executive Roy Jakobs in recent months to 10,000, or around 13% of Philips' current workforce.

It also adds to the string of technology-based firms to make layoffs, after companies including Alphabet's Google (GOOGL.O), Microsoft (MSFT.O), Amazon (AMZN.O) and German software maker SAP (SAPG.DE) announced thousands of layoffs to cut costs as they brace for tougher economic conditions.

---- "There is a significant beat on Q4 and the operational improvement measures are very large," ING analyst Marc Hesselink said in a note.

Jakobs took over the reins of the company last October, as Philips continued to grapple with the fallout from the recall of millions of ventilators used to treat sleep apnoea over worries that foam used in the machines could become toxic.

"What we present today I think is a very strong plan to secure the future of Philips. The challenges we have are serious and we are adressing them head on," Jakobs told reporters.

More

Philips to cut 13% of jobs in safety and profitability drive | Reuters

 

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.

FDA Sued for Withholding COVID-19 Vaccine Safety Analyses

January 28, 2023Updated: January 29, 2023

The U.S. Food and Drug Administration (FDA) has been sued for withholding the results of key COVID-19 vaccine safety analyses.

The FDA’s actions violate federal law, the new lawsuit, filed on Jan. 26 in federal court in Washington by the nonprofit Children’s Health Defense (CHD), alleges.

The suit is seeking the raw results from the FDA’s analyses of reports to the Vaccine Adverse Event Reporting System (VAERS).

The system, which the FDA runs with the U.S. Centers for Disease Control and Prevention (CDC), accepts reports of post-vaccination adverse events.

As part of its vaccine safety monitoring, the FDA pledged to run an analysis called Empirical Bayesian (EB) data mining on the reports to see if any safety signals were triggered. These signals give agencies an idea of which problems may be caused by vaccines. Agencies are supposed to research signals to verify them or rule them unrelated to vaccination.

“A report to VAERS does not mean that a vaccine caused an adverse event. But VAERS can give CDC and FDA important information. If it looks as though a vaccine might be causing a problem, FDA and CDC will investigate further and take action if needed,” the CDC states on its website.

The FDA denied CHD’s request for the results of the data mining, claiming that the records are “intra-agency memoranda consisting of opinions, recommendations, and policy discussions within the deliberative process of FDA, from which factual information is not reasonably segregable.”

The FDA also claimed that the sought-after information “contains a discussion of legal and policy matters and fall within the attorney work product and attorney-client privileges as enunciated by the Supreme Court.”

The FDA also refused to provide the results of the EB data mining to The Epoch Times, using the same rationale.

In a set of operating procedures, the federal government said that the FDA would carry out EB data mining and that the CDC would conduct a separate type of analysis using a method called Proportional reporting ratio, or another way to analyze the VAERS data.

More

FDA Sued for Withholding COVID-19 Vaccine Safety Analyses (theepochtimes.com)

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.

Profitable retrofit system could slash steelmaking emissions by 94%

Loz Blain  January 29, 2023

A rare decarbonization idea that looks as good for business as it does for the planet. This system promises to radically reduce carbon dioxide emissions for 70% of steelmakers, while generating profits and making use of existing blast furnaces.

Iron and steel form the structural backbone of modern life, but they're responsible for somewhere around 8% of global carbon emissions, making them the single biggest source of industrial greenhouse gases.

The path to a 100% clean future is clear enough; ditch the blast furnaces and baked-coal coke reductants, and replace them with electric arc furnaces running on clean energy, and green hydrogen reductants. Boom: green steel with water as the only by-product.

Here's the problem: humanity is now producing somewhere around two billion tons of steel a year globally, and such a vanishingly tiny percentage of that is clean that it was big news in 2021 when a block of green steel actually got delivered to a customer. This is a colossal industry with an enormous amount of assets, facilities and machinery already fully functional, and built to last.

Switching to an electric arc furnace is no trivial exercise; it costs between US$1.1 to 1.7 billion according to the world's second-largest steelmaker, not including costs related to your stranded blast furnace assets. Green hydrogen isn't available yet at the necessary scale, and thus the production cost of green steel is a brutal 60% higher than the dirty stuff.

So blast-furnace/basic oxygen furnace (BF-BOF) steel is going to be around for decades to come, and that's why this new retrofit system from the University of Birmingham may be one of the most important green-tech advances of the year, despite not being fully green.

In a nutshell, it replaces about 90% of the coke used in the blast furnace with direct carbon monoxide injection. The carbon monoxide comes from a system that captures and recycles the furnace's own exhaust "top gas," separating out carbon monoxide, carbon dioxide, hydrogen and nitrogen gases at high temperatures. These gases are then sent through a twin-reactor redox system that keeps the carbon inside a closed loop.

The carbon dioxide is cycled through a thermochemical oxidation process in one reactor chamber, using a double perovskite material (Ba2Ca0.66Nb0.34FeO6, or BCNF1 for brevity), which converts it into carbon monoxide at around 800 °C (1,472 °F) at a rate around 10.1% each pass, grabbing oxygen atoms out of carbon dioxide molecules and using them to fill up the cubic crystal structure of the BCNF1.

More

Profitable retrofit system could slash steelmaking emissions by 94% (newatlas.com)

We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness outside of the EUSSR.”

With grateful thanks to the writers of the US Declaration of Independence.

 

 

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