An Interesting H2 23 Comes Next. Russia???

 Baltic Dry Index. 1240 +24             Brent Crude 74.11

Spot Gold 1924                   US 2 Year Yield 4.71 -0.06

Let me say to you now, that to do nothing at all is the most difficult thing in the world, the most difficult and the most intellectual.

Oscar Wilde.

In the stock casinos, a nervous pause as we enter the final gambling week of H1 23.

Higher interest rates are now seriously slowing the global economy, though only having a minor impact on slowing global inflation, especially food price inflation.

Politically, the weekend turmoil in Russia has yet to be fully understood in the west and probably in Russia and China too.

In America, a growing presidential corruption scandal is probably just in act one.

Elsewhere, from Canada, to UK, to EU, political non entities rule.

Our inept central banksters are all promising more interest rate hikes to come, ignoring signs of a growing property crisis in the USA, Canada, UK, EU and China.

An interesting H2 23 lies directly ahead.

Asia markets mixed as Wall Street rally fades, oil gains after aborted Russian mercenary rebellion

UPDATED SUN, JUN 25 2023 9:52 PM EDT

Asia-Pacific markets started the final week of June mixed, even as U.S. markets snapped a multi-week winning streak Friday.

In an early Monday note, CMC Markets analyst Tina Teng, wrote that “economic concerns took central stage again as recession fears mounted, with spiking rates in both Europe and the US rattling global markets.”

Over the weekend, Europe also saw a brief rebellion by the Wagner private military group in Russia, pushing oil prices up on Monday.

In Japan, the Nikkei 225 reversed earlier losses and gained 0.14%, while the Topix rose 0.13%. Japan’s service sector prices climbed 1.6% year-on-year in May, unchanged from the previous month’s figure.

South Korea’s Kospi was also in the green, climbing 0.45%, while the Kosdaq saw a larger gain of 0.55%.

Hong Kong’s Hang Seng index rebounded from last week’s losses and opened 0.42% higher. In contrast, mainland Chinese stocks fell, with the Shanghai Composite down 0.79% and the Shenzhen Component 0.78% lower.

In Australia, the S&P/ASX 200 fell 0.41%, dragged by energy stocks.

All three major U.S. indexes slid in Friday’s trading session, with the Dow Jones Industrial Average falling 0.65%, while the S&P 500 dropped 0.77% and the Nasdaq Composite closed lower by 1.01%.

Oil trades higher after aborted Russian mercenary revolt

Oil prices rose early Monday after as investors assessed the aborted rebellion in Russia by the Wagner private military company over the weekend.

Brent crude futures rose about 1% to trade at $74.58, while U.S. West Texas Intermediate crude futures rose 0.91% to trade at $69.78.

Asia markets mixed as Wall Street rally fades, oil gains after aborted Russian mercenary rebellion (cnbc.com)

Stock futures are little changed ahead of final week of trading in June: Live updates

UPDATED SUN, JUN 25 2023 7:01 PM EDT

Stock futures were flat on Sunday evening as Wall Street looked to see if the market rally could find more momentum in the final week of June.

Futures tied to the Dow Jones Industrial Average ticked up 55 points, or less than 0.2%. S&P 500 futures and Nasdaq 100 futures were also higher by about 0.2%.

The market rally sputtered last week. The Nasdaq Composite fell 1.44%, breaking an eight-week win streak. The S&P 500 dipped 1.01%, ending a five-week streak. The Dow, which has underperformed in 2023, shed 1.67% to halt a three-week positive run.

“The SPX and NDX finally saw some profit-taking after the significant rally seen over the past couple of months,” Rick Bensignor of Bensignor Investment Strategies said in a note to clients.

Segments of the market is still on track for a banner first half of the year. The tech-heavy Nasdaq Composite is up nearly 29% year-to-date, and the S&P 500 is up more than 13%. The Dow, however, is up less than 2%.

The final week of June is a light one for economics reports and corporate earnings, which are highlighted by Walgreens Boots Alliance on Tuesday and Nike on Thursday. Traders will likely keep an eye on Europe, where Russia saw a brief rebellion by a private military group over the weekend. Uncertainty about the situation there will likely keep the markets on edge.

Stock market today: Live updates (cnbc.com)

 

S&P Global cuts China 2023 growth forecast to 5.2% from 5.5%

June 26, 20233:38 AM GMT+1

BEIJING, June 26 (Reuters) - S&P Global said it has cut its 2023 GDP growth forecast for China after May data showed a post-COVID recovery was faltering in the world's second-largest economy.

"We have reduced our 2023 GDP growth forecast to 5.2%, from 5.5%," it said in a research note on Sunday.

"China's recovery should continue but at an uneven pace, with investment and industry lagging."

S&P is the first major international credit agency to cut its forecasts for China's economy this year, although several major banks including Goldman Sachs have lowered their estimates this month.

Goldman Sachs reduced its forecast from 6% to 5.4%, citing persistently weak confidence and the cloud over the property market as stronger-than-expected headwinds.

China's economy stumbled in May with property investment slumping further, industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery.

China will roll out more stimulus to support a slowing economy this year, sources involved in policy discussions have said.

S&P Global cuts China 2023 growth forecast to 5.2% from 5.5% | Reuters

BIS warns world economy at critical juncture in inflation fight

June 25, 2023

LONDON (Reuters) - The world's central bank umbrella body, the Bank for International Settlements (BIS), called on Sunday for more interest rate hikes, warning the world economy was now at a crucial point as countries struggle to rein in inflation.

Despite the relentless rise in rates over the last 18 months, inflation in many top economies remains stubbornly high, while the jump in borrowing costs triggered the most serious banking collapses since the financial crisis 15 years ago.

"The global economy is at a critical juncture. Stern challenges must be addressed," Agustin Carstens, BIS general manager, said in the organisation's annual report published on Sunday.

"The time to obsessively pursue short term growth is past. Monetary policy must now restore price stability. Fiscal policy must consolidate."

Claudio Borio, the head of BIS's monetary and economics unit, added there was a risk an "inflationary psychology" was now setting in, although the bigger-than-expected rate hikes in Britain and Norway last week showed central banks were pushing "to get the job done" in terms of tackling the problem.

Their challenges are unique by post-World War Two standards though. It is the first time that, across much of the world, a surge in inflation has co-existed with widespread financial vulnerabilities.

The longer inflation remains elevated, the stronger and prolonged the required policy tightening, the BIS report said, warning that the possibility of further problems in the banking sector was now "material".

If interest rates get to mid-1990s levels the overall debt service burden for top economies would, all else being equal, be the highest in history, Borio said.

"I think central banks will get inflation under control. That is their job – to restore price stability," he told Reuters. "The question is what will the cost be."

More

BIS warns world economy at critical juncture in inflation fight (msn.com)

Finally, more on last year’s Great London Metal Exchange Nickel Fiasco.

 

Column: Court case shines a harsh light on London Metal Exchange

June 23, 20232:58 PM GMT+1

LONDON, June 23 (Reuters) - The first part of the London Metal Exchange's (LME) courtroom drama is over after three days of legal argument at London's Royal Courts of Justice.

The LME, owned by Hong Kong Exchanges and Clearing (0388.HK), now awaits judgment on whether its cancellation of nickel trades on March 8 last year was lawful.

U.S.-based hedge fund Elliott Associates and market maker Jane Street Global Trading (Jane Street) argue its action was unlawful and are demanding $472 million in damages.

The 146-year-old exchange contends it was justified in closing the market and cancelling trades because $19.7 billion of margin calls would otherwise have triggered a "death spiral" of member defaults.

The legal spotlight has not been kind to either the LME or its chief executive Matthew Chamberlain, who made the fateful decision that the nickel market had become disorderly.

How to define that word is a tricky question.

Two other tricky questions emerging from the court proceedings are why no-one spotted the nickel storm coming and why such a momentous decision came down to one man's call.

DISORDERLY, IRRATIONAL OR BOTH?

LME three-month nickel closed at $50,300 per tonne on March 7. Chamberlain viewed the price as rational given the heightened speculation around the possible sanctioning of Norilsk Nickel metal after Russia's invasion of Ukraine at the end of February.

The LME's Special Committee, tasked with overseeing emergency situations, agreed.

When Chamberlain woke the next morning at 05:30 London time, nickel was breaking up through $60,000 per tonne. Fifteen minutes later it breached $70,000 and then accelerated up to $101,365 per tonne at 06:08 before plunging back to $80,010 in the space of seven minutes.

Based on the scale and speed of price move and the absence of any Russian news, "there was no doubt in my mind that the market had become disorderly," Chamberlain said in court documents.

What he didn't know at the time was the LME's own operations team had removed nickel price bands during the early Asian trading hours, which contributed to the market wildness, according to Elliott and Jane Street.

The bid-ask spread on the LME's Select platform reached $5,500 per tonne and the average price impact of a one-lot order widened to over $225 per tonne during the spike, according to consultancy Oliver Wyman's independent review of the March meltdown.

----Within an hour of waking on March 8 Chamberlain was fielding a series of calls and e-mails from panicked members worried about the impact of the price rise on the next round of margin calls.

LME nickel crisis had turned into potential LME clearing house crisis with Chamberlain having to juggle both parts of the meltdown while also being a nickel market specialist.

Alternative counsel doesn't appear to have been given. And alternative pathways were missed, according to Elliott and Jane Street.

They argue that the LME Clear rule-book has a provision for setting variation margin at a level other than last price if that price is deemed to be unrepresentative.

Using the previous day's close as a basis price for margining would have cut the collective pain from $19.7 billion to $570 million.

The LME argues that this would still have caused member defaults after the scale of previous margin calls, leaving it no choice but to go down the trade cancellation route.

NICKEL CRISIS PAST

Underlying the legal complexities of the case is the simple truth that the LME seems to have lost touch with the reality of the market it serves.

More

Column: Court case shines a harsh light on London Metal Exchange | 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.

The Recession Will Bring Deflation

Jun 24, 2023,12:22pm EDT

If there ever was a competition for a company that most reflected the state of the economy, FedExFDX -0.3% would be in the final four. In Q1, its revenues fell -10%, and earnings were off -28%. On top of that, they guided even lower than the already reduced market estimates.

Nevertheless, the media and Wall Street continue to push the “soft landing” or even “no landing” scenario based on the “resilient” labor market and a few positive blips, like the +22% rise in housing starts or a +0.2% rise in May’s existing home sales. Regarding the latter, those sales are still down -20% from year-earlier levels (see chart). So, no, that’s not a positive for the economy.

Regarding the +22% jump in housing starts, they are rising because there is no inventory in the existing home market. About 85% of homeowners have a mortgage rate below 3% which they obtained prior to the Fed’s rate hiking campaign. Consequently, they can’t afford to move because they can’t afford a new mortgage rate at 7% and their payments would skyrocket even if they traded sideways. They’ve become prisoners in their own homes! Thus, the level of existing “for sale” inventory is at a record low level, so those looking to purchase have had to turn to the “new” home market. (This phenomenon has also ignited the prices of the homebuilder stocks.)

Cracks Appearing in the Employment Story

In past blogs, we’ve discussed the hesitancy of employers to layoff workers after two plus years of scratching and clawing to find employees. We have noted that they have chosen to reduce hours worked instead (see chart). May’s unemployment rate (U3) did tick up 0.3 percentage points, and in June we’ve seen three consecutive weeks of significantly higher Initial Unemployment Claims (>+260K, up from +220K in May and +216K in the same week in 2022). For Q2, Manpower’sMAN -2.1% Hiring Index dropped to 38 from 41 in Q1 and 51 in Q4.

More

The Recession Will Bring Deflation (forbes.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

No Covid update today. Instead an update on Europe’s crops.

Europe’s wheat crops get rain relief after torrid end to spring

June 23, 2023

PARIS: The return of rain to northern Europe should help wheat crops after a hot, dry end to spring and may avert dire yield losses seen in drought-hit Spain, analysts and traders said.

Forecasters have reduced their outlook for this year’s wheat harvest in Europe to nearer last year’s drought-affected level, warning of further cuts if dryness persists.

In France, where harvesting is starting, showers since last weekend are expected to aid final growth of crops in the north, despite localised storm damage.

Good yields are anticipated even though the recent parched spell has dented earlier talk of record levels.

“Up to mid-May the yield potential was very high, so inevitably a little was lost with the hot, dry spell,” Benoit Fayaud, analyst with Strategie Grains, said of French wheat.

Along with increased planting, favourable yields are expected to push the French soft wheat crop above last year’s 33.7 million metric tons, with market estimates between 35 and 37 million. Early harvesting of winter barley, a pointer to the wheat crop, was showing good yields and quality, traders said.

The outlook was also promising in Britain, where rain returned sooner.

“Heading into harvest this year prospects remain encouraging from a yield perspective and the recent rains will have restored confidence,” analyst Peter Collier of CRM Agri said.

The situation was more uncertain elsewhere in northern Europe, despite rain this week and more forecast in coming days. In Germany, regular rain was needed to counter crop stress in northern and eastern zones that have turned very dry.

“In mid-May, some fields were too wet for vehicles to drive on, now plants are suffering from massive stress from dryness throughout Germany,” said Guido Seedler of Germany’s association of farm cooperatives.

The association this week cut its forecast of this year’s German wheat crop by over 400,000 tons compared with May, putting its projection nearly 3% below 2022 output at 21.87 million tons.

In Poland, wheat in the north, northwest and the centre suffered from heat and dryness, though crops in the south look good, said Wojtek Sabaranski of analysts Sparks Polska.

“Recent rains helped a bit, but they were not sufficient to solve the drought problem in these regions,” Sabaranski said.

“Therefore, some yield losses, locally major, have to be taken into consideration.”

The Polish wheat crop could fall to 12.0-12.2 million tons, down 5-6% from last year, Sabaranski forecast.

More

Europe’s wheat crops get rain relief after torrid end to spring - Markets - Business Recorder (brecorder.com)

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Fast, low-cost direct lithium extraction could avert a supply crisis

By Loz Blain  June 23, 2023

Canadian company Volt Lithium has developed and pilot-tested a new low-cost lithium extraction method to pull this critical battery metal out of low-concentration brines. Now it plans to turn old oil fields into lithium production operations.

As the global transition to electric vehicles gathers momentum, and power grids worldwide turn to huge banks of batteries to balance demand against the intermittent supply of renewables, the world is going to need unprecedented amounts of lithium to fuel its insatiable hunger for batteries.

We've written before that many people are expecting a lithium squeeze in the coming decade; it takes around 13 years to start up a new mining operation, for example, and the International Energy Agency projects that existing mines and brine projects, plus those currently under construction, are only going to deliver about half of the projected demand.

Direct Lithium Extraction (DLE) offers a "potentially revolutionary" way to quickly and cheaply boost production from brine "much like shale did for oil," according to a Goldman Sachs report from April.

The typical way to extract lithium from salty groundwater brine is to pump it up from underground, then sit it in gigantic ponds on the surface. Over the course of a year or more, the Sun gently evaporates the water away until the lithium concentration can be precipitated out with chemical reagents and processed into lithium carbonate or hydroxide for sale. Operating this way, you can extract 40-60% of the lithium in your brine at a cost between US$3,300 and US$4,900 per metric ton of lithium carbonate equivalent.

The DLE process is much faster, taking a matter of hours instead of more than a year. It can pull up to twice as much lithium out of a given brine as an evaporative process, potentially doubling the output of a given brine operation. It uses about 95% less land, and is economically viable with considerably lower lithium concentrations in the brine. And it costs less per ton of lithium carbonate equivalent than evaporation.

Essentially, the DLE process involves adding a highly selective absorbent molecule to the brine, which captures the lithium and quickly separates it from the water, rejecting impurities in the process.

More

Fast, low-cost direct lithium extraction could avert a supply crisis (newatlas.com)

Look we can’t stand here all day doing nothing, people will think we’re British workmen.

Spike Milligan.