Baltic Dry Index. 1183 -50 Brent Crude 72.54
Spot Gold 1916 US 2 Year Yield 4.74 +0.09
We do not have, nor have had, and never will have an opinion about where the stock market, interest rates, or business activity will be a year from now.
Warren Buffett.
In the stock casinos, optimism. Well optimism that the punters can rely on the perma-bulls, stock promoters and money managers to dress up the stock indexes for the all important end of the month, quarter and half year. Many a stock manager’s half year bonus depends upon it.
In the real economy where people must work
for a living, more sign of the global economy struggling ahead of an arriving
recession in H2 23.
Asia markets mixed as Australia inflation slows
and China industrial profits sink
UPDATED TUE, JUN 27 2023 10:47 PM
EDT
Asia-Pacific markets were mixed as the region
digests May inflation figures out of Australia and China releases its
industrial profits for May.
In Australia, the S&P/ASX 200 climbed
1.31%, as the country saw a lower-than-expected weighted inflation rate of 5.6%
in May. Economists polled by Reuters expected the country’s inflation rate to
ease to 6.1%, compared with the 6.8% recorded in April.
In Japan, the Nikkei 225 rebounded
after three straight days of losses, gaining 0.68%, with the Topix also surging
0.88%.
In contrast, South Korea’s Kospi lost 0.4%,
while the Kosdaq was down 0.12%.
Hong Kong’s Hang Seng index also
reversed its gains after climbing almost 2% on Tuesday, falling 0.39%. Mainland
Chinese markets were also in negative territory as China’s industrial profits
sank 18.8% in first five months of 2023.
The Shanghai Composite was
down 0.31%, while the Shenzhen
Component saw a larger loss of 0.82%.
Overnight in the U.S., all three major indexes
climbed, the Dow Jones Industrial Average climbing
0.63 % and marking its first gain seven days.
The Nasdaq Composite surged
1.65% as investors piled back into tech stocks, and the S&P 500 advanced
1.15%.
Asia markets mixed as
Australia inflation slows and China industrial profits sink (cnbc.com)
S&P 500
futures inch lower after Tuesday’s tech-fueled rally: Live updates
UPDATED TUE, JUN 27 2023 8:25 PM EDT
U.S.
S&P 500 futures inched lower on Tuesday night.
S&P 500 futures and Nasdaq
100 futures dipped 0.19% and 0.39%, respectively. Dow Jones Industrial Average
futures were little changed.
During Tuesday’s
trading, the Dow Jones
Industrial Average posted its
first positive session in seven, with the index closing 0.63%
higher. Meanwhile, the S&P 500 and
the Nasdaq Composite jumped
more than 1% each, buoyed by a resurgence in tech stocks after
last week’s selloff.
Investors are preparing to close
out the best first half for the Nasdaq in 40 years, as they ride a wave of
optimism around artificial intelligence that has significantly buoyed a handful
of mega-cap tech stocks. The S&P 500 and Nasdaq Composite are higher this
year by 14% and 29%.
“We’re sequencing this series of
higher highs and higher lows. I wouldn’t call it a momentum market, maybe we’re
starting to shift to that a little bit, but certainly it’s a trend market,”
Jeff deGraaf, chairman at Renaissance Macro Research, said Tuesday on CNBC’s “Closing Bell.” He noted
the leadership in cyclical sectors such as technology and industrials, saying
that they are positive indicators.
“Those are pretty good,
bulletproof indications that you’re in a bull market,” deGraaf added.
More
Stock
market today: Live updates (cnbc.com)
In the commodity sector, Dr. Copper is signalling more inflation ahead. Well maybe, but a new global recession seems to me more likely to make this copper scramble “transitory.” Still I wouldn’t short into the scramble for copper in the face of an arriving recession later this year. The current scramble may be related to the NATO proxy war on Russia in Ukraine.
Column: Global
exchange copper stocks sink to 15-year lows
June
28, 20231:00 AM GMT+1
LONDON, June 27
(Reuters) - There's a renewed scramble for copper sitting in London Metal
Exchange (LME) warehouses.
Headline
LME copper stocks have slid from 100,100 tonnes to 77,050 over the last three
weeks despite almost 30,000 tonnes of arrivals.
What's
arriving is just as quickly turning around and going out again. Available
tonnage stands at just 31,900 tonnes, enough to supply the global market for
around 11 hours.
Unsurprisingly,
the stocks raid has ignited LME time-spreads, the benchmark
cash-to-three-months period closing Monday valued at a backwardation of $31 per
tonne. It's the highest premium for cash since November last year.
The drain on LME
copper stocks is puzzling given weakening manufacturing activity in both
Europe and the United States.
The
closure of Swedish producer Boliden's (BOL.ST) Ronnskar smelter has opened up a
220,000-tonne supply gap in the European market, but the swoop on LME stocks
started before the June 13 fire at the plant and has
been focused on Asian and U.S. locations not European.
It
wouldn't be the first time that the LME stocks signal has been refracted, and
the lower the stocks, the easier it is to bend the light.
But
this is not just a London market phenomenon. Visible stocks everywhere are low.
Combined copper
stocks registered with the LME, its U.S. counterpart the CME and the Shanghai
Futures Exchange (ShFE) totalled 165,000 tonnes at the end of last week.
Global
exchange inventory is now down by 45,500 tonnes on the start of the year and the
lowest it's been since 2008.
More
Column: Global exchange copper stocks sink to 15-year lows | Reuters
Finally, more global economic gloom from
China, Switzerland, the UK and HSBC.
China's deepening slide
in industrial profits adds to economic gloom
June 28, 2023
BEIJING
(Reuters) - Profits at China's industrial firms tumbled 18.8% year-on-year in
the first five months of 2023, data showed on Wednesday, as companies were hit
hard by a squeeze in margins from softening demand amid a stumbling post-COVID
economic recovery.
The slide
extended a 20.6% profit fall in the January-April period, according to data
from the National Bureau of Statistics (NBS), and reinforces market
expectations of further policy support over coming months.
In May alone,
industrial earnings contracted by 12.6% from a year earlier, according to the
NBS, which only occasionally publishes monthly figures. Profits were down 18.2%
in April.
The continued
weakness in profits came on the back of a slowing economy that was losing steam
in May on many fronts including retail sales, exports and property investment
as youth jobless rate scaled a fresh high of 20.8%.
The patchy
recovery has prompted S&P Global, Goldman Sachs and other global agencies
to ratchet down their China growth forecasts for this year.
As part of efforts to shore up the faltering recovery, China
last week cut its key lending benchmarks for the first time in 10 months. It
also unveiled a 520 billion yuan package of purchase tax break on new-energy
vehicles through the end of 2027.
More
China's
deepening slide in industrial profits adds to economic gloom (msn.com)
Your Evening
Briefing: UBS Plans to Slash Half of Credit Suisse
27 June 2023
at 23:18 BST
Three months after UBS agreed to buy Credit Suisse in a government-brokered rescue—the coup de grâce for its teetering Swiss rival and the European chapter of this spring’s banking fiascoes—the full human price of the forced union has now become clear. UBS is said to be planning to terminate more than half of Credit Suisse’s 45,000 employees. It’s a dramatic drop of the anvil on a financial sector in which Wall Street banks such as Morgan Stanley and Goldman Sachs previously announced thousands of their own firings.
UBS, whose combined workforce jumped to about 120,000 when the deal closed, has said it aims to save some $6 billion in staff costs in the coming years. Credit Suisse employees in London, New York and parts of Asia are expected to suffer the worst of the dismissals. Staffers have been told to expect three rounds of terminations this year, with the first expected by the end of July and two more tentatively planned for September and October.
UBS signaled
early in the takeover that it intended to drastically cut back at Credit
Suisse’s loss-making investment bank, which was the source of the $5.5 billion
disaster tied to the Archegos Capital Management scandal in
2021. Shares of UBS gained as much as 2% in US trading on Tuesday. As for
UBS Chief Executive Officer Sergio Ermotti, he says the integration with Credit
Suisse is going “very well.”
More
Bloomberg
Evening Briefing: UBS Plans to Slash Half of Credit Suisse Employees -
Bloomberg
London house prices fall as mortgage interest rate hikes hit buyers’ budgets
June 27, 2023
London was one of the few
regions of the UK to see an annual drop in house prices this
month, with property in the
capital down 0.2 per cent compared to last year. This made it, alongside
Northern Ireland, one of the few regions to see a drop, according to new
research from Zoopla.
Interestingly,
Zoopla’s data also found that the increase in mortgage rates is starting to
have a knock-on effect on asking prices. More than four in 10 vendors (42 per
cent) are now accepting offers five per cent or more below their asking price
and 15 per cent are agreeing to a discount of at least 10 per cent. The average
price reduction is 3.8 per cent.
The
South East, where prices have increased the most in recent years, is among the
areas where it appears they need to adjust the most too.
Buyers are
being forced to drive harder bargains as the cost of getting a mortgage,
something 70 per cent of sales involve, has skyrocketed in recent months
following the Bank of England’s base rate increases. The result of mortgage rates moving from four
per cent to five per cent recently has led to an 11 per cent reduction in
buying power, but this is set to increase to nearly 20 per cent if mortgage
rates top six per cent.
More
London
house prices fall as mortgage interest rate hikes hit buyers’ budgets (msn.com)
A U.S. recession is coming this year, HSBC warns
— with Europe to follow in 2024
The U.S. will enter a
downturn in the fourth quarter, followed by a “year of contraction and a
European recession in 2024,” according to HSBC Asset Management.
In its midyear
outlook, the British banking giant’s asset manager said recession warnings are
“flashing red” for many economies, while fiscal and monetary policies are out
of sync with stock and bond markets.
Joseph Little, global
chief strategist at HSBC Asset Management, said while some parts of the economy
have remained resilient thus far, the balance of risks “points to high
recession risk now,” with Europe lagging the U.S. but the macro trajectory
generally “aligned.”
“We are already in a mild profit recession, and
corporate defaults have started to creep up too,” Little said in the report
seen by CNBC.
“The silver lining is that we
expect high inflation to moderate relatively quickly. That will create an
opportunity for policymakers to cut rates.”
Despite the hawkish tone adopted by
central bankers and the apparent stickiness of inflation, particularly at the
core level, HSBC Asset Management expects the U.S. Federal Reserve to
cut interest rates before the end of 2023, with the European Central Bank and
the Bank of England following
suit next year.
More
HSBC:
Global economies are out of sync; 2024 will be a ‘year of contraction’
(cnbc.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.
Corporate greed has been
biggest contributor to inflation since pandemic, says International Monetary
Fund
June
27, 2023
The UN-body has said firms should
allow profit margins to decline as workers rightly look to make up lost
spending power.
Corporate
greed is the main contributing factor to rising inflation in the Eurozone, one
of the world’s leading financial agencies has claimed.
The stark
claim from the International Monetary Fund (IMF) comes as politicians in the UK
have suggested they may ignore the recommendations of public sector pay bodies
in a bid to reduce inflation.
Last week,
Bank of England governor Andrew Bailey was criticised when he seemed to place
the responsibility for rising inflation squarely on the shoulders of working
people, saying that we “cannot continue to have the current level of wage
increases”.
Rising
corporate profits have accounted for almost half the increase in Europe’s
inflation over the last two years, as companies have increased prices by more
than the inflated costs of energy, according to the IMF.
The UN-body
has said companies may have to accept smaller profit shares if inflation is to
remain on track, as workers push for pay rises in order to keep up with
inflation and recoup lost purchasing power.
Rising profits
have accounted for 45% of price rises since the start of 2022, the largest
factor alongside import prices (40%) and significantly higher than labour costs
(25%) - taxes had a slightly deflationary impact.
This means
that corporations have managed to protect their profit margins more than
workers have been able to protect their earnings against rising costs.
More
German yield curve
most inverted in nearly 31 years before ECB speakers
June
27, 2023
(Reuters) -
The German yield curve was at its most inverted in nearly 31 years on Tuesday
as investors bet that a flagging economy would lead the European Central Bank
to cut interest rates after they reach their peak around 4%.
Investor focus
is on speeches from ECB officials at the central bank's Sintra forum, including
President Christine Lagarde and executive board members Fabio Panetta and
Isabel Schnabel.
It would be
Lagarde's first public speech following the weak PMI and Ifo data which added
to doubts about the health of the bloc's economy, boosting expectations that
the ECB will have to be cautious in its future tightening moves.
Analysts
expect the message from central banks to be overall hawkish, though worries
about a policy error and hard landing for the economy are likely to surface.
Germany's
2-year government bond yield, most sensitive to expectations for policy rates,
rose 2 basis points (bps) to 3.16%. Last Friday, it hit 3.282%, its highest
level since March 9.
Germany's
10-year yield, the bloc's benchmark, was up 3 bps at 2.33%.
The gap
between Germany's 2-year and 10-year yields was at -83.5 after falling earlier
in the session to -86.8, its lowest level since September 1992.
Investors will
also look at U.S. economic data later in the session, including new orders for
durable goods, housing figures, and consumer surveys from the Conference Board
and the University of Michigan.
Italy's
10-year government bond yield rose 3.5 bps to 3.975%.
The spread
between Italian and German 10-year yields, a gauge of confidence towards the
euro area's most indebted countries, was roughly stable at 162 bps. It was
around 220 bps at the end of last year.
Investment
funds have been piling back into fixed-income assets to lock in the higher
returns on offer, with the euro zone's peripheral bonds in the spotlight as
they deliver enticing yields while benefiting from an ECB backstop – the
Transmission Protection Instrument - to avoid risks of disorderly bond
sell-offs.
More
German yield curve most inverted in nearly 31 years before ECB speakers (msn.com)
Covid-19 Corner
This section will continue until it becomes unneeded.
Today, something a little different.
But if AI can produce new drugs, can AI also produce the next pandemic?
First Human Trials Begin for AI-Designed Drug
June 26, 2023
Forget college essays. Artificial
intelligence has much bigger fish to fry.
Biotech firm Insilico Medicine said
Monday that it entered an "AI-discovered-and-designed" drug into
Phase 2 clinical trials involving human subjects, a first for the industry. The
robots: they may not be so bad after all.
AI optimists have long
pointed to advances in drug development as a reason for bullishness, and it's
easy to understand why: The sheer data-crunching and protein-identifying
prowess of such systems could potentially cut development time in half, and
development prices by even more, proponents often claim. In plain English: AI
can complete complex math problems far faster than human scientists ever could.
Thus, AI and ML tools could help develop 50 new drugs worth potentially $50
billion over the next decade, according to a Morgan Stanley
report.
Now,
Insilico Medicine, a start-up backed by major private equity firm Warburg
Pincus and Chinese conglomerate Fosun Group, is turning that optimism into
reality by using machine-learning tools to develop INS018_055, a novel
treatment for chronic lung disease idiopathic pulmonary fibrosis. "For
Insilico, [the clinical trial] is the moment of truth," founder and CEO
Alex Zhavoronkov told the Financial Times, adding "but
it is also a true test for AI and the entire industry should be watching."
The entire industry has
already bet big on AI start-ups like Insilico:
More
First Human Trials Begin for AI-Designed Drug
(msn.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.
26
June 2023
Experiments reveal water can "talk"
to electrons in graphene
For the last 20 years,
scientists have been puzzled by how water behaves near carbon surfaces. It may
flow much faster than expected from conventional flow theories or form strange
arrangements such as square ice. Now, an international team of researchers
from The University
of Manchester, the Max
Planck Institute for Polymer Research of Mainz (Germany), and the Catalan Institute
of Nanoscience and Nanotechnology (ICN2, Spain), reports in a study published
recently in Nature Nanotechnology that water can interact directly with
the carbon’s electrons: a quantum phenomenon that is very unusual
in fluid dynamics. The results of this research could lead to applications in
water purification and desalination processes and maybe even to liquid-based
computers.
---- To their surprise, the electron cloud cooled
faster when the graphene was immersed in water while immersing
the graphene in ethanol made no difference to the cooling rate. “This was yet
another indication that the water-carbon couple is somehow special, but we
still had to understand what exactly was going on,” Kavokine says. A possible
explanation was that the hot electrons push and pull on the water
molecules to release some of their heat: in other words, they
cool through quantum friction. The researchers delved into the theory,
and indeed: water-graphene quantum friction could explain the experimental
data.
"It's fascinating to see that the carrier
dynamics of graphene keep surprising us with unexpected mechanisms, this time
involving solid-liquid interactions with molecules none other than the
omnipresent water," comments Prof Klaas-Jan Tielrooij.
What makes water special here is that its vibrations, called hydrons, are in
sync with the vibrations of the graphene electrons, called plasmons, so that
the graphene-water heat transfer is enhanced through an effect known as
resonance. “It is impressive that quantum phenomena usually occurring in solids
appear in what would be considered a classical liquid as water” adds Dr Alessandro Principi, Senior Lecturer at the University of Manchester.
The experiments thus confirm the basic mechanism
of solid-liquid quantum friction. This will have implications for
filtration and desalination processes, in which quantum friction could
be used to tune the permeation properties of the nanoporous membranes. “Our
findings are not only interesting for physicists, but they also hold potential
implications for electrocatalysis and photocatalysis at the solid-liquid
interface," says Xiaoqing Yu, PhD student at the Max
Planck Institute in Mainz and first author of the work.
More
Experiments reveal water can "talk" to
electrons in graphene (manchester.ac.uk)
I do not like debt and do not like to invest in companies that have too much debt, particularly long-term debt. With long-term debt, increases in interest rates can drastically affect company profits and make future cash flows less predictable.
Warren Buffett.
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