Baltic Dry Index. 993 -01 Brent Crude 76.79
Spot Gold 1913 US 2 Year Yield 4.99 +0.05
The statesman who should attempt to
direct private people in what manner they ought to employ their capitals, would
not only load himself with a most unnecessary attention, but assume an
authority which could safely be trusted, not only to no single person, but to
no council or senate whatever, and which would nowhere be so dangerous as in
the hands of a man who had folly and presumption enough to fancy himself fit to
exercise it.
Adam Smith, The
Wealth Of Nations, 1776.
In the stock casinos, the harsh reality of higher interest rates to come. Did Goldilocks just die?
Few stocks do well in a recession, especially a global recession brought on by higher interest rates, let alone stocks trading in bubble territory largely flying on AI hype and spin.
Bond yields are already high enough to start
attracting funds away from risky stocks.
Asia markets
extend declines as U.S. jobs data triggers sell-off on Wall Street
UPDATED THU, JUL 6 2023 11:15 PM
EDT
Markets in Asia-Pacific marked a second day of
declines after Wall Street sold off on stronger-than-expected U.S. jobs data,
leaving room for more rate hikes ahead by the Federal Reserve.
Companies created far more jobs
than expected, payroll processing firm ADP reported Thursday. Private
sector jobs surged by 497,000 for the month, much better than
the 220,000 Dow Jones consensus estimate. The increase resulted in the biggest
monthly rise since July 2022.
The data also followed minutes of
the Federal Reserve’s June meeting, released Wednesday, which showed that most
officials would support more rate increases ahead.
U.S. Secretary of Treasury Janet
Yellen is in Beijing for a four-day trip to meet Chinese
officials, marking a deepening thaw in ties between the U.S. and China.
Hong Kong’s Hang Seng index fell
1.06% as the Hang Seng Tech index dropped nearly 2%. In mainland China, the Shanghai Composite fell
0.25% and the Shenzhen
Component fell 0.55%.
In Australia, the S&P/ASX 200 fell
1.8%, leading losses in the region.
Japan’s Nikkei 225 fell
1.13% and the Topix shed 1.1%. In South Korea, the Kospi slid 1.14% as Samsung
Electronics estimated a 96% likely plunge in its second quarter operating
profit.
Overnight in the U.S., the Dow Jones Industrial Average dropped
366.38 points, or 1.07%. The S&P
500 lost 0.79% and the Nasdaq Composite dropped
0.82%. Thursday’s session marked the worst daily performance for the Dow and
S&P 500 since May.
The three major indexes are on
pace to finish the week lower with just Friday’s session left in the holiday-shortened
trading week. The Dow is poised for a slide of 1.4% on the week. The S&P
500 and Nasdaq, meanwhile, are on pace for weekly losses of 0.9% and 0.8%,
respectively.
Asia markets extend
declines as U.S. jobs data triggers sell-off on Wall Street (cnbc.com)
Stock futures are little changed as investors
look toward Friday jobs report: Live updates
UPDATED THU, JUL 6 2023 8:43 PM EDT
Stock futures were little changed Thursday
evening, as investors refocused their attention on the upcoming June payrolls
report and the implications for the Federal Reserve’s policy stance.
Futures tied to the Dow Jones
Industrial Average and S&P 500
futures were
flat. Nasdaq 100 futures slipped
by 0.03%. In other after-hours action, Levi Strauss shares
tumbled 6% as the denim giant cut its profit
outlook for the year.
Earlier Thursday, the major
averages slipped after data
from ADP showed that private sector employers added 497,000
jobs in June. That figure far exceeded the 220,000 estimate from economists
polled by Dow Jones.
The ADP results spurred worries
about the Fed’s next steps. Bond yields spiked during regular
trading Thursday, with the rate on the 2-year Treasury —
which is most sensitive to the central bank’s policy —touching its highest
level since 2007. Stocks also fell, as the 30-stock Dow shed
more than 1%. The S&P 500 and
the Nasdaq Composite slid
about 0.8% each.
This week’s main event for
economic data looms ahead: the Labor Department’s June
payrolls report, which is due Friday morning. Economists polled by
Dow Jones anticipate an increase of 240,000 positions, a cooldown from May’s
gain of 339,000 jobs.
Investors are on high alert for
signs that the central bank will tighten policy even further. Traders now
forecast a 91% chance the Fed will raise rates at its July meeting, according
to the FedWatch tool from CME Group. Policymakers
indicated at their June gathering that two
more rate hikes could be ahead in 2023.
“The Fed is signaling a
willingness to keep tightening, but markets aren’t convinced it will happen as
much as the Fed projects,” Kathy Jones, chief fixed income strategist for
the Schwab Center for Financial Research, wrote in a bond market
update. “The gap between the peak rate implied by the dot plot and market
expectations has narrowed but hasn’t closed.”
The three major averages are on
their way to a losing week. The S&P 500 is off by about 0.9%, while the
Nasdaq is on pace for a 0.8% decline. The Dow is the underperformer of the
three, tracking for a 1.4% loss.
Stock
market today: Live updates (cnbc.com)
Buckling bond market
casts pall over stocks
July
7, 20233:16 AM GMT+1
SINGAPORE, July 7 (Reuters) - Asian
stocks slid on Friday to cap a torrid first week of the quarter for financial
markets, with the dollar advancing and bonds crumbling as the resilience of
U.S. jobs data has investors bracing for interest rates to head higher still.
MSCI's broadest
index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell
0.8% to a one-month low. Japan's Nikkei (.N225) fell
0.6%.
Overnight,
surprisingly strong partial
figures on the U.S. labour market sent a selloff in bond markets into overdrive
and pushed the S&P 500 stock index (.SPX) 0.8%
lower.
Two-year Treasury
yields burst above 5% and futures pricing started to admit the possibility that
the Federal Reserve will raise rates twice before the year is out. Ten-year
yields rose more than 17 basis points in two sessions to 4.05%, and selling
wrapped around the globe as investors who had positioned for a peak in interest
rates bailed out.
Germany's two-year bond
yield jumped to its highest in 15 years. In Britain, traders
are now bracing both for recession and for interest rates heading towards 7%,
as selling across the curve drove 10-year gilt
yields to post-2008 highs.
Three-year and
ten-year Australian government bond yields each rose a dozen basis points on
Thursday and a dozen more on Friday morning to hit decade highs.
"These were
pretty savage moves," said Jack Chambers, senior rates strategist at ANZ
in Sydney.
"It suggests
some longs have maybe been squeezed out, and people caught," he said, with
signs of strength in the U.S. economy starting to stoke nerves about how high
rates could rise.
More
Buckling
bond market casts pall over stocks | Reuters
Samsung Elec flags
96% drop in Q2 profit as chip glut drags on
July
7, 20231:33 AM GMT+1
SEOUL, July 7
(Reuters) - Samsung Electronics Co Ltd (005930.KS) reported
a likely 96% plunge in second-quarter operating profit on Friday, largely in
line with forecasts, as an ongoing chip glut drives large losses in the tech
giant's key business despite a supply cut.
The world's largest
memory chip and smartphone maker estimated its operating profit fell to 600
billion won ($459 million) in April to June, from 14.1 trillion won a year
earlier in a short preliminary earnings statement.
It would be
Samsung's lowest profit for any quarter since a 590 billion won profit in the
first quarter of 2009, according to company data.
The profit was
largely in line with a 555 billion won Refinitiv SmartEstimate, which is
weighted toward forecasts from analysts who are more consistently accurate.
Shares in Samsung
fell 1.4% in early morning trade, underperforming a 0.6% drop in the wider
market (.KS11).
Samsung is due to
release detailed earnings on July 27.
In the January-March
quarter, the company reported a whopping 4.58 trillion won loss in its
chip business as memory chip prices fell further and its inventory values were
slashed.
More
Samsung Elec flags 96% drop in Q2 profit as chip glut drags on | Reuters
Goldman's China banks
downgrade based on 'pessimistic assumptions' - state media
July
7, 20232:54 AM GMT+1
BEIJING, July 7
(Reuters) - Goldman Sachs' (GS.N) downgrade
of some major Chinese lenders to "Sell" ratings is based on
"pessimistic assumptions," state-backed Securities Times said in an
editorial on Friday, as worries over the banking sector deepen amid a rocky economy.
"It is not
advisable to be bearish on the fundamentals of Chinese banks based on
pessimistic assumptions, and to a large extent there is a
misinterpretation," the newspaper said.
Goldman said
in a report on Wednesday that it had downgraded Agricultural
Bank of China (AgBank) (601288.SS) from
"Neutral" to "Sell", while cutting Industrial and
Commercial Bank of China (ICBC) and Industrial Bank (601166.SS) from
"Buy" to "Sell".
Chinese bank shares
listed in Hong Kong tumbled after the report was released.
Investors are
concerned about Chinese banks' exposure to local government debt, earnings
risks stemming from such debt, and diverging fortunes among individual banks,
Goldman said in the report.
Chinese policymakers
are stepping up efforts to boost infrastructure investment and are tackling
hidden local government debts, the Securities Times said.
Goldman did not
respond immediately to a request for comment on the newspaper's editorial.
Goldman's
China banks downgrade based on 'pessimistic assumptions' - state media |
Reuters
Finally, at the Old Lady of Threadneedle
Street, just how high is too “high?” In a gigantic mistake by UK central
banksters, I think we are all about to find out.
Markets bet on Bank
of England rates hitting 25-year high of 6.5%
July 6, 2023
LONDON
(Reuters) - Financial markets bet on Thursday that the Bank of England will
raise interest rates to a 25-year high of 6.5% early next year, up from a
previous expected peak of 6.25%, pushing the yield on short-dated government
bonds to their highest since mid 2008.
Rate futures
showed a roughly two in three chance that the BoE will have raised rates to
6.5% or higher by its February 2024 meeting, up from 5% now.
Last month the
BoE said there had been "more persistence in the inflation process"
and raised interest rates by a bigger-than-expected half a percentage point.
The more
hawkish shift and comments last week by BoE Governor Andrew Bailey have done
nothing to stem an upward climb in gilt yields and rate expectations.
"Investors'
expectations for future BoE hikes have only become more aggressive in recent
days," strategists at Deutsche Bank wrote in a note to clients.
Bailey said on Thursday there was some evidence that
overcharging by some retailers was contributing to inflation. The BoE previously
said this was not widespread.
Economists'
forecasts have also moved up, though more slowly. A Reuters poll published on
June 26 showed a median forecast of rates peaking at 5.5%.
A BoE survey
on Thursday gave mixed messages on inflation stickiness. Businesses' plans to
raise prices were the lowest in 15 months at 5.3%, but their expectations for
consumer price inflation in the medium term rose to a five-month high of 3.7%,
well above the BoE's 2% target.
The impact on
higher interest rates on some parts of the economy is already clear, with a
construction purchasing managers' index (PMI) recording the biggest fall in
house building since 2009, bar two months in 2020.
Despite the
weaker growth outlook, gilt yields rose strongly across a range of maturities,
in contrast to a recent trend where the biggest moves have been for shorter
maturities.
Ten-year
yields rose as much as 11 basis points (bps) on the day to 4.606%, their
highest since turmoil after September's mini-budget, while five-year yields
surpassed that peak to reach 4.898%, their highest since July 2008.
Two-year gilt
yields, the most sensitive to rate expectations, rose as much as 11 bps too to
5.488%, the highest since June 2008.
All the gilts
underperformed against U.S. and German government bonds, with spreads versus
Bunds reaching their widest since October at more than 200 bps.
Markets bet on Bank of England rates hitting 25-year high of 6.5% (msn.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.
US Factory Order Data Flash Red
Alert for Economy
July 5, 2023 Updated: July
5, 2023
U.S. factory orders
fell into negative territory for the first time since October 2020, delivering
a fresh sign that the U.S. manufacturing sector is suffering a slowdown.
The U.S. Census
Bureau announced on July 5 that orders for U.S. manufactured goods declined by
1 percent in year-over-year terms in May, the first time in 31 months that the
gauge has dipped below zero.
“The closer we get
to the 2024 presidential election, the more the economy is slip slidin’ away,”
economist Anthony Sanders, former director of MBS/ABS Research at Deutsche
Bank, wrote in a blog post commenting on the numbers.
In month-over-month terms,
factory orders experienced a modest increase of 0.3 percent in May. While the reading
marks the fifth month-over-month gain within the past six months, it was well
below market forecasts of 0.8 percent growth.
“U.S. factory orders rose for a
third straight month in May, but the trend has turned negative for the
year-over-year comparison,” James Picerno, director of analytics at wealth
management firm The Milwaukee Company, wrote in a tweet.
Excluding transportation orders,
the month-over-month factory order data show a slump of minus 0.5 percent and a
fresh sign that U.S. manufacturing is hitting a soft patch.
Manufacturing Falls Deeper Into Recession
Other
data released in recent days confirm that the U.S. manufacturing sector has
fallen deeper into recession territory.
The
Institute for Supply Management (ISM) said in a July 3 report that its
manufacturing purchasing managers index fell to 46 last month, the lowest
reading since May 2020 and the eighth consecutive sub-50 reading.
Any
readings below 50 represent recession, with all key sub-components in
contraction, including the employment index, suggesting that layoff pressures
are building.
The negative May
manufacturing data extend a multi-month slump as experts warn that the economy
faces obvious challenges.
More
US Factory Order Data Flash Red Alert for Economy
(theepochtimes.com)
Higher wages overtake
energy to become 'biggest driver of price rises'
July 5, 2023
Higher wages are the "biggest driver of price rises" for
two-thirds of businesses, according to the findings of a report which will do
nothing to ease worries at the Bank of England that inflation is coming under
control.
The British Chambers of Commerce's
(BCC) economic survey of its members, covering April to June, showed that the
pace of wage increases had become the biggest cost headache in the period,
replacing energy bills.
The findings chime with the bank's
warnings about high wage settlements as it looks to get a grip on the
country's inflation problem.
After its shock 0.5 percentage point hike to
bank rate last month, which took the rate to 5%, governor Andrew Bailey hit
out at higher corporate profit margins and salary increases as contributing
most to inflation's stickiness.
The most recent consumer prices index
(CPI) measure was unchanged at 8.7% while there was a surprise leap in the pace
of so-called core inflation. which strips out the impact of volatile elements
such as food and energy.
Financial markets now forecast bank
rate peaking above 6% due to the core inflation data and the fact that wage growth is running at an
annual rate of 7.2%.
While public and private sector
operators are under pressure to attract and retain staff in the tight labour
market and help workers with the cost of living crisis, the bank argues bumper
pay packets are counterproductive.
Its mandate dictates it must raise the cost of
borrowing to help get inflation back down to its 2% target.
The process of stifling activity in
the economy through interest rate hikes is what has driven things such as fixed
mortgage rates up - intensifying the squeeze on household budgets.
The BCC's survey findings suggest
there is a chance that wage growth has further to go as the official figures
from the Office for National Statistics currently only cover up to April.
One bit of good news in the BCC
report was that a minority (45%) of the 5,000 participants expected their
prices to increase in the current third quarter of the year.
That compared to a 55% reading during
the first three months of 2023.
BCC director general Shevaun Haviland
said of the survey: "With inflationary pressures weakening, but wage cost
concerns remaining high, our research should give the government and Bank of
England pause for thought on their next steps.
More
Higher wages
overtake energy to become 'biggest driver of price rises' (msn.com)
Covid-19
Corner
This section will continue until it becomes unneeded.
More bad news on the Pfizer
vaccines. Approx. 17 minutes.
Viral Vaccine paper
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.
EV Charger Hacking Poses a ‘Catastrophic’ Risk
Vulnerabilities in electric vehicle charging stations and
a lack of broad standards threaten drivers—and the power grid.
July 5, 2023
With his electric Kia EV6 running low on
power, Sky Malcolm pulled into a bank of fast-chargers near Terre Haute,
Indiana, to plug in. As his car powered up, he peeked at nearby chargers. One
in particular stood out.
Instead of the businesslike welcome screen
displayed on the other Electrify America units, this one featured a picture
of President Biden pointing
his finger, with an “I did that!”
caption. It was the same meme the president’s critics started slapping on gas
pumps as prices soared last year, cloned 20 times across the screen.
"It was, unfortunately, not terribly surprising,”
Malcolm says of the hack, which he stumbled upon last fall. Such shenanigans
are increasingly common. At the beginning of the war in Ukraine, hackers
tweaked charging stations along the Moscow–Saint Petersburg motorway in
Russia to greet users with anti-Putin
messages. Around the same time, cyber-vandals in England programmed public
chargers to broadcast pornography. Just this year, the
hosts of YouTube channel The Kilowatts tweeted a video showing it was possible to take control of an
Electrify America station’s operating system.
While such breaches have so far remained relatively
innocuous, cybersecurity experts say the consequences would be far more severe
at the hands of truly nefarious miscreants. As companies, governments, and
consumers sprint to install more chargers, the risks could only grow.
In recent years, security researchers and white-hat
hackers have identified sprawling vulnerabilities in internet-connected home
and public charging hardware that could expose customer data, compromise Wi-Fi
networks, and, in a worst-case scenario, bring down power grids. Given the
dangers, everyone from device manufacturers to the Biden administration is
rushing to fortify these increasingly common machines and establish security
standards.
“This is a major problem,” says Jay Johnson, a
cybersecurity researcher at Sandia National Laboratories. “It is potentially a
very catastrophic situation for this country if we don't get this right.”
Vulnerabilities in EV charger security aren’t hard to
find. Johnson and his colleagues summarized known shortcomings in a paper
published last fall in the
journal Energies. They found everything from the
possibility of hackers being able to track users to vulnerabilities that “may
expose home and corporate [Wi-Fi] networks to a breach.” Another study, led by
Concordia University and published last year in the journal Computers
& Security, highlighted more than a dozen classes of “severe
vulnerabilities,” including the ability to turn chargers on and off
remotely, as well as
deploy malware.
More
EV Charger Hacking Poses a ‘Catastrophic’ Risk | WIRED
Damaged electric cars
‘quarantined’ over fears they will explode
July 5, 2023
Electric cars that sustain minor
bumps are being kept 15
meters apart in repair yards over fears they might explode, adding to insurance
bills.
Government guidelines
recommend electric vehicles with damaged batteries should be “quarantined” from
other vehicles due to the risk of battery fires. Damaged batteries pose a risk
of “thermal runaway” where the energy stored in the battery releases rapidly,
creating temperatures of up to 400C.
But the practice threatens to
increase costs for the insurance industry by more than £600m, costs which
ultimately could be passed onto drivers in increased premiums, according to a
report by automotive risk firm Thatcham Research.
It said insurers would need
to spend an additional £900m a year on quarantine facilities for damaged cars
as a result of the safety measures by 2035, as more battery-powered vehicles
take to the roads. The extra
costs risk adding £20 a year onto all car insurance premiums, rising to £28 by
2050 when there are expected to be some 360,000 electric cars on the road
network.
Just two damaged electric
cars can fit into the same space that would otherwise fit 100 petrol or diesel
cars, under current the DVLA and Transport Department guidelines.
Adrian
Watson, of Thatcham Research, said: “I’ve seen salvage plants with quarantining
compounds. Any EV goes straight in there and sits there for a week before they
do anything with it.”
The placement of the battery within electric cars can
make it more likely that it will be damaged and written off after a minor
accident, according to experts who have previously pointed to common
“skateboard” designs. These place batteries underneath the car, leaving them
susceptible to damage from minor accidents such as mounting the kerb.
Take
up of electric cars is expected to increase in the coming years as net zero legislation forces manufacturers to phase out fossil
fuel vehicles.
Last
year 9,400 vehicles were potentially involved in collisions resulting in
batteries needing repair – a figure that could reach as high as 260,000 by
2035, the report said.
Claims
for damaged electric cars cost insurers 25pc more than their petrol
counterparts, the report found. Electric vehicles also take 14pc longer to
repair.
More
Damaged electric cars ‘quarantined’ over fears they
will explode (msn.com)
Another weekend and a rocky start to summer in the
stock casinos. Will 2023 repeat 2008. Back then Bear Stearns blew up in the
early Spring, the Lehman Bros. blew up in September. Three US banks blew up in February 2023, does
history repeat later this year with more bank failures as the central banks
resume raising interest rates? Unlike 2008, 2023s bank crisis probably starts
in Commercial Mortgage Backed Securities. Have a great weekend everyone.
It is the highest impertinence and
presumption… in kings and ministers, to pretend to watch over the economy of
private people, and to restrain their expense... They are themselves always,
and without any exception, the greatest spendthrifts in the society. Let them
look well after their own expense, and they may safely trust private people
with theirs. If their own extravagance does not ruin the state, that of their
subjects never will.
Adam Smith, The
Wealth Of Nations, 1776.
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