Fed Hikes. ECB’s Turn. More Recession Signs?

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“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith,” aka George Goodman.

As expected, the US central bank raised its key interest rate by a quarter of one percent. The European Central Bank is expected to do the same later today.

In the stock casinos, more hopium that this is the last or penultimate interest rate hikes from both central banks.

I hope the rate hikes will stop now too, but only because I see a global recession arriving later this year, if it hasn’t already started with manufacturing and a lack of EV sales leading the way.

Asian shares climb after Fed hikes as expected; eyes on Europe, Japan

By Stella Qiu  July 27, 20233:33 AM GMT+1

SYDNEY, July 27 (Reuters) - Asian shares advanced and the dollar fell on Thursday after a well-flagged U.S. rate rise delivered no major surprises, although policymakers in Europe and Japan could pose risks for markets with their own interest rate decisions.

S&P 500 futures rose 0.2% while Nasdaq futures gained 0.5%, helped by a 6.8% jump in Meta Platforms (META.O) in after-hours trading. Facebook's parent company reported a strong rise in advertising revenue, topping Wall Street targets.

 

During the much-watched press conference, Chair Jerome Powell remained non-committal about the prospects of a hike in the next meeting in September, though analysts said a continued slowing of inflation and weaker economic data may prompt policymakers to pause.

"Chair Powell post the FOMC outcome started off sticking to script, but slowly morphed to an acknowledgement that inflation has indeed fallen, the real rate had risen and was indeed in a restrictive state," said Padhraic Garvey, regional head of research, Americas, at ING.

---- The European Central Bank is widely expected to raise interest rates for the ninth time in a row on Thursday. The slow retreat in inflation is piling pressure on policymakers to keep rates higher and for longer.

 

Another major risk event this week is the Bank of Japan meeting on Friday amid speculation of more tweaks to its ultra loose monetary policy. The majority view is policymakers would hold steady, according to a Reuters poll.

 

After the Fed decision, markets continued to bet that the tightening is done, with futures implying a slim chance - about 20% - that the central bank could surprise with a quarter-point increase in September.

They also moved to price in sizeable rate cuts of 125 basis points by the end of next year.

More

Asian shares climb after Fed hikes as expected; eyes on Europe, Japan | Reuters

Fed hikes interest rates to 22-year high after brief pause

BY TAYLOR GIORNO - 07/26/23 2:00 PM ET

The Federal Reserve pushed interest rates to a 22-year high Wednesday, one month after a brief respite in hikes during the central bank’s race to bring down historic inflation.

The Fed hiked its baseline interest rate range by 0.25 percent to a span of 5.25 to 5.5 percent. It is the Fed’s 11th interest rate hike since March 2022, a dizzying ascent from near-zero interest rates at the beginning of last year.

All 11 voting members of the Federal Open Market Committee (FOMC), the panel of Fed officials charged with managing monetary policy, supported the rate hike.

Interest rates are among the sharpest tools in the Fed’s toolbox to hack away at high inflation, which is finally falling after squeezing consumers for the last two years.

Inflation peaked at 9.1 percent annually last June, a 40-year high that sparked fears of a recession on the horizon. Price growth has since fallen to 3 percent year over year as of last month, according to consumer price data released by the Department of Labor.

While this is a marked improvement from the same period last year, Fed officials are wary of pulling back on rate hikes before inflation is closer to the bank’s 2 percent annual target.

Fed officials unanimously voted to pause in June after months of falling inflation, but several members privately expressed support for hiking rates last month. The economy is growing and adding jobs at a slower pace than before the Fed began hikes, but still faster than many economists expected it would after a series of rapid rate increases.

While 0.25 percent doesn’t sound like a lot, incremental rate hikes can have a profound impact on the economy — and Americans’ wallets. 

From savings account yields to the cost of carrying a credit card balance, interest rate hikes drive up the cost of borrowing in an effort to curb inflation-driving spending.

Though some Wall Street experts predicted rate hikes could tip the economy into another recession, the prognosis has improved. 

Nearly three-quarters of the 52 business economists surveyed by the National Association for Business Economics (NABE) in June put the odds of a recession hitting in the next 12 months as 50 percent or less. That’s down significantly from a 50-50 split in NABE’s April survey.

Consumer confidence also jumped to its highest level in two years in July, according to the business research group The Conference Board.

Fed hikes interest rates to 22-year high after brief pause | The Hill

 

Fed recap: Details from the Federal Reserve’s July hike and Powell’s market-moving comments

UPDATED WED, JUL 26 2023 3:44 PM EDT

Fed is on a prolonged ‘hawkish hold,’ says Manulife’s Donald

The bar for the Fed to start cutting interest rates is high and is going to require actualized data, which may materialize at the end of the year, when the central bank may feel confident that inflation is better controlled, according to Frances Donald, global chief economist for Manulife Investment Management.

“We now believe that the Fed is on a prolonged ‘hawkish hold,’” she said. “In our base case, their next move will likely be a cut but it will take until 2024 until we see it. That said, Powell will have no choice but to keep the threat of hikes alive, lest he encourage markets to prematurely price in cuts and re-ignite inflation expectations.”

“Indeed, throughout this coming extended pause, the risk to our base case will likely almost always be for one last hike to cement the disinflationary trend,” she added. “Because inflation’s improvement is likely to stall in the next 2-3 reasons for largely mathematical reasons, market probabilities of rate hikes at future meetings will remain non-zero and would be unwise to completely fade this even as we don’t expect any additional hikes.”

Fed recap: The Federal Reserve's July hike and Powell's market-moving comments (cnbc.com)

Finally, more blips or more signs of an arriving global recession?

 

LVMH shares fall as second-quarter sales fail to impress

July 26, 20239:47 AM GMT+1

PARIS, July 26 (Reuters) - Shares in LVMH (LVMH.PA) fell on Wednesday as an in-line increase in sales at the world's top luxury indicated the overall sector was moving towards a less impressive path of growth.

 

Despite a "solid" growth rate, the report "will likely trigger further questions...on whether we are now at the end of the positive earnings revision cycle for luxury and on the drivers of sector growth going forward," wrote analysts at JP Morgan.

----LVMH reported a 1% fall in U.S. sales as appetite for high-end fashion and leather goods slowed there as well as lower-than-expected margins due to high marketing spending.

After hefty investment in high profile events, notably Pharrell Williams' debut fashion show at Vuitton -- LVMH said it plans to rein in marketing spending in the second half of the year to maintain flat margins.

LVMH shares fall as second-quarter sales fail to impress | Reuters

Samsung reports 95% drop in profit, but expects global demand to recover in second half of the year

PUBLISHED WED, JUL 26 2023 8:27 PM EDT

Samsung Electronics posted a second-quarter profit drop Thursday as weak demand for memory chips persists.

Here are Samsung’s second-quarter results versus estimates:

• Revenue: 60.01 trillion Korean won (about $47.21 billion), vs. 60.8 trillion Korean won expected by analysts, according to Refinitiv consensus estimates.
• Operating profit: 0.67 trillion Korean won, vs. 0.6 trillion Korean won expected by the company.

Samsung reported sales slipped 22% from a year ago, while operating profit plunged 95%. Earlier this month, Samsung estimated second-quarter revenue to be 60 trillion Korean won and operating profit to be 600 billion Korean won.

Samsung is the world’s largest maker of dynamic random-access memory chips, which are found in consumer devices such as smartphones and computers.

More

Samsung earnings report Q2 2023 (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.

RV industry steers through post-pandemic US slump

By Timothy Aeppel  July 25, 20235:30 PM GMT+1

July 25 (Reuters) - The U.S. economy may ultimately skirt a recession, but it's felt like one for months at Jon Ferrando's 103 RV dealerships.

Retail sales of recreational vehicles are on track to be the lowest since 2015, said Ferrando, CEO and president of Fort Lauderdale, Florida-based Blue Compass RV, which operates in 33 U.S. states. There's "definitely a recession in RVs," he said.

Blame the coronavirus pandemic. Few industries better illustrate the wild shift in U.S. spending habits that occurred during the health crisis.

In a matter of months, consumers stuck at home cut spending on services, as restaurants shuttered and airports turned into ghost towns, and began splurging on goods, especially items like RVs, bicycles, and swimming pools. Anything that made quarantine conditions more tolerable saw a massive surge in demand.

Winnebago Industries (WGO.N) CEO and President Michael Happe has called it the "COVID retail frenzy" when speaking to investors.

But trouble emerged soon after pandemic restrictions were eased and U.S. interest rates began to rise. The Federal Reserve has hiked borrowing costs 10 times since last March as part of an aggressive campaign to tame high inflation. The U.S. central bank's benchmark overnight interest rate has climbed by 5 percentage points to the 5.00%-5.25% range, the highest level in about a decade-and-a-half.

The interest rate consumers pay on loans is well above even that, and RV loans recently have averaged around 10% versus 7% or so before the Fed's monetary tightening kicked into high gear, Ferrando said. With 80% of his company's customers financing their purchases, it was natural that rapid rate hikes would curb buyers' appetites.

As demand evaporated, manufacturers hit the brakes. North American shipments of new motorhomes and trailers, almost all of which are produced in the United States, are expected to plummet to 300,000 this year, about half the number shipped in 2021, according to the RV Industry Association. The only other time shipments have fallen so sharply was during the 2007-2009 financial crisis and recession.

More

RV industry steers through post-pandemic US slump | Reuters

Covid-19 Corner

This section will continue until it becomes unneeded.

Subclinical Heart Damage More Prevalent Than Thought After Moderna Vaccination: Study

Jul 26 2023

Damage to the heart is more common than thought after receipt of Moderna’s COVID-19 booster, a new study indicates.

One in 35 health care workers at a Swiss hospital had signs of heart injury associated with the vaccine, mRNA-1273, researchers found.

 

“mRNA-1273 booster vaccination-associated elevation of markers of myocardial injury occurred in about one out of 35 persons (2.8%), a greater incidence than estimated in meta-analyses of hospitalized cases with myocarditis (estimated incidence 0.0035%) after the second vaccination,” the researchers wrote in the paper, published by the European Journal of Heart Failure.

 

In a generally healthy population, the level would be about 1 percent, the researchers said.

 

The group experiencing the adverse effects was followed for only 30 days, and half still had unusually high levels of high-sensitivity cardiac troponin T, an indicator of subclinical heart damage, at follow-up.

 

The long-term implications of the study remain unclear as little research has tracked people over time with heart injury after messenger RNA vaccination, which is known to cause myocarditis and other forms of heart damage.

 

“According to current knowledge, the cardiac muscle can’t regenerate, or only to a very limited degree at best. So it’s possible that repeated booster vaccinations every year could cause moderate damage to the heart muscle cells,” University Hospital Basel professor Christian Muller, a cardiologist and the lead researcher, said in a statement.

Moderna did not respond to a request for comment.

 

None of the patients experienced a major adverse cardiac event, such as heart failure, within 30 days of booster vaccination, and none had electrocardiogram changes.

The people with elevated levels were advised to avoid strenuous exercise, which may have mitigated more serious problems, the researchers said.

 

No imaging was done to examine the participants’ hearts, despite imaging being recommended by many cardiologists in cases of suspected vaccine-induced myocarditis.

It’s possible that imaging would have revealed inflammation, which could cause scarring or irregular heartbeat, Dr. Andrew Bostom, a heart expert in the United States who was not involved in the research, told The Epoch Times.

 

----Researchers posited that the incidence of vaccine-associated heart injury was more prevalent than previously thought following messenger RNA booster vaccination because of a lack of symptoms or mild symptoms.

 

They defined injury as a sharp increase in high-sensitivity cardiac troponin T on the third day after vaccination without evidence of an alternative cause. The levels of cardiac troponin had to hit the upper limit of normal, 8.9 nanograms per liter in women and 15.5 nanograms per liter in men.

More

Subclinical Heart Damage More Prevalent Than Thought After Moderna Vaccination: Study (theepochtimes.com)

Slightly off topic today but interesting nevertheless.

Super killer T-cells discovered in patients who beat cancer

By Michael Irving  July 24, 2023

Scientists have discovered a previously unknown type of immune cell that develops in people who successfully fight off cancer. Unlike other killer T cells, these home in on multiple cancer-associated targets at once, preventing new tumors forming for up to a year later and could lead to more effective cancer therapies.

Our immune system is our first line of defense against pathogens or disease, including cancer, but sometimes it needs some help. That’s the basis behind an emerging field of treatment called immunotherapy, which involves removing immune cells from a patient, supercharging them and returning them to the body to attack the cancer with renewed vigor.

In the new study, researchers at Cardiff University investigated what biological differences there could be between successful and unsuccessful rounds of treatment in different patients. Over a decade they followed a phase I and II clinical trial examining what’s known as Tumor-Infiltrating Lymphocyte (TIL) therapy, which focuses on the white blood cells that are already at work in the patient’s tumor.

The researchers focused on patients that successfully cleared their cancer after the treatment. They exposed blood samples from patients to tumor cells that had previously been taken from the same patient, and found that the survivors’ killer T cells still showed very strong responses even a year after entering remission.

They used algorithms designed to predict which targets these T cells were recognizing, based on differences between healthy and cancerous cells. And to their surprise, the scientists discovered that the cancer-defeating patients’ T cells were recognizing multiple protein changes in the cancer cells. In contrast, each T cell is usually thought to only target one protein at a time.

“A multipronged killer T cell from a cancer survivor was shown to be substantially better at recognizing cancer than a normal anticancer killer T cell,” said Professor Andy Sewell, lead researcher on the study. “In addition, the ability to simultaneously respond to multiple cancer-associated proteins meant that these T cells could respond to most types of cancer as cancers only needed to express one of the aberrant targets to be identified as dangerous and killed.”

More

Super killer T-cells discovered in patients who beat cancer (newatlas.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.

Looking deeper into graphene using rainbow scattering

JULY 25, 2023

 

Graphene is a two-dimensional wonder material that has been suggested for a wide range of applications in energy, technology, construction, and more since it was first isolated from graphite in 2004.

 

This single layer of carbon atoms is tough yet flexible, light but with high resistance, with graphene calculated to be 200 times more resistant than steel and five times lighter than aluminum.

Graphene may sound perfect, but it very literally is not. Isolated samples of this 2D allotrope aren't perfectly flat, with its surface rippled. Graphene can also feature structural defects that can, in some cases, be deleterious to its function and, in other instances, can be essential to its chosen application. That means that the controlled implementation of defects could enable fine-tuning of the desired properties of two-dimensional crystals of graphene.

In a new paper in The European Physical Journal D, Milivoje Hadžijojić and Marko Ćosić, both of the Vinča Institute of Nuclear Sciences, University of Belgrade, Serbia, examine the rainbow scattering of photons passing through graphene and how it reveals the structure and imperfections of this wonder material.

While there are other ways of investigating the imperfections of graphene, these have drawbacks. For instance, Raman spectroscopy can not distinguish some defect types, while high-resolution transmission electron microscopy can characterize crystal structure defects with outstanding resolution, but the energetic electrons it uses can degrade the crystal lattice.

"The rainbow effect is not that rare in nature. It was discovered in scattering of the atoms and molecules as well. It was detected in ion scattering experiments on thin crystals. We have theoretically studied a scattering of low energy protons on graphene and demonstrated that rainbow effect occurs in this process as well," Hadžijojić says. "Furthermore, we have shown that graphene structure and thermal vibrations could be studied via proton rainbow scattering effect."

Using a process called rainbow scattering, the duo observed the diffraction they took as this passed through the graphene and the "rainbow" pattern created.

Characterizing the diffraction pattern, the researchers found perfect graphene gave a rainbow pattern in which the middle part was a single line with the inner part demonstrating a pattern with hexagonal symmetry, a symmetry that was absent in imperfect graphene.

The scientists also concluded that specific defect types produce their own distinct rainbow patterns, and this could be used in future research to identify and characterize defect types in a graphene sample.

"Our approach is rather unique and could potentially serve as a useful complementary characterization technique of graphene and similar two-dimensional materials," Hadžijojić says.

Looking deeper into graphene using rainbow scattering (phys.org)

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation […] Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Alan Greenspan, Gold and Economic