US Inflation Day. NATO Meets.

 Baltic Dry Index. 1024 +15                  Brent Crude 78.13

Spot Gold 1929                        US 2 Year Yield 4.85 -0.09   

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith.

In the stock casinos, renewed optimism that this week’s US inflation figures will cause the Fed to halt raising interest rates. The next move in US and global interest rates will be down, goes the new spin.

While I have my doubts that food price inflation is beaten or that wage price inflation is over, a looming recession will become a crash landing if the Fed, ECB and BOE keep raising interest rates from present levels.

Besides, raising interest rates has zero effect on food price inflation.

Below, Asian markets awaiting today’s US inflation figures.

 

Asia markets rise as Wall Street snaps three-day losing streak

UPDATED TUE, JUL 11 2023 12:06 AM EDT

Asia-Pacific markets rose on Tuesday, tracking moves on Wall Street as U.S. markets snapped a three-day losing streak.

In Australia, the S&P/ASX 200 climbed 1.04% and Japan’s Nikkei 225 advanced 0.53%, while the Topix saw a smaller gain of 0.23%.

South Korea’s Kospi led gains in the region among benchmark indexes, gaining 1.23%, while the Kosdaq was up 1.52%.

Hong Kong’s Hang Seng index extended its gains from Monday, rising 0.75%, while mainland Chinese markets were also all up. The Shanghai Composite gained 0.21% and the Shenzhen Component was up marginally.

Investors are bracing for a slew of inflation data later in the week, including June inflation numbers from the U.S., which will give clues to the Federal Reserve’s hiking path.

Reuters reported that comments from Fed officials say that interest rates will still be needed to raised further to bring down inflation that is still too high, “but the end to its current monetary policy tightening cycle is getting close.”

Overnight in the U.S., the Dow Jones Industrial Average led gains and added 0.62%, while the S&P 500 rose 0.24% and the Nasdaq Composite gained 0.18%.

Central banks in Asia could soon diverge from the Fed: Nomura

Major economies in the region could start “decoupling” from a global tightening cycle led by the Fed due to different macroeconomic conditions in Asia, Nomura economists said.

“Our view of Asian central banks cutting policy rates ahead of the Fed in this cycle is based on the fundamental divergences between Asian and U.S. economies,” Nomura economists wrote in a Friday note.

According to a real-time survey conducted by Nomura’s research team, more than 32% of respondents said they expect South Korea’s central bank to be the first to cut rates after China, followed by Indonesia, the Philippines, then India.

Asia markets rise as Wall Street snaps three-day losing streak (cnbc.com)

Microsoft confirms more job cuts on top of 10,000 layoffs announced in January

PUBLISHED MON, JUL 10 2023 8:46 PM EDT

Microsoft confirmed Monday that it’s eliminating additional jobs, a week after the start of its 2024 fiscal year.

The cuts are in addition to the downsizing announced in January that resulted in 10,000 layoffs. The software maker also disclosed a small number of cuts this time last year. GeekWire reported on the latest cuts earlier Monday.

Amazon, Google and other large technology companies have also scaled back this year after adding headcount rapidly to meet rising demand during the Covid-19 pandemic. Microsoft has said in recent months that clients are looking for ways to save money on their cloud computing bill.

A Microsoft spokesperson declined to specify the number of cuts in the latest round. In January, CEO Satya Nadella issued a memo, indicating the company would change its hardware lineup and consolidate leases.

Microsoft filed a notice Monday saying it would cut 276 people in its home state of Washington. Of those, 66 are virtual.

Salespeople and customer success representatives posted messages on social networks to announce they lost their jobs.

more

Microsoft confirms more job cuts on top of 10,000 layoffs in January (cnbc.com)

Next, stealing Russia’s gold gave the rest of the world a fast reality check. Whose big idea was that?

Countries repatriating gold in wake of sanctions against Russia, study finds

July 10, 2023 1:07 AM GMT+1

LONDON, July 10 (Reuters) - An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday.

 

The financial market rout last year caused widespread losses for sovereign money managers who are "fundamentally" rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay.

 

Over 85% of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last.

 

Gold and emerging market bonds are seen as good bets in that environment, but last year's freezing of almost half of Russia's $640 billion of gold and forex reserves by the West in response to the invasion of Ukraine also appears to have triggered a shift.

 

The survey showed a "substantial share" of central banks were concerned by the precedent that had been set. Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.

 

One central bank, quoted anonymously, said: "We did have it (gold) held in London... but now we've transferred it back to own country to hold as a safe haven asset and to keep it safe."

 

Rod Ringrow, Invesco's head of official institutions, who oversaw the report, said that is a broadly-held view.

 

"'If it's my gold then I want it in my country' (has) been the mantra we have seen in the last year or so," he said.

DIVERSIFY

Geopolitical concerns, combined with opportunities in emerging markets, are also encouraging some central banks to diversify away from the dollar.

 

A growing 7% believe rising U.S. debt is also a negative for the greenback, although most still see no alternative to it as the world's reserve currency. Those that see China's yuan as a potential contender fell to 18%, from 29% last year.

 

Nearly 80% of the 142 institutions surveyed see geopolitical tensions as the biggest risk over the next decade, while 83% cited inflation as a concern over the next 12 months.

Infrastructure is now seen as the most attractive asset class, particularly those projects involving renewable energy generation.

 

Concerns over China mean India remains one of the most attractive countries for investment for a second year running, while the "near-shoring" trend, where companies build factories closer to where they sell their products, is boosting the likes of Mexico, Indonesia and Brazil.

 

As well as China, Britain and Italy are seen as less attractive, while rising interest rates coupled with work-from-home and online shopping habits which became embedded during the COVID-19 outbreak meant property is now the least attractive private asset.

 

Ringrow said the wealth funds that performed better last year were those that recognised the risks posed by inflated asset prices and were willing to make substantial portfolio changes. It would be the same going forward.

 

"The funds and the central banks are now trying to get to grips with higher inflation," he said. "It's a big sea change."

Countries repatriating gold in wake of sanctions against Russia, study finds | Reuters

Finally, China’s trade war fight back bites. Trouble ahead for US bank depositors?

 

China’s ‘first warning shot’ on export controls causes 27% jump in price of gallium—a metal vital to tech industries 

July 8, 2023 at 12:05 AM GMT+1

Global gallium prices jumped 27% this week as buyers reacted to China’s move to control exports of the niche metal used in an array of high-tech industries.

Beijing’s announcement on Monday has been viewed as a retaliation over recent trade restrictions targeting the country’s semiconductor industry, and comes amid broader efforts by the US and Europe to reduce its dominance in the supply chain for critical raw materials.

The gallium market was well supplied before the announcement, but buyers are now moving to lock in shipments before the controls kick in, according to one trader who said he has been actively buying this week. Gallium and germanium are high-value products that are produced in small volumes, and traders don’t typically hold large volumes in stock, he said, requesting anonymity to discuss commercially sensitive matters.

Gallium and other minor metals aren’t typically traded on futures exchanges, and price benchmarks are set by publishers like Fastmarkets, whose journalists survey producers, consumers and traders. 

Gallium rose to $326 a kilogram on Friday, the Fastmarkets data showed, up $43 from a week ago, in an early sign that buyers are seeking to shore up supplies before the export controls kick in next month. Germanium, which is also subject to the restrictions, saw a much smaller impact, rising 1.9%. 

It’s still unclear how the new measures might affect Chinese shipments. From Aug. 1, exporters will need to apply for licenses from the commerce ministry if they want to start or continue to ship them out of the country and will be required to report details of the overseas buyers and their applications.

More.

China export controls cause 27% jump in price of gallium—vital to tech | Fortune

Hugh Hendry Warns of Rising Probability of US Banks Restricting Cash Withdrawals.

Watchlist Idea from Microsoft Start

10/07/2023

Hugh Hendry, a macro guru and hedge fund manager, recently shared his views on the U.S. banking system on Stansberry Research's ""The Daniela Cambone Show."" Hendry believes that the Federal Reserve's monetary policy has increased the probability that banking customers could one day face restrictions on the amount of cash they can withdraw. He also believes that the country's banking industry will likely witness a further deposit flight since customers can now easily pull out their funds with the press of a button. Hendry attributes this to the Fed's interest rate hikes, which have made it attractive for depositors to take their money out of banks and invest it in money market funds.

This list has performed 13.85% over the past year. By comparison, FTSE 100 Index is 1.00% over the same period. The beta of this list, which is a measure of volatility, is Moderately High at 1.42. List Beta is calculated using an equally weighted average beta of the securities within this list. This list includes 20.00% of Industrials stocks, 20.00% of Technology stocks, 20.00% of Consumer Cyclicals stocks, 20.00% of Energy stocks, 10.00% of Basic Materials stocks, 10.00% of Healthcare stocks.

List performance is calculated using an equal-weight methodology. This list is generated by scanning the web and using our algorithms to surface potentially relevant securities to the topic.The list is intended to be educational and includes securities that may be suitable for a watchlist.It is not intended for investment or trading purposes. Microsoft does not recommend using the data and information provided as the basis for making any investment decision.

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High Risk List Details - MSN Money

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.

Stubborn inflation in UK might finally be set to give way

FRIDAY 07 JULY 2023 5:30 AM

Inflation in Britain has stayed higher than other similar economies after global shocks were compounded by post-Brexit workforce woes, writes Oliver Jones.

In the UK, inflation has remained stubbornly high, even as global forces push it in the opposite direction. The good news is, even in the midst of some problems specific to Britain, this should start to fall in the latter half of the year. 

Around the world, inflation was initially driven higher by the twin shocks to manufactured goods markets (mainly caused by pandemic-induced demand and disruption to supply chains) and to food and energy commodity markets (primarily due to the invasion of Ukraine). Without the impact of food and energy prices, headline inflation in the UK may never have risen much over 5 per cent, compared to its actual peak above 11 per cent. But they are now going into reverse, and the impact should feed into UK consumer prices later this year.

In global goods markets, delays at key shipping hubs have now cleared, and firms’ inventory levels are back to normal after more than two years of severe shortages. Global manufacturers have collectively reported outright falls in their selling prices since May. Previous weakness in sterling (which makes imported goods more expensive) may have meant these improvements have taken longer to show up in the UK than elsewhere. But that shouldn’t last, given the extent of the recent rebound in the currency.

Meanwhile, the initial impact of the war in Ukraine on agricultural commodity markets has unwound. The prices of key food commodities, like wheat, are even lower now than on the eve of the invasion, and growth in UK food producers’ input costs has slowed significantly in the last few months. That should finally show up on the supermarket shelves in the second half of 2023, as the two largest chains have both indicated.

It’s a similar story when it comes to energy prices. Russia has found ways to keep exporting oil, while Europe has coped far better than feared without Russian gas, so the wholesale prices of both are now lower now than just before the invasion. The regulatory structure of our energy markets means that it takes time for lower gas prices to feed through to consumers. But the average UK household will see its energy bills fall by nearly 20 per cent this month as the regulator’s new price cap comes into force. 

Of course, the Bank of England is most concerned about domestic price pressures, specifically the tightness of the jobs market and associated strength of services inflation. While a red-hot jobs market has not been a uniquely British phenomenon, it’s fair to say that a couple of UK-specific factors have contributed here. Post-Brexit changes in migration law enacted have reduced the availability of workers in sectors like hospitality and agriculture. And the continued rise in NHS waiting lists appears to be linked to the growing number of would-be workers out of the labour force due to illness.

However, even with these structural problems, peak jobs market tightness appears to have passed as policy has swung from supportive to restrictive. The unemployment rate has crept up since last summer, while the number of unfilled job vacancies has fallen by about a quarter of a million. Surveys suggest that firms have pared back future hiring plans. The latest official wage growth numbers were very strong, but were influenced by April’s 9.7 per cent jump in the National Living Wage which won’t be repeated. A more up-to-date private sector measure of pay growth for new hires shows it falling. Our overall assessment is that the jobs market, while still very hot, has crucially begun to cool. It’s reasonable to expect that to continue, and wage increases to slow, as the effects of higher interest rates continue to bite.

With all of this in mind, inflation could be in the low single digits before the end of this year, as it is already in the US and parts of the Eurozone. While the Bank of England isn’t done yet, it may not need to deliver tightening as aggressive as currently discounted in markets.  

Stubborn inflation in UK might finally be set to give way - CityAM

Covid-19 Corner

This section will continue until it becomes unneeded.

 

COVID-19: India records 20 fresh cases, active caseload declines to 1,420

New Delhi, Jul 11 (PTI) India has recorded 20 fresh coronavirus cases while the number of active cases of the infection has declined to 1,420, the Union health ministry said on Tuesday.

The death toll due to the viral disease has gone up to 5,31,913, according to the ministry's data updated at 8 am.

With the fresh cases, India's COVID-19 tally has climbed to 4,49,94,619, the data showed.

The national COVID-19 recovery rate was recorded at 98.81 per cent, according to the ministry's website.

The number of people who have recuperated from the disease has gone up to 4,44,61,286 while the case fatality rate was recorded at 1.18 per cent.

COVID-19: India records 20 fresh cases, active caseload declines to 1,420 (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.

Super-cheap gigawatt-scale rust battery greenlit for Minnesota

By Loz Blain  July 09, 2023

Gates- and Bezos-backed startup Form Energy is one of the most exciting companies in the grid-level renewable energy storage space, with a multi-day iron-air battery system just 10% the cost of lithium. A 10-MW/1-GWh demo system has now been approved.

For large electrical grids to move toward 100% renewable energy, grid operators need clever, affordable, practical and eco-friendly ways to store up energy that's generated at inconvenient times, and then release it when demand is outstripping supply.

This needs to happen on different timescales; some of this grid smoothing needs to happen on a daily basis, and that's an area where lithium "big battery" projects are already doing a great job. But lithium is less suited to longer-duration storage; it doesn't like staying fully charged for days or months at a time, so other, slower, bulk storage options are being developed to buffer energy grids against multi-day bad weather spells and seasonal lulls in renewable generation.

Form Energy is working in the multi-day space, commercializing a relatively simple, modular battery solution based around the rust cycle of iron. Charging these washing-machine-sized battery modules up uses electricity to convert rust, or iron oxide, into metallic iron, and releases oxygen as a by-product. Discharging the batteries requires oxygen to be put back into the system, and turns the metallic iron to rust, releasing energy in the process.

Obviously, this reaction is slower than the instant, high-power discharge of a lithium battery. But it's quicker than you might think; a full discharge cycle takes about 100 hours, or a little over four days. That's right about the sweet spot for the kind of multi-day batteries cities will need to buffer against bad weather. Well, in some places. Sorry, London.

The advantages of an iron-air battery are simple and clear. Direct reduced iron is the cheapest form of iron available, and was previously mainly used in steelmaking. It's extremely abundant, and totally safe. So are water and air, the other two main ingredients.

These cells might take up some volume – you need about an acre (0.4 ha) of land for 3 MW of power generation, but they last for ages, and they're totally recyclable; you can pull the iron out again and easily sell it on. The result is a Levelized Cost of Storage (LCoS) that comes in at about 10% of a lithium big battery array per kilowatt-hour stored and released.

After announcing a US$760 million manufacturing plant in West Virginia earlier this year, Form Energy has now announced an impressive demonstration project: a 10-megawatt/1-gigawatt-hour system to be built on 5 acres (2 ha) of land near the Sherburne County Generating Station in Becker, Minnesota.

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Super-cheap gigawatt-scale rust battery greenlit for Minnesota (newatlas.com)

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

Ernest Hemingway.