Baltic Dry Index. 1150 +23 Brent Crude 85.64
Spot Gold 1947 US 2 Year Yield 4.92 +0.05
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
The big news in mainstream media today is yet more indictments for former President Trump.
The big news in the stock casinos was an
unexpected downgrade by ratings agency Fitch of the USA credit rating.
Asia markets
fall as Fitch lowers U.S. credit ratings
UPDATED TUE, AUG 1 2023 10:39 PM EDT
Asia-Pacific markets fell Wednesday after
ratings agency Fitch cut
the U.S. credit rating from AAA to AA+, citing “expected
fiscal deterioration over the next three years.”
IG market analyst Tony Sycamore
said this will spark risk aversion flows, which means lower equities in Asia,
as well as safe haven buying of treasuries and currencies such as the Japanese
yen and Swiss franc against riskier currencies, such as the Australian and New
Zealand dollars.
Japan’s Nikkei 225 led
losses in the region and slid 1.21%, while the Topix is also down 0.53%.
South Korea’s Kospi fell 0.64%
and the Kosdaq also dipped 0.72%. The country saw its inflation rate for July
come in at 2.3% — its lowest level in 25 months.
Meanwhile, Australia’s S&P/ASX 200 dropped
0.67%, a day after the Reserve Bank of Australia held its benchmark interest
rate at 4.1%.
Hong Kong’s Hang Seng index shed
0.9% on its open, while mainland Chinese markets were trading close to the
flatline. The Shanghai
Composite slid marginally, and the Shenzhen Component was
up marginally.
Overnight in the U.S., the
three major indexes ended mixed, with the Dow Jones Industrial Average up 0.2% and briefly touching its highest
level this year, while the S&P 500 lost 0.27% and the Nasdaq Composite down 0.43%.
Asia
markets fall as Fitch lowers U.S. credit ratings (cnbc.com)
Stock
futures fall after Fitch downgrades U.S. rating, earnings season continues:
Live updates
UPDATED TUE, AUG 1 2023 8:02 PM EDT
U.S. stock futures fell Tuesday night after
Fitch downgraded the U.S.’s long-term rating and traders continued to assess
the latest batch of second-quarter earnings results.
Dow Jones Industrial Average
futures slid by 75 points, or 0.2%. S&P 500 and Nasdaq-100 futures dipped
0.3% and 0.4%, respectively.
Fitch Ratings lowered
the U.S.’s long-term foreign currency issuer default rating to
AA+ from AAA Tuesday night, citing “expected
fiscal deterioration over the next three years.”
Advanced
Micro Devices rose 2% in
extended trading after reporting better-than-expected quarterly
results. Meanwhile, SolarEdge
Technologies tumbled
12% after missing second-quarter revenue expectations.
Those moves came after a
lackluster first day of trading in August in the S&P 500. On Tuesday, the
broad market index fell 0.27%, while the Nasdaq Composite declined
0.43%. Meanwhile, the Dow
Jones Industrial Average added 71.15 points, or 0.2%. At one
point during the session, the Dow reached its highest level since February
2022.
Earnings season is more than
halfway over with results coming in stronger than expected. Of the S&P 500
companies that have reported, about 82% have posted positive surprises,
according to FactSet data. The earnings beats have added to bullish investor
sentiment with stocks continuing this year’s recovery since the third quarter
began.
More
Stock
market today: Live updates (cnbc.com)
Fitch downgrades US credit rating from AAA to AA+
August 2, 2023
The US government's credit rating has been downgraded following concerns over the state of the country's finances and its debt burden.
Fitch, one of three major independent agencies that assess creditworthiness, downgraded it from the top rating of AAA to AA+.
Fitch said it had
noted a "steady deterioration" in governance over the last 20 years.
Treasury Secretary Janet Yellen called the downgrade "arbitrary".
It was based on "outdated data" from the period 2018 to 2020, she said.
Investors use credit ratings as a benchmark for judging how risky it is to lend money to a government. The US is usually considered a highly secure investment because of the size and relative stability of the economy.
However, this year saw another round of political brinkmanship over government borrowing.
In June the government succeeded in lifting the debt ceiling to $31.4 trillion (£24.6 trillion) but only after a drawn-out political battle, which threatened to push the country into defaulting on its debts.
"The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" relative to peers, said Fitch in a statement.
"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said.
Ms Yellen said she
"strongly" disagreed with Fitch's decision.
"Treasury securities remain the world's preeminent safe and liquid asset, and... the American economy is fundamentally strong," she said in a statement.
The timing and
rationale behind the downgrade has taken many economists by surprise.
More
Fitch downgrades US credit rating from AAA to AA+ - BBC News
Despite several mainstream economists objecting, my question is what took them so long?
America now has one former POTUS under multiple indictments, a sitting President and members of his family mired in a growing foreign payments corruption scandal, and to quote from David Stockman’s latest newsletter, rampant fiscal recklessness by both parties in Washington, District of Crooks.
David Stockman knows something of what he writes. David Stockman was Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan
That’s right.
Trump ignited a grotesque outbreak of fiscal recklessness far worse than
anything GOP orators had inveighed against for decades. And much of this
spending eruption was recorded in the government data series for personal
transfer payments. The latter is posted monthly and therefore captures in real
time the impact of Trump’s fiscal cyclone ripping through the US economy.
The annualized run rate of government transfer payments, including the state and local matching portions, posted at a normal level of $3.15 trillion in February 2020. So that’s the pre-Covid baseline. But after the sight-unseen $2.2 trillion CARES act was enthusiastically signed into law by the Donald in late March, it erupted to a $6.42 trillion rate in April.
Thereafter a second wave surged the transfer payment rate to $5.682 trillion in January 2021 when the second relief act was signed by the Donald in December, followed by a final burst at an annualized rate to $8.098 trillion in March 2021 owing to Biden’s American Rescue Act...
In other news, selling off the US Strategic
Petroleum Reserve to lower US oil prices ahead of last year’s US mid term
elections might have saved a lot of Democrat Congressmen and kept control of
the Senate, but buying in replacement oil looks like it may never happen. Saudi Arabia has President Biden trapped over a barrel.
US pulls back offer
to buy 6 million barrels of oil for emergency reserve
August 2,
202312:11 AM GMT+1
WASHINGTON, Aug 1
(Reuters) - The Biden administration has pulled an offer to buy 6 million
barrels of oil for the Strategic Petroleum Reserve, an Energy Department
spokesperson said on Tuesday, as oil prices are expected to keep rising after a
output cut from Saudi Arabia.
The U.S. made
the latest solicitation to buy the sour crude oil for the SPR on July 7. After
the administration released a record 180 million barrels from the reserve last
year to control prices after Russia's invasion of Ukraine, the Energy
Department has bought back 6.3 million barrels in recent months.
The move was not
a rejection of oil companies' offers to sell oil to the SPR but a decision made
on "market conditions," the spokesperson said. The person not specify
what that meant, but tight oil supplies that have caused global oil prices to
rise above $80 per barrel in recent weeks.
Oil
prices are expected to rise
further in coming months after Saudi Arabia said it would cut output
by 1 million barrels per day starting in July, on top of other cuts from eight
OPEC+ countries announced in April.
The American
Petroleum Institute indicated on Tuesday that U.S. crude stocks fell about 15.4
million barrels in the week that ended July 28, sources said.
The Biden
administration has said it wants to buy back oil for the reserve when it costs
$67 to $72 per barrel.
The Energy
Department "remains committed to its replenishment strategy for the
SPR" which includes direct purchases, returns of oil that was loaned to
companies in the wake of hurricanes and other supply disruptions, and
cancellation of planned sales where drawdown is unnecessary, in coordination
with Congress, the spokesperson said.
Last year's record sales from the reserve have pushed its level
of oil to the lowest in about 40 years, although domestic crude output is
higher now.
US
pulls back offer to buy 6 million barrels of oil for emergency reserve |
Reuters
Finally, more on that growing global
manufacturing recession. Layoffs coming next?
The factories on the front line of
China’s economic slowdown
Manufacturers reel from falling demand, rising geopolitical tensions and
sluggish post-Covid recovery
August 1,
2023
From slowing global demand to rising geopolitical tensions and a tentative post-Covid recovery, China’s manufacturers are facing some of the strongest headwinds in years.
The tale of three factories — spanning footwear and electronics — illustrates how manufacturers are experiencing a slowdown in the world’s second-biggest economy.
Factory activity, one of the main pillars
of economic growth during the pandemic, has slowed for four consecutive months
to July 31, according to official statistics. The private Caixin/S&P index
on Tuesday also showed manufacturing declined last month, posting a figure of
49.2. A reading below 50 indicates a contraction.
The Chinese Communist party’s politburo last week acknowledged the economy’s
“tortuous progress” since the lifting of pandemic restrictions, vowing measures
to “actively expand domestic demand”, such as spurring consumer spending.
“Things are pretty bad,” said Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis. Domestic demand “will only recover with a big stimulus”, she added, and “industrial production overall will underwhelm”.
This picture has been complicated by
President Xi Jinping’s desire for “high-quality” growth, a strategy that
favours tech industries over the vast manufacturing hubs that churn out basic
consumer goods.
Feng Tai Footwear exemplifies the difficulties faced by the low-technology manufacturers on which China’s economic success has been built. Prior to the pandemic it sold some 5mn pairs of shoes a year to clients such as Walmart and Target. This year it will do well to sell 3mn. Orders for the second half of this year — typically filled by July — are down at least a third compared with last year.
“Our sector is in misery,” said chief executive Eddie Lam, who runs more than 10 manufacturing plants in China and employs more than 3,000 workers. “Orders often get cancelled halfway . . . Some buyers say they no longer have sufficient budgets. The sentiment is poor.”
“We
are basically at a standstill,” he added. “Our workers are sometimes not even
working their full-time hours.”
China’s monthly export delivery value of goods made with leather, fur or feathers as well as footwear has fallen more than a third from 2019, hitting nearly Rmb17bn ($2.4bn) in May this year.
The domestic market is tough, too, the
company added, as shoes sell for a “much lower price” online.
More
The factories on the front line of China’s economic
slowdown | Financial Times (ft.com)
Manufacturing sector
shrank at fastest rate since 2020 in July
August
1, 2023
The
UK’s manufacturing sector shrank at its fastest rate for three years in July
after 12 months of decline, a new influential survey has suggested.
The
S&P Global/CIPS UK Manufacturing PMI
survey returned a reading of 45.3 in July, compared with 46.5 in June.
It is
the joint-worst performance for the sector since May 2020, indicating that it
is shrinking fairly rapidly.
It
marks 12 months of decline for the sector, although it is slightly better than
the 45.0 score analysts had expected.
The
survey found that companies were hit by weakening exports, as the fall in
exports was among the fastest in three years.
Manufacturers
blamed a weakening global market, which hit demand from most parts of the
world.
The
number of people employed in the sector also dropped for the 10th month in a
row as firms tried to protect their margins.
While the prices
companies paid for supplies dropped again, almost as rapidly as June’s more
than seven-year high, businesses did not reduce the amount they charged
customers.
Firms said
they kept their own prices steady to recover margins lost to recent inflation.
Rob Dobson,
director at S&P Global Market Intelligence, said: “July saw a deepening of
the UK’s manufacturing downturn.
“Output fell
at the quickest pace since January, as overstocked clients, rising export
losses, higher interest rates and the cost-of-living crisis coalesced to create
a worrying intensification of the slump in demand.
The only
upside is that prices are falling in this environment of sharply deteriorating
demand, with cost pressures also helped lower by further repair to supply
chains
More
Manufacturing sector shrank at fastest rate since 2020
in July (msn.com)
Germany: Once again
the 'sick man' of Europe?
August 1, 2023
It was just before the turn
of the millennium that the British business magazine The Economist passed a
verdict on the German economy, referring to the country as the sick man of
Europe. Such an assessment served as a wake-up call for German politics, which,
still intoxicated by the economically strong years after reunification, had
been dragging its feet on reforms. The government of Chancellor Gerhard
Schröder then reformed the labor market, which finally paid off: In 2014, a
group of economists from Berlin and London wrote that Germany had
developed"From sick man of Europe to an economic superstar."
The German economy is again
struggling. For two quarters in a row, its economic output has declined —
something economists label a "technical recession." In the most
recent quarter, Germany's gross domestic product
(GDP) has stagnated at the
level of the previous quarter, and all the important economic indicators show a
decline.
"Germany's
economic situation is darkening," was the conclusion of the president of
the ifo Institute, the Leibniz Institute for Economic Research at the
University of Munich, Clemens Fuest. The ifo Institute surveys 9000 executives
each month about the current state of their businesses and their expectations
for the next six months. The resulting ifo Business Climate Index (July 2023)
has just fallen for the third month in a row. The ifo researchers expect
Germany's gross domestic product (GDP) to decline again during the current
quarter.
The situation is also clear to Commerzbank chief economist Jörg
Krämer: "Unfortunately, there is no improvement in sight," Krämer
told the Reuters news agency. "The worldwide interest rate increases are
taking their toll, especially since German businesses are already unsettled due
to the eroding quality of their location."
Industry is no longer the showpiece
Compared
with other industrialized nations, Germany is performing exceptionally poorly —
and according to an estimate by the International Monetary Fund (IMF) will be
the only large country to have a shrinking economic output. It is especially
the showpiece of Germany that is causing the most concern — the industrial
sector. It accounts for a relatively large portion of Germany's gross value
added (GVA), about 24%, and has long suffered under the worldwide weak economic
situation. The engineering and automotive sectors, which are heavily reliant
on exports, are especially feeling the effects of foreign customers holding
back.
More
Germany: Once again the 'sick man' of Europe? (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.
Crash warning: House prices slump in July as markets soften to financial crisis levels
August 1, 2023
House price growth slumped
-3.8 per cent in July, the latest figures from Nationwide show, as a season of
high interest rates and weak consumer confidence continues to batter the
market.
The figure is the weakest
since July 2009, although it is only slightly lower than the -3.5 per cent
recorded last month.
According to the high street
bank the average price of a home now costs £260k down from £262k compared to
last month.
It comes amid a challenging
period for the housing market which has been battling high mortgage rates every
since the central bank hiked interest rates for a 13th consecutive time.
While some High Street
lenders were beginning last week to reduce the cost of their deals, it has been predicted that the Bank
of England will raise rates again in efforts to fight inflation.
Higher borrowing costs have knocked
sentiment and forced buyers to recalculate their budgets but the property
market hasn’t slammed on the brakes,” Tom Bill, head of UK residential research
at Knight Frank, said.
“The bank rate is nearing its peak,
which means that while sentiment will remain subdued, it will only improve in
the second half of this year. That said, prices and sales volumes will come
under pressure as the market descends from the highs of the pandemic and
adjusts to the new lending environment.”
He added: “While we expect UK prices
to fall by 5 per cent this year, demand should prove more resilient than
expected between now and the general election given the cushioning effect of
wage growth, high levels of housing equity, lockdown savings, the availability
of longer mortgage terms, forbearance from lenders and the popularity of
fixed-rate deals in recent years.”
Crash warning: House prices slump in July as markets soften to financial crisis levels (msn.com)
Euro zone inflation falls further in comforting sign for ECB
July 31, 2023
FRANKFURT
(Reuters) - Euro zone inflation fell further in July and most measures of
underlying price growth also eased, in a largely comforting sign for the
European Central Bank (ECB) as it considers ending a brutal string of interest
rate hikes.
Consumer
prices grew by 5.3% this month versus 5.5% in June, extending a downtrend that
started in the autumn. Excluding energy and unprocessed food, prices increased
by 6.6% after a 6.8% rise a month earlier.
While this is
still a far cry from the ECB's 2% target, the reading may help policymakers
argue that inflation in the euro zone is on a clear, albeit gentle, downward
path and they can afford to skip raising interest rates at least at their next
meeting.
The ECB raised
borrowing costs for the ninth consecutive time last week, but President
Christine Lagarde flagged the possibility of a pause in September as inflation
pressures showed tentative signs of easing and recession worries mounted.
Prices for
services stood out once more, however, as they accelerated to a 5.6% annual
increase in July from 5.4% in June, likely reflecting growth in nominal wages
and a greater desire to spend on travel and entertainment after the COVID-19
pandemic.
Euro zone inflation falls further in comforting sign for ECB (msn.com)
Covid-19 Corner
This section will continue until it becomes unneeded.
Major breakthrough could stop Covid forever
Katherine FidlerTuesday 1 Aug 2023 11:57 am
Antibodies that can neutralise virtually
all known Covid variants
have been discovered by scientists, offering hope of preventing future coronavirus outbreaks.
The
antibodies were initially isolated from the blood of a recovered SARS patient
who went on to receive a Covid-19
vaccine.
Duke-NUS
Medical School in Singapore, which led the
research, said in a statement: ‘This unique combination of prior coronavirus
infection and vaccination generated an extremely broad and powerful antibody
response capable of stopping nearly all related coronaviruses tested.’
Six
antibodies were obtained that could neutralise multiple coronaviruses,
including SARS-CoV-2 – Covid-19 – its variants Alpha, Beta, Gamma, Delta
and Omicron, the original SARS virus, and multiple other animal
coronaviruses transmitted from bats and pangolins.
The most powerful antibody, named E7, functions by targeting a
particular weakness in the virus’s spike protein, which it uses to invade
cells. The antibody appeared to ‘lock’ the spike in an inactive conformation
and block the shape-shifting process the virus requires to infect cells and
cause illness.
‘The neutralising potency and breadth of the E7 antibody exceeded any
other SARS-related coronavirus antibodies we’ve come across,’ said first author
Dr Chia Wan Ni. ‘It maintained activity against even the newest Omicron
subvariants, while most other antibodies lose effectiveness.’
Senior author Professor Wang Linfa, a
world-renowned bat virus expert with Duke-NUS’s emerging infectious diseases
(EID) programme, added: ‘This work demonstrates that induction of broad
sarbecovirus-neutralising antibodies is possible – it just needs the right
immunogenic sequence and method of delivery.
‘This provides hope that the design of a universal coronavirus vaccine
is achievable.’
The outbreak of Covid-19 almost four years ago led to a global pandemic
as a never-before-seen disease swept through the human population.
A number of vaccines were developed in record time, enabling widespread
inoculation against the disease, but Covid-19 has continued to mutate and spawn
new variants, effectiveness has waned.
The development of targeted vaccines continues, but the latest
developments could not only serve as a powerful preventative measure as a
universal vaccine – and also a treatment for the virus – but it could help
prevent future outbreaks.
More
Major breakthrough could stop Covid forever with
universal vaccine | Tech News | Metro News
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.
Carbon capture
technology can be used to turn greenhouse gas methane into clean hydrogen and
graphene – John Hartley
August 1, 2023
Many of us started our week
hearing about a new multi-million-pound carbon capture
project in Aberdeenshire being given the green light. The news has prompted many questions, not least “what
is carbon capture and what role should it have in the energy transition?”
Put simply, carbon capture,
utilisation and storage, or CCUS as it is known, is a process to capture carbon
generated by energy production or energy intensive activities. This can include
trapping carbon from industries such as agriculture, or steel and cement
production, and storing it somewhere (usually underground) so it can’t be
released into the atmosphere. However, the positive impact of this tech is only
truly unlocked if you mobilise the U – utilising the captured carbon
effectively, rather than burying it.
The Acorn
scheme announced yesterday will simply store carbon under the seabed, but CCUS
takes many more environmentally beneficial forms. For example, driving this a
step further toward net zero in Annan, Dumfries and Galloway, technology will
be deployed later this year that will turn captured methane into clean hydrogen
and graphene. This hydrogen can be used as a source of clean energy, while the
graphene can be part of a circular economy, both decarbonising existing heavily
polluting materials, such as concrete, and transforming the performance of
future energy infrastructure like battery cells and solar panels.
Carbon capture technology is being
advanced all over the world at a phenomenal pace, with the Global CCS Institute
putting the number of large-scale facilities globally at 194 last year, up from
just 51 in 2019. To that end, while most of us will agree that we need to
transition to clean energy as quickly as possible, we also need to find climate
solutions to help us rapidly decarbonise the industries we rely on today.
Carbon capture with effective utilisation capabilities must be part of our
arsenal of measures if we’re going to prevent an irreversible and catastrophic
rise in temperature.
The scaling of CCUS in Scotland will
bring significant benefits. It is imperative that we decarbonise our
hard-to-abate industries, and it is clear that Scotland is well-placed to lead
the way here.
John Hartley is
chief executive of climate tech business Levidian
Finally, more on that AI danger we covered last week. UG 1, 2023 7:00 AM
A New Attack Impacts Major AI Chatbots—and No One
Knows How to Stop It
Researchers
found a simple way to make ChatGPT, Bard, and other chatbots misbehave, proving
that AI is hard to tame.
AUG 1, 2023 7:00 AM
CHATGPT
AND ITS artificially
intelligent siblings have been tweaked over and over to prevent troublemakers
from getting them to spit out undesirable messages such as hate speech,
personal information, or step-by-step instructions for building an improvised
bomb. But researchers at Carnegie Mellon University last week showed that adding a simple
incantation to a prompt—a string text that might look like gobbledygook to you or
me but which carries subtle significance to an AI model trained on huge
quantities of web data—can defy all of these defenses in several popular
chatbots at once.
The work suggests that the propensity for the cleverest AI
chatbots to go off the rails isn’t just a quirk that can be papered over with a
few simple rules. Instead, it represents a more fundamental weakness that will
complicate efforts to deploy the most advanced AI.
“There's no way that we know of to patch this,” says Zico Kolter, an associate professor at CMU
involved in the study that uncovered the vulnerability, which affects several
advanced AI chatbots. “We just don't know how to make them secure,” Kolter
adds.
The researchers used an open source language model to
develop what are known as adversarial attacks. This involves tweaking the
prompt given to a bot so as to gradually nudge it toward breaking its shackles.
They showed that the same attack worked on several popular commercial chatbots,
including ChatGPT, Google’s Bard, and Claude from Anthropic.
More
A New Attack Impacts ChatGPT—and No One Knows How to
Stop It | WIRED
Before
you react, think. Before you spend, earn. Before you criticize, wait. Before
you quit, try.
Ernest Hemingway.
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