Friday 26 July 2024

The Global Recession Arrives? Debt Crisis Next.

Baltic Dry Index. 1834 -30        Brent Crude  82.52

Spot Gold 2370              US 2 Year Yield 4.41 +0.04

Blessed are the young for they shall inherit the national debt.

Herbert Hoover.

It may be arriving late, but that long predicted US and global recession seems to have arrived. 

A massive debt default comes next if that long expected recession is now finally underway.

Most Asia-Pacific markets rebound after sell-off as investors assess Tokyo CPI, await U.S. inflation data

PUBLISHED THU, JUL 25 2024 7:41 PM EDT

Asia-Pacific markets mostly rebounded Friday, after Thursday’s sell-off saw some indexes in the region hit their lowest level in months.

In Asia, traders assessed July inflation data out of Japan’s capital city of Tokyo, which is widely considered a leading indicator of nationwide trends.

Tokyo’s headline inflation slowed slightly to 2.2% in July from 2.3% in May, while its core inflation rate — which strips out prices of fresh food — remained unchanged at 2.2%, in line with expectations.

The so called “core-core” inflation rate, which strips out prices of fresh food and energy and is watched by the Bank of Japan, fell to 1.5% from 1.8%.

The yen will also be closely watched, after it strengthened sharply against the dollar in the past week. The currency is currently trading at 153.79 against the greenback.

Japan’s Nikkei 225 traded close to the flatline, while the Topix was up 0.25%.

Chipmaker Renesas Electronics fell for a second straight day, plunging over 6% on Friday to lead losses in the index. This brought its share price to its lowest level since April.

Renesas saw a 29% drop in net profit for the first half of the year, with Nikkei reporting that President Hidetoshi Shibata admitted that the firm “misjudged demand for industrial equipment.” Unlike most Japanese companies, Renesas’ financial year starts on Jan. 1.

The sell-off on Thursday resulted in 760 billion yen ($4.9 billion) being wiped off its market capitalization in a single day.

Some Japanese automakers also fell, with Nissan down 3.92% after announcing dismal results for its first quarter ended June 30. Operating profit collapsed over 99% year on year, while net profit tumbled 72.9%.

Separately, Reuters reported that Honda will shutter a factory in China and halt production at another plant, intending to start producing more electric vehicles. Honda shares gained 0.91% on Friday.

Taiwan’s markets returned to trade after being closed for two days due to a typhoon, with the Taiwan Weighted Index plunging 3.33%.

Heavyweights Hon Hai Precision Industry — known as Foxconn internationally — and chip manufacturer Taiwan Semiconductor Manufacturing Company lost 4.71% and 5.52% respectively.

South Korea’s Kospi also rose 0.62%, while the small cap Kosdaq was flat.

Australia’s S&P/ASX 200 was up 0.92%.

Hong Kong’s Hang Seng index climbed 0.17%, while the mainland Chinese CSI 300 was also trading close to the flatline.

Separately, Singapore’s monetary authority announced that it will keep its monetary policy steady, with no changes to its exchange rate settings for the Singapore dollar.

Unlike most economies, Singapore does not use interest rates to control its monetary policy, instead opting to use exchange rate settings to control the strength of the Singapore dollar.

Over in the U.S, traders continued to rotate out of tech, with the S&P500 and Nasdaq Composite extending their losses by 0.51% and 0.93% respectively on Thursday, while the Dow Jones Industrial Average rose 0.2%.

“There’s a changing of the guard happening on Wall Street. The AI stocks that led on the way up are now leading on the way down,” said Adam Sarhan, CEO of 50 Park Investments, adding that these movements are not uncommon during a bull market “great mini rotation.”

Asia markets: Tokyo CPI, U.S. inflation, Singapore MAS (cnbc.com)

Markets Look to Be Unwinding Some ‘Stupid’ Valuations

July 25, 2024 at 11:03 PM GMT+1

Assumptions that have driven global financial markets this year appear to be getting a rapid rethink. In bond and currency markets, investors are racing to redeploy money amid doubts over the outlook of the US economy, which has led to speculation (or wishful thinking) that the Federal Reserve will cut rates faster or deeper than previously expected.

Helping to drive the shift is weakening consumer spending. At the same time, stockholders have suddenly grown skeptical that technology companies’ massive investments in artificial intelligence will pay off any time soon. As a result, frightened investors have dumped shares of big winners such as Nvidia and Broadcom. Copper and other industrial metals are also reversing a recent run-up with China’s slowdown playing a role in their decline.

Even a report Thursday showing stronger-than-expected US growth in the second quarter didn’t allay investor concerns about the path ahead. Wall Street can be quite nervy of course, and we’ve seen this happen before only to witness a new wave of confidence and market records. But it does have to end sometime. Louis-Vincent Gave, chief executive of Gavekal Research, thinks this may be that time, telling clients “it does seem that an unwinding has begun of popular trades that brought valuations to stupid levels.”

More

Bloomberg Evening Briefing: Markets Look to Be Unwinding ‘Stupid’ Valuations - Bloomberg

In other news.

Cost-of-Living Crisis Hits Sales of Food, Cars, Luxury Goods

July 25, 2024

(Bloomberg) -- A global consumer backtrack from post-pandemic revenge spending is starting to hit companies’ top and bottom lines.

From food producers to airlines, automakers to luxury houses, evidence of the impact is piling up. Whether it’s US grocery shoppers tapped out after a period of punishing inflation or wealthy Chinese customers postponing their next splurge, the effects are rippling across the corporate landscape.

Nestle SA, the world’s biggest food company, cut its revenue outlook for the year on Thursday, while Unilever Plc reported sales that missed estimates and Jeep-owner Stellantis NV posted a plunge in profit. A day before, US appliance maker Whirlpool Corp. lowered its earnings forecast, while big US airlines have warned that cut-rate airfares are weighing on sales and profits. 

“There is value-seeking behavior among consumers,” Nestle Chief Executive Officer Mark Schneider said on a call with journalists. “We’re seeing continued pressure and I think that’s consistent with what some other companies in the consumer goods sector are reporting.”  

A cost-of-living crisis has taken its toll on shoppers who’ve traded down to cheaper brands, and consumer giants have struggled to coax them back. Around 80% of US shoppers are reducing grocery spending, according to a recent poll of 1,000 people who broadly represent the US demographic by Savings.com, a website that offers coupons.

---- US consumers have generally been resilient against the backdrop of years of inflation and rising interest rates, though they’re selective in how they are spending and searching for value. Walmart Inc., Target Corp. and other retailers have said in recent months that consumers’ wallets are still stretched and that the broader environment remains challenging. 

In lowering its full-year guidance, Maytag owner Whirlpool said shoppers are refraining from costly purchases amid a weakening housing market, pessimism on the economy and negativity around the US presidential election. Major appliance sales in North America dropped 5.7% in its most recent quarter, it said. 

An aversion to big-ticket purchases also hit Stellantis, owner of Fiat, Peugeot and other brands. The shares dropped Thursday after the carmaker reported a plunge in sales during the first six months of the year. Earnings fell by nearly half.

Ford Motor Co. and Tesla Inc. also posted disappointing results this week, while Porsche AG warned of supply-chain snags.

Parcel carriers like UPS and FedEx have been contending with low volumes in their delivery networks since the dropoff of the Covid spending boom. But what these companies are seeing now isn’t that consumers are buying less, they’re buying cheaper. 

More

Cost-of-Living Crisis Hits Sales of Food, Cars, Luxury Goods (msn.com)

A 134-Year-Old American Furniture Chain Closing Down All 553 Stores

The company faced pressures from inflation and interest rates, which affected its growth.

July 25, 2024

Furniture retailer Conn’s filed for bankruptcy and is shutting down outlets nationwide after experiencing a slowdown in recent years that negatively affected the firm’s sales and liquidity.

The Chapter 11 bankruptcy was filed on July 23 in the U.S. Bankruptcy Court for the Southern District of Texas. Founded in 1890, Conn’s operates 553 retail stores across the country that will be closed as part of the bankruptcy proceedings. The company has started running store closing sales at some of its locations and requested the court to allow it to continue with these sales.

The bankruptcy filings were made after the company’s growth faced “significant headwinds” in recent years, CEO Norman J. Miller said in another court filing. These challenges include “drastic shifts” in consumer behavior, interest rate pressures, inflation, and integration delays and increased costs associated with the firm’s merger during 2023–24, he stated.

More

A 134-Year-Old American Furniture Chain Closing Down All 553 Stores | The Epoch Times

China to use ultra-long bonds for consumer, trade-in policy support as worries about retail sales slump grow

PUBLISHED THU, JUL 25 2024 6:50 AM EDT

SHANGHAI — China on Thursday announced its most targeted measures yet for boosting consumption, which has remained lackluster since the Covid-19 pandemic.

Authorities announced they would allocate 300 billion Chinese yuan ($41.5 billion) in ultra-long special government bonds to expand an existing trade-in and equipment upgrade policy. The document was jointly published by the National Development and Reform Commission — China’s economic planning agency — and the Ministry of Finance.

“There have never been such specific measures” aimed at consumption, Bank of China’s chief researcher Zong Liang said in a phone interview Thursday, according to a CNBC translation of his Mandarin-language remarks.

He noted how the new policy links Beijing’s ultra-long bond program — announced in March — with consumption.

“This is a very important measure for implementing the Third Plenum,” Zong said. He was referring to a high-level meeting of Chinese leaders last week that only occurs twice every 10 years, and which typically sets the tone for economic policy.

The latest Third Plenum concluded with the release of several major guiding documents over the past weekend that reaffirmed Beijing’s long-term interest in bolstering advanced tech.

The official communique focused on “deepening reform.” It also said China would work to achieve its full-year national targets, but disappointed many analysts by not indicating major policy changes.

Policymakers have started to act in the last week. The People’s Bank of China unexpectedly cut interest rates on Monday, amid other changes, and on Thursday cut its medium term facility lending rate.

The National Development and Reform Commission on Thursday then announced the expanded policy to support consumption.

“The move is a three-birds-with-one-stone action: Spurring consumption, absorbing industrial output, and [solidifying] economic growth to meet the pledged target of 5%,” said Bruce Pang, chief economist and head of research for Greater China at JLL.

The policy at least doubles the subsidies for new energy and traditional fuel-powered vehicle purchases to 20,000 yuan and 15,000 yuan per car, respectively.

The measures subsidize a range of equipment upgrades, from those used in farming to apartment elevators. Officials noted Thursday that about 800,000 elevators in China have been used for more than 15 years, and that 170,000 of those had been used for more than 20 years.

The policy also laid out specific subsidies for home renovations and consumer purchases of refrigerators, washing machines, televisions, computers, air conditioners and other home appliances.

The document said each consumer could get subsidies of up to 2,000 yuan for one purchase in each category.

more

China to use ultra-long bonds for consumption as retail sales slump (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.

The UK economy has defied gloomy expectations. Can this continue?

THURSDAY 25 JULY 2024 6:00 AM  |  Updated:  THURSDAY 25 JULY 2024 5:30 PM

The UK economy has surprised pundits again and again this year, growing at a much faster rate than almost anyone had expected.

In the first quarter, the economy grew 0.7 per cent, making it the fastest growing economy in the G7. After May’s GDP figures, which showed a 0.4 per cent expansion month-on-month, many economists think this could be repeated in the second quarter.

A raft of forecasters, both in the City and beyond, have been bumping up forecasts for the UK, with consensus for annual growth now approaching one per cent. At the start of the year it was nearer 0.5 per cent.

So why has the economy performed so much better than expected?

Sanjay Raja, chief UK economist at Deutsche Bank, said last year’s shallow recession might actually be contributing to stronger growth this year, reflecting what economists call ‘catch-up’ effects.

Last year the economy grew just 0.1 per cent, well short of its potential growth rate. This means there was unfilled capacity in the economy which is now, unsurprisingly, being utilised.

The fact that the UK is growing more strongly than expected suggests that economists had underestimated the UK’s output gap, how far output is from its potential output. This meant the ‘catch up’ effects this year were stronger than anticipated.

The backdrop for consumers has become significantly more supportive over the past few months too. With inflation back at two per cent and wage growth still strong, households are receiving a significant boost in disposable income.

Disposable income rose by 0.7 per cent in the first quarter, which helped consumer spending to rise by 0.4 per cent in the same period.

Ashley Webb, UK economist at Capital Economics, expected this supportive backdrop to continue. The consultancy expects real household income to climb by 2.5 per cent across 2024 and between 3.0 and 3.5 per cent next year.

While consumers have played their part in fuelling economic growth, there could be more to come. Households are spending more than they were during the cost-of-living crisis, but they are not spending anywhere near as much as they were in the 2010s.

Data released this week by the Office for National Statistics (ONS) showed that the savings ratio climbed to just over 11 per cent in the first quarter of this year. During the 2010s the savings ratio averaged 6.3 per cent.

The savings ratio measures the amount of disposable income which consumers squirrel away rather than spend. The significant increase in savings since the pandemic is likely a reflection of the many different shocks households have faced over the past few years.

Higher interest rates will have also made it more attractive to save.

The ONS noted that consumers in the US have been much more willing to spend, which has been “an important factor in supporting household consumption and economic growth”. The spike in savings suggests there is further scope for consumption to increase if sentiment improves.

It also means that household savings exceed debt for the first time on record. “UK household balance sheets haven’t looked this strong for quite some time,” Raja said.

With inflation more or less back under control, the Bank of England is likely to start cutting interest rates in the next couple of months, which should provide a further tailwind to growth.

More

Why has the UK economy outperformed expectations? (cityam.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

Blood Proteins Can Predict the Risk of Developing More Than 60 Diseases

Study authors found that examining blood proteins can better predict 52 diseases than current clinical tests.

7/22/2024 Updated:7/23/2024

Over 60 diseases can be predicted just by looking at proteins in the blood, a study published Monday finds.

These proteins provided more accurate predictions for 52 out of 67 diseases than current clinical tests.

“Measuring one protein for a specific reason, such as troponin to diagnose a heart attack, is standard clinical practice. We are extremely excited about the opportunity to identify new markers for screening and diagnosis from the thousands of proteins circulating and now measurable in human blood,” lead author professor Claudia Langenberg, director of the Precision Healthcare University Research Institute at Queen Mary University of London, said in a press release.

Postdoctoral researcher Julia Carrasco-Zanini-Sanchez, who is also the study’s first author, told The Epoch Times that the study was prompted by her team’s prior research on a disease related to impaired glucose control.

“[The condition] is basically a form of prediabetes that you can only detect when you do what’s called an oral glucose tolerance test, but not through HBA1c (blood glucose testing) or fasting glucose testing,” she said.

“We started working with proteomics (large-scale study of proteins) to try to develop a test ... to predict the outcome of this oral glucose tolerance test without having to perform it because it’s routinely not done in clinical practice.”

Ms. Carrasco-Zanini-Sanchez said that their prior study led them to wonder if other diseases could be predicted using proteins.

She said that their current model predicts disease development in 10 years’ time.

“[Ten years] is kind of a long time frame for some of the diseases that we’re studying … a three- or five-year prediction timeline would be a bit more relevant. However, the data is still not large enough, which is why ... all of them are trained for 10-year incidents,” the first author said.

Ms. Carrasco-Zanini-Sanchez, who did her doctorate research on proteomics, told The Epoch Times that she hoped the study’s proteomics tests would be used to screen specialized populations most at risk for the disease in question rather than the entire population.

The study, published in Nature Medicine, used data from the UK Biobank and analyzed over 3,000 different blood proteins for 218 different diseases.

Over 40,000 people were recruited to have a sample of their blood taken for proteomics analysis.

These people were then followed for 10 years through their electronic health records to see what diseases they would develop.

For those who did end up developing various diseases, by studying the protein levels they had 10 years ago, researchers determined protein signatures for over 60 diseases.

Each protein signature is made up of five to 20 different proteins.

The researchers developed a clinical model to predict the risk for various diseases, which included information such as age, sex, and body mass index, among other factors.

On top of that model, they added the protein signature, disease biomarkers, or genetic risk scores to make three other models and compared the results.

More

Blood Proteins Can Predict the Risk of Developing More Than 60 Diseases | The Epoch Times

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.

Premier Graphene starts testing graphene-enhanced asphalt  

The tests aim to assess the material's durability, thermal properties, cost-efficiency, and environmental benefits.

July 24, 2024

Premier Graphene has initiated third-party testing on HGI Industrial Technologies’ proprietary graphene-enhanced asphalt. 

The collaboration between the two companies involves Premier Graphene integrating HGI’s graphene formulation into asphalt mixtures for testing.  

The tests aim to assess the material’s performance in various global climates, focusing on structural strength and thermal conductivity when compared to standard asphalt formulations.  

Premier Graphene president Pedro Mendez said: “Our early, initial tests have yielded outstanding results. Our team believes that HGI’s unique graphene formulation, particularly given the results to date, is destined to dramatically affect the durability of asphalt by enhancing its resistance.  

“By using less asphalt, our discovery may have dramatic results on reducing CO₂ [carbon dioxide] emissions.” 

The third-party testing aims to determine the most effective ratio for ease of use, mechanical strength, thermal stability, and overall durability.  

The identification of this ratio could result in annual savings of billions for national, state, and local governments by reducing road maintenance costs and extending the lifespan of infrastructure. 

Once the optimal mix ratio is established, Premier Graphene plans to collaborate with road construction companies.  

The partnership will focus on constructing specific road sections in extreme weather conditions and high-traffic areas using graphene-enhanced asphalt.  

Long-term monitoring of these roads is expected to provide data on the material’s performance and benefits. 

More

Premier Graphene starts testing graphene-enhanced asphalt (worldconstructionnetwork.com)

Next, the world global debt clock. Nations debts to GDP compared.  

World Debt Clocks (usdebtclock.org)

Another weekend and the gloves come off in the US presidential election fight. According to the FBI Director, Trump wasn't hit by a bullet, merely nicked by a piece of shrapnel.  Meanwhile VP Harris makes a pitch for the pro-Palestine symphony vote. It's going to be an interesting, if unseemly, few months. Have a great weekend everyone.

It is just as important that business keep out of government as that government keep out of business.

Herbert Hoover.


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