The Fed Sticks. BOE Next. Stocks Surge. Well, It Was Month-End.

Baltic Dry Index. 1708 -54        Brent Crude  80.72

Spot Gold 2445              US 2 Year Yield 4.29  -0.06

“Why, sometimes I’ve believed as many as six impossible things before breakfast.”

Pouffe Chair Powell, with apologies to Lewis Carroll and Alice.

As expected, the US central bank left interest rates unchanged, but Stool Chair Powell goosed the US stock casinos by all but promising a quarter point rate cut in September.

But not to worry, Deckchair Chair Powell says it’s not a political gift to the Democrats. Well if he says so, I suppose.

Well, it was the last trading day of July and Sofa Chair Powell had all those money manager month-end bonuses to cover. After all, he won’t be at the Fed forever.

Asian markets mostly followed on from the US stock casinos lead.

The Great Stock Casino Disconnect from economic and Middle East war reality continues, until one day, out of the blue, it doesn’t.

Japan stocks tumble as yen strengthens, most Asia markets rise after Powell signals rate cut

Published Wed, Jul 31 2024 7:37 PM EDT

Asia-Pacific markets largely rose on Thursday, after comments from U.S. Federal Reserve Chair Jerome Powell indicated that a rate cut could come in September if inflation data remained “encouraging.”

However, Japan’s Nikkei 225 tumbled 2.72%, while the broad-based Topix plunged 3.45%.

The indexes were mainly dragged by losses in real estate stocks, while heavyweight exporters also saw losses as the yen strengthened.

A stronger yen hits the competitiveness of Japanese exports, while higher borrowing costs tend to hit real estate companies.

On Wednesday, the Bank of Japan raised its benchmark interest rate to “around 0.25%,” marking its highest level since 2008. The yen fell below the 150 level against the dollar late Wednesday, strengthening 0.9% and currently trading at 148.61.

The country’s finance ministry revealed that it spent 5.53 trillion yen ($36.8 billion) on foreign exchange intervention from June 27 to July 29.

The broad Asian rally comes after the Fed’s Federal Open Market Committee meeting concluded Wednesday, where it opted to hold the federal funds rate at its current level of 5.25% to 5.5%.

Powell cautioned that a rate cut is not guaranteed, though he also seemed to rule out a 50-basis-point reduction.

“I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now,” he said.

Investors in Asia are also assessing business activity data from around the region in addition to the Fed comments, with July purchasing managers index data out from China, Japan and South Korea.

Australia’s S&P/ASX 200 touched new all-time highs, gaining 0.52%.

South Korea’s Kospi climbed 0.26%, while the small-cap Kosdaq was up 0.86%. Reuters reported the country’s exports rose at the fastest pace in six months in July, according to preliminary data.

South Korean exports rose 13.9% year-on-year to $57.49 billion, after a 5.1% rise the previous month. However, the figure was weaker than an 18.4% increase expected in a Reuters survey of economists.

Hong Kong’s Hang Seng index was up 0.2%, while the CSI 300 on mainland China was down marginally.

Hong Kong saw its GDP climb 3.3% year-on-year in the second quarter, beating expectations of a 2.7% rise from economists polled by Reuters.

China’s factory activity contracted in July, according to the Caixin survey done by S&P Global. The country’s manufacturing PMI came in at 49.8, surprising economists polled by

Reuters which expected an expansionary figure of 51.5.

A PMI above 50 indicates an expansion in the sector, and vice versa.

Overnight in the U.S., stocks rallied after the Federal Reserve kept interest rates unchanged, as expected, while traders also poured back into megacap tech names.

The S&P 500 jumped 1.58% to close at 5,522.30, while the Nasdaq Composite popped 2.64% to 17,599.40. It was the best session since February for both indexes.

The Dow Jones Industrial Average added 99.46 points, or 0.24%.

Asia stock markets: Fed rate cut, China PMI, South Korea trade (cnbc.com)

Fed recap: Chair Powell gives the September rate cut signal traders were hoping for

Wed, Jul 31 2024 3:34 PM EDT

The Federal Reserve kept its key interest rate at 5.25% to 5.5%, citing “some further progress” toward its 2% inflation goal. At his press conference, Fed Chair Jerome Powell said a rate cut in September is “on the table,” provided the inflation data continues to be encouraging. The comments propelled stocks to their highs of the day.

10 Hours Ago

Powell says a potential September rate cut would be apolitical

Federal Chair Powell said a rate cut at the September meeting would be unrelated to the upcoming presidential election.

He said the central bank would be “absolutely” apolitical if it lowered borrowing costs at the meeting. But the Fed chief also cautioned against assuming that a cut was definitely happening.

“We never use our tools to support or oppose a political party, a politician or any political outcome,” Powell said.

He also said the central bank’s economic forecasts do not take into account who wins the presidency.

“We would never try to make policy decisions based on the outcome of an election that hasn’t happened yet,” Powell said. That would be “a line we would never cross.”

Powell noted November will mark his fourth presidential election at the Fed. He also emphasized that the central bank is a nonpolitical agency.

Fed recap: Chair Powell gives September rate cut signal traders were hoping for (cnbc.com)

Now back to reality. In US recession news, the US consumer is in trouble. When Americans can't afford a McDonalds, the US economy is in deep trouble.

McDonald’s sales fall as customers skip meals out and look to cut costs

July 30, 2024

McDonald’s same-stores sales fell for the first time in nearly four years in the second quarter as inflation-weary consumers skipped meals out or chose cheaper options.

The company said it is working on fixes, such as meal deals and new menu items, but it expects same-store sales to be down for the next few quarters.

“Consumers still recognise us as the value leader versus our key competitors, it’s clear that our value leadership gap has recently shrunk,” McDonald’s chairman, president and CEO Chris Kempczinski said yesterday during a conference call with investors. “We are working to fix that with pace.”

Sales at locations open at least a year fell 1pc in the April-June period, the first decline since the final quarter of 2020 when the pandemic led to the closure of stores and millions stayed at home.

In America, same-store sales fell nearly 1pc. McDonald’s served fewer customers but it said those who came spent more because of price increases.

Mr Kempczinski defended those increases, saying McDonald’s costs for paper, food and labour have increased as much as 40pc in some markets over the last few years.

The company also reported lower store traffic in France and the Middle East, where people have been boycotting McDonald’s because of a perception that it supports Israel in the war in Gaza. Mr Kempczinski said weak consumer sentiment in China had customers fleeing to lower-priced rivals.

McDonald’s warned in April that more of its inflation-weary customers were seeking better value and affordability.

The Chicago burger giant introduced a $5 (€4.6) meal deal at US restaurants on June 25, which was late in this financial reporting period.

McDonald’s US president Joe Erlinger said that $5 meal deal sales are running ahead of expectations and are getting lower-income consumers back into McDonald’s stores. He said 93pc of McDonald’s franchisees have agreed to run the promotion through August.

Other countries such as Germany and the UK are also seeing success with meal deals, the company said.

More

McDonald’s sales fall as customers skip meals out and look to cut costs (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.

Germany on brink of recession even as eurozone GDP exceeds forecasts

Diego Mendoza  Tue, Jul 30, 2024, 7:59 PM GMT+1

Insights from the Financial Times, The Guardian, Bloomberg, and The Associated Press

The News

The eurozone economy grew by 0.3% in the second quarter, slightly exceeding economists’ predictions, but Germany revealed it is tipping toward a recession.

Growing gross domestic product — the total value of goods and services — in Spain, France, and Ireland helped offset a 0.1% decline in Germany, Europe’s biggest economy but lately its problem child.

The eurozone entered a technical recession in the second half of 2023, and while analysts said that the latest figures suggest it is healing, it’s still unclear how long the recovery will last.

“The question remains where the economy will head from here and recent data do not provide much confidence that the eurozone economy is further accelerating,” wrote one economist.

Germany is ‘the weak link’ of the eurozone

Sources:  Financial Times, The Guardian

Economic growth in Europe has lagged far behind the US and even some developing economies, an economist told The Guardian: “Leave out Spain and you just have an economy that moves along at a lacklustre growth pace.” The Spanish economy continued to grow at a strong pace in the second quarter, largely driven by tourism, the Financial Times noted. But Germany has become “the weak link,” and it could turn out to be a more significant drag for other countries, too. It has hardly grown at all since the start of the pandemic, prices are still almost 20% higher than pre-pandemic levels, and industrial orders are slowing down.

Uneven growth could influence interest rate decisions

Source:  Bloomberg

The region’s uneven growth complicates the decision-making process for the European Central Bank, which, like most other central banks around the world, is waiting for the right moment to cut interest rates and ease up on measures meant to tamp down inflation, Bloomberg noted. More crucial data for that calculation will emerge on Wednesday, when Europe’s inflation report comes out. The ECB is likely to “move cautiously,” an economist told the outlet, “as it worries about strong services inflation.” Lower borrowing costs are “very much needed for consumers to start buying goods again,” the CEO of a Swiss chemical company added.

More

Germany on brink of recession even as eurozone GDP exceeds forecasts (yahoo.com)

Business confidence rebounds to eight year high following dip in June

Wednesday 31 July 2024 6:00 am 

Business confidence rebounded sharply in July, a survey revealed, as firms felt a renewed sense of optimism about the UK’s economic prospects.

Overall business confidence jumped by nine points to 50 per cent this month, according to Lloyds’ Business Barometer.

The rebound in confidence during July brought business confidence back up to May’s level, which was the highest level since before the Brexit referendum.

Firms reported a much stronger outlook for their trading prospects, with 62 per cent of businesses reporting stronger activity, up from 53 per cent in June.

Wider economic optimism, meanwhile, rebounded with 62 per cent of respondents feeling more confident about the economy’s prospects. This was up from 55 per cent previously.

“This month shows that businesses are feeling more confident, buoyed by their positive trading prospects and economic outlook,” Hann-Ju Ho, senior economist at Lloyds’ commercial bank.

“Retail-focused businesses were the main driving force behind the positive rise in trading prospects and these results tally with the improvement we have seen in consumer confidence,” he added.

The rapid rebound from June’s confidence dip suggests that the downturn could have been a result of temporary factors, such as uncertainty generated by the election. If the resurgence is sustained, the survey suggests that the UK’s surprisingly strong performance so far this year may continue.

Paul Gordon, managing director for relationship management at Lloyds said higher confidence would help “drive innovation and create jobs across the sectors” in the months ahead.

Lloyds’ survey is another positive leading indicator for the economy as it enters the second half of the year. The UK was the fastest growing G7 economy in the first quarter of the year and most economists expect to see strong growth in the second quarter too.

Households are seeing a healthy increase in real wages on the back of falling inflation while interest rate cuts are on the horizon too. This should contribute to a healthy tailwind for consumer spending.

Business confidence rebounds eight year high following dip in June (cityam.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

COVID-19 looms over Olympics with several athletes testing positive

By Lori Ewing  July 30, 20242:18 PM GMT+1

PARIS, July 30 (Reuters) - Three years after the Tokyo Olympics were held amid strict precautions and with no fans because of the global COVID-19 pandemic, the virus has forced athletes to withdraw from events at the Paris Games and has others donning masks again.

This time the impact is much more limited though.

Several athletes have tested positive, including Australian swimmer Lani Pallister who was a medal hope in the women's 1,500 metres freestyle but had to withdraw from the event.

A team spokeswoman said, however, that the decision was made to save Pallister's energy for the 4x200m freestyle relay which starts on Thursday.

Likewise, British swimmer Adam Peaty, who tested positive a day after he just missed out on 100m breaststroke gold, sharing silver with American Nic Fink, said he would focus on a "fast, full recovery" to give his best in relays later in the week.

"Adam's okay, he's not dying. He's alright, just a bit of a cold," Peaty's British teammate Matt Richards said after his 100m freestyle heat on Tuesday.

"We'll avoid it (COVID) as best we can," Richards said. But "we're here to race. If we get a little bit ill whilst we're racing we'll keep racing. It's how we do it."

Several Australian women's water polo players tested positive for COVID-19 in the days leading up to the opening ceremony, forcing them to isolate from other team members.

However the team played on Tuesday, smashing Serbia 8-3.

More

COVID-19 looms over Olympics with several athletes testing positive | Reuters

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.

Today, some common sense advice from an insurer.

Public warned as risk of battery-related fires rises with hot weather

July 31, 2024

With temperatures on the rise, homeowners in the South West are being warned not to leave mobile phones or laptops charging in direct sunlight, with concerns over a possible rise in battery-related fires.

Lithium-ion batteries are commonly found in rechargeable devices such as mobile phones, tablets, laptops, electric toothbrushes, vapes, power tools and smart home devices like doorbells.

While normally safe to use, devices with such batteries can present a significant fire risk if the battery is exposed to extreme temperatures,

According to William McCarter, who works at home insurance broker Lycetts, considerable increases in lithium-ion battery-caused home fire related insurance claims have been experienced over the past year.

Mr McCarter said: "Fires caused by lithium-ion batteries can also prove more difficult to extinguish, starting with a heat reaction before what’s known as thermal runaway, smoke, fire and often an explosion, so it’s vital that homeowners take a few simple precautions to minimise the risk of battery-related fires."

He detailed the dangers associated with excessively high temperatures, specifically in environments above 45⁰C, which can include the internal temperature in vehicles left in the sun.

He advocated for the use of manufacturer-approved chargers, warning against leaving batteries on continuous charge unattended or overnight.

He said: "Avoid overcharging the battery by disconnecting your device when fully charged and unplugging the charger.

"Don’t leave batteries charging continuously unattended, especially overnight or if you are out of the house, and try to avoid charging them on soft surfaces such as beds or other flammable materials where heat can’t dissipate."

Charging devices or batteries in hallways, doorways, or other areas which could potentially block escape routes during a fire incident, is strongly discouraged.

Chargers or battery packs should not be covered while charging to avoid rapid overheating.

Mr McCarter added: "Never charge batteries or devices in high temperatures or direct sunlight, as this can lead to overheating and pose a fire risk.

“Always use the original battery and power cord recommended by the device manufacturer or a compatible replacement which meets UK safety regulations from a trusted supplier.

“Keep an eye on your battery and device for any signs of damage such as overheating, bulging, dents, unusual smells, hissing, leaking or poor device performance, and stop using it immediately if this happens.

“When not in use, keep devices in a cool, dry place away from direct sunlight and flammable materials. And finally, check your smoke alarms are all still working.”

Public warned as risk of battery-related fires rises with hot weather (msn.com)

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

World Debt Clocks (usdebtclock.org)

“It would be so nice if something made sense for a change.”

Armchair Chair Powell, with apologies to Lewis Carroll and Alice.