Thursday, 16 January 2025

US CPI Sparks Casino Bounce. President Tariff Man. A Gaza Truce.

Baltic Dry Index. 1063 -17           Brent Crude 82.02

Spot Gold 2691                 US 2 Year Yield 4.27 -0.10  

The consequences of inflation are malinvestment, waste, a wanton redistribution of wealth and income, the growth of speculation and gambling, immorality and corruption, disillusionment, social resentment, discontent, upheaval and riots, bankruptcy, increased government controls, and eventual collapse.

Henry Hazlitt.

The US CPI inflation figure came in as expected at +2.9 percent but that was good enough to cause a stock casino buying frenzy.

More exit selling rally, I think. Look away from that rising crude oil price now.

In Gaza, a ceasefire truce on terms largely available months ago. Cui bono from the needless delay?

Asia-Pacific markets track Wall Street gains; South Korea unexpectedly keeps rates unchanged

Updated Thu, Jan 16 2025 1:03 AM EST

Asia-Pacific markets mostly climbed Thursday, after U.S. markets soared on the back of an unexpected decline in core inflation numbers in December and strong bank earnings.

Korea’s central bank surprised market watchers by keeping benchmark rates unchanged at 3%. Economists polled by Reuters had expected the Bank of Korea to cut its policy rate by 25 basis points.

South Korea’s Kospi was up 1.16% while the small-cap Kosdaq index was up 1.65%, following the announcement. The Korean won last weakened slightly to trade at 1,456.91 against the greenback.

Japan’s benchmark Nikkei 225 was trading up 0.27% while the Topix gained 0.09%.

Japan’s annual producer price index climbed 3.8% in December, in line with expectations of economists polled by Reuters.

Hong Kong’s Hang Seng index jumped 0.57%, while mainland China’s CSI 300 fell 0.35%.

Over in Australia, the S&P/ASX 200 was up 1.38%.

The country’s seasonally adjusted unemployment rate for December rose slightly to 4% from November’s 3.9%, in line with estimates by economists polled by Reuters.

Overnight in the U.S., stocks saw significant gains with all three major averages recording their best day since Nov. 6.

The Dow Jones Industrial Average dropped 1.65%, while the S&P 500 gained 1.83%. The tech-heavy Nasdaq Composite rallied 2.45%.

Meanwhile, the benchmark 10-year Treasury yield dropped sharply at about 4.65% or around 13 basis points on the back of the CPI report.

Oil prices rose following news of the Israel-Hamas ceasefire and hostage deal. Brent crude gained 3.22% while the WTI edged up 0.3% to settle at $80.28 per barrel.

Asia markets live updates: BOK rate decision, Australia unemployment

European markets retreat from gains on the back of U.S. inflation data and head for mixed open

Updated Thu, Jan 16 2025 12:56 AM EST

European markets are expected to open in mixed territory Thursday, retreating from gains in the previous trading session as traders cheered a cooler-than-expected inflation print in the U.S.

The U.K.’s FTSE 100 index is expected to open 9 points higher at 8,306, Germany’s DAX down 26 points at 20,595, France’s CAC down 15 points at 7,475 and Italy’s FTSE MIB up 8 points at 35,705, according to data from IG.

Trading updates are set to come from WhitbreadDeliveroo and Richemont, while Rio Tinto releases its latest operational review. Data releases include German inflation figures and U.K. monthly gross domestic product.

The mixed open for European stocks comes after global markets rallied on Wednesday after U.S. consumer price inflation came in just below expectations, at 3.2% on a core basis, which excludes food and energy prices. The headline annual reading came in line with the 2.9% forecast in a Dow Jones poll.

U.S. markets soared after the data print but sentiment was also buoyed by a flurry of strong big bank earningsJPMorgan Chase posted record profit, while Citigroup and Goldman Sachs beat market expectations.

Overnight, Asia-Pacific markets climbed on the back of Wall Street’s rally. U.S. stock futures rose modestly as traders look ahead to more big bank earnings from Morgan Stanley and Bank of America.

More clues on the state of the U.S. economy will be available Thursday, with the December retail sales report expected to show a 0.5% increase, down from a 0.7% rise the previous month, according to a Dow Jones consensus estimate. Weekly jobless claims are also due.

European markets live updates; stocks, news, data and earnings

Inflation Fears Seen Overblown as CPI Spurs Rally

January 15, 2025 at 11:09 PM GMT

Fresh data Wednesday showed US inflation to be slowing again, triggering a stock rally and a plunge in bond yields as investors (some of whom just days ago thought the Fed wouldn’t cut rates anytime soon) became hopeful again. Equities erased their losses for the new year with the S&P 500 up about 2%—its biggest gain since after the US election. A surge in Treasuries pushed 10-year yields down by almost 15 basis points—easing fears of the 5% rate horizon. Commodities roared, with oil topping $80 a barrel. The concerted cross-asset advance was the best for a consumer-price-index day since at least late 2023, according to data compiled by Bloomberg. Krishna Guha of Evercore said the CPI report adds weight to the argument that markets have “overtraded” the inflation story and should stop being so risk averse. “It reinforces the base case for two Fed cuts, and keeps open the possibility of a March cut,” he said. David E. Rovella

Inflation Fears Seen Overblown as CPI Spurs Rally: Evening Briefing Americas - Bloomberg

Targeting TurkStream pipeline amounts to attack on sovereignty of nations using its gas: Hungary

Hungarian foreign minister's remarks come after Russia claimed to have foiled Ukrainian strike on compressor station supplying gas through TurkStream pipeline

Talha Ozturk  |13.01.2025 - Update : 13.01.2025

Hungarian Foreign Minister Peter Szijjarto said on Monday that an alleged attack on the Turkish Stream pipeline constitutes an attack on the sovereign rights of the countries that use it.

Szijjarto's remarks came after Russia claimed on Monday that Ukraine attempted to strike a compressor station supplying gas through the TurkStream.

“Security of energy supply is a sovereignty matter; therefore, every action that threatens the security of our energy supply must be considered an attack against sovereignty,” Szijjarto stated in a Facebook post.

He said Hungary expects that the TurkStream remain safe and functional.

"The TurkStream pipeline is critical for natural gas supply in Hungary and Central Europe. This freight route has been operating reliably for many years; both carriers and transit countries adhere to their contractual obligations and behave consistently,” Szijjarto stated.

Earlier, a statement by the Russian Defense Ministry said the country's air defenses shot down nine Ukrainian drones heading toward the Russkaya compressor station near the village of Gai-Kodzor in the southern Krasnodar region.

The statement said there were no casualties, but infrastructure within the facility received minor damage due to fragments from the downed drones.

Spanning over 930 kilometers (578 miles) across the Black Sea, the TurkStream natural gas pipeline runs from the Russkaya compressor station and makes landfall in the Thrace region of northwestern Türkiye.

The claim comes as a five-year deal between Moscow and Kyiv on the transit of Russian gas through Ukraine expired on Jan. 1.

Targeting TurkStream pipeline amounts to attack on sovereignty of nations using its gas: Hungary

In other news.

Ceasefire at Last Between Israel and Hamas

January 15, 2025 at 6:29 PM GMT

Israel and Hamas agreed to a ceasefire deal, bringing at least a temporary halt to the war in Gaza that has killed tens of thousands of people in the last 15 months. Details of the agreement are still unclear with the Israeli prime minister’s office saying there are still unresolved points in the pact. It is also not clear how many of the hostages captured after Hamas attacked Israel on Oct. 7, 2023 may be released. A formal announcement is seen as imminent, we are told. The agreement is expected to pause fighting that has all but destroyed Gaza. Officials hope a truce will lead to an increase in aid to the tiny strip of land that is home to more than 2 million people. The talks had been overseen by the US, with officials from both the outgoing Biden and incoming Trump administrations involved. Qatar and Egypt mediated the negotiations. Here is a reminder of the roots of the conflict. —Joshua Gallu

Israel and Hamas Reach Ceasefire Deal - Bloomberg

Trump announces powerful new department that will rake in billions

14 January 2025

Donald Trump announced the surprise creation of a powerful new government agency that will collect billions of dollars in taxes and tariffs from foreign countries.

‘I am today announcing that I will create the EXTERNAL REVENUE SERVICE to collect our Tariffs, Duties, and all Revenue that come from Foreign sources,’ Trump wrote on social media.

Trump argued that the United States government has relied too much on taxing Americans for revenue, specifically pointing to the much-loathed Internal Revenue Service (IRS) efforts to collect more taxes.

‘Through soft and pathetically weak Trade agreements, the American Economy has delivered growth and prosperity to the World, while taxing ourselves. It is time for that to change,’ he wrote.

Currently the United States Customs and Border Protection (CBP) collects tariffs, so any new agency would have to reorganize the current system.

The president-elect’s statement will likely have an impact on the Senate confirmation hearings of his economic cabinet picks, as senators will want a thorough explaining of his thinking on the issue.

Trump appears to be making his announcement to emphasize the amount of money the United States can collect from foreign countries on trade.

‘We will begin charging those that make money off of us with Trade, and they will start paying,’ he wrote. ‘FINALLY, their fair share.’

Trump indicated he would create the new agency on his first day as president.

For years, Trump has adamantly campaigned on the issue of raising tariffs on foreign goods coming into the United States, even as producers warn him away from sparking a trade war.

Trump has proposed a widespread 10 percent tariff on global imports to raise revenue for the United States.

He also views tariffs as an ecumenic weapon, as he has threatened China with tariffs as high as 60 percent if they do not do more to reduct the amount of fentanyl flowing into the United States through Mexico.

Trump has also proposed higher tariffs on Mexico and Canada, if they do not do more to reduce the number of drugs and migrants coming across the border.

He has only escalated his tariff proposals since the election, even suggesting that Canada join the United States as the 51st state to avoid higher charges on their imported goods. 

‘I am a Tariff Man,’ he wrote in 2018. ‘When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.’

More

Trump announces powerful new department that will rake in billions

Los Angeles insurance giant makes prediction after devastating fires

January 14, 2025

California home insurance CEO said the inability to insure homes amid the ongoing wildfires burning hundreds of acres would 'completely upend the state' as it looks to rebuild.  

Mike Zuckerman, CEO and president of the third-largest home insurance company in the Golden State, CSAA Insurance Group, issued an unsettling statement regarding insurance availability in California on Friday.

Zuckerman, unlike other companies who have stopped writing policies or refused to renew customers amidst the raging fires, believes that the state and its wildfires are still insurable. 

'It's hard to think about the answer to that being no,' Zukerman told the San Francisco Chronicle.

With the Palisades and Eaton fires far from containment, Zukerman acknowledged that it is 'impossible to know' exactly how the insurance industry as a whole might react to the fires. 

However, the insurance giant claimed 'there is no alternative' to having home insurance.

'I don't think there's an alternative for us as a society and as an industry and as a people,' he said. 'Not being able to insure homes in California against these kinds of risks will completely upend the state.' 

Over the last few years, many California-based insurance companies have cited the risk of costly wildfires as a reason to stop writing new policies, decline renewal for customers or even leave the state altogether

However, CSAA continues to write new policies in the state and renew the vast majority of existing ones.

Zukerman said CSAA did not renew about 5,500 policies -1.2 percent of its total policies in the state - due to wildfire risk in 2024, according to regulatory filings.

However, he added that the companies cancellations are not a sign that wildfires aren’t insurable, Zukerman said, adding, 'it is a sign that insurance companies need to be allowed to charge the prices that match the increased risk in order to insure.'

Now, the question is how much more expensive California insurance will get, and whether more carriers might cut back on their business in the state as additional - and costly - wildfires break out. 

Starting this year, the California Department of Insurance will allow insurance companies to use wildfire catastrophe models to inform new pricing. 

The companies will also be able to pass on some of what they pay for reinsurance -insurance for insurance companies - to their customers, under the new policy.

Such reforms recognize that climate change is increasing overall risk, something Zukerman feels 'insurance companies need to be able to cover.' 

Just how much insurance prices will increase has yet to be seen, however, experts fear that any increase could exacerbate California's affordable housing problem, the Chronicle reported. 

Zukerman's CSAA raised its home insurance rates by 6.9 percent, earlier this year, though others, like Allstate and State Farm, have raised rates by double-digits. 

Aside from ongoing wildfires ravaging the West Coast state, Californians must answer whether or not building new housing in the wildland-urban interface, where forest wildfires can quickly spread to homes, should continue.

The answer, Zukerman said should be no. But the CEO added 'insurance availability is a problem California will have to solve.'  

Los Angeles insurance giant makes prediction after devastating fires

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’s economy shrank for a second consecutive year in 2024 and is unlikely to grow much in 2025, laying bare the challenge for the country’s new government once snap elections are held in February. With lingering effects of the energy crisis, stifling red tape, a dearth of skilled workers and weak global demand for its exports, few foresee growth picking up quickly. Germany’s car industry in particular is bracing for another tough year as intensifying competition from China and the wavering transition to electric vehicles weighs on sales.

Israel and Hamas Reach Ceasefire Deal - Bloomberg

Inflation falls to 2.5 per cent in boost for Chancellor Rachel Reeves

Wednesday 15 January 2025 7:03 am  |  Updated:  Wednesday 15 January 2025 8:15 am

UK inflation came in below expectations in December, new figures show, easing the pressure on the Chancellor as she deals with a sell-off in the bond markets.

The headline rate of inflation fell to 2.5 per cent last month, according to figures from the Office for National Statistics (ONS).

This was down from 2.6 per cent the month before and slightly below economists’ expectations. City experts had expected the headline rate to remain unchanged.

Services inflation, a crucial gauge of homegrown inflationary pressure, fell to 4.4 per cent. This was down from 5.0 per cent previously and well below expectations of 4.8 per cent.

Core inflation, which strips out more volatile components like food and energy, dipped to 3.2 per cent, down from 3.5 per cent previously and also below expectations.

The fall in the headline rate was driven by lower hotel prices, which fell in December having increased the year before. Tobacco prices also increased at a slower pace than last year.

This was partially offset by the rising cost of fuel and higher prices for second-hand cars.

Gilt market jitters

The inflation figures will likely help to ease jitters in the gilt market, which has faced a major sell-off in recent weeks.

Yields on the 10-year and 30-year gilt hit their highest level in decades last week, partly due to fears that the government’s fiscal plans will push up inflation in the coming months.

Yields and prices move inversely. Higher yields represent the cost of government borrowing, meaning that the Treasury has to pay out more in order to attract investors towards UK debt.

Zara Nokes, global market analyst at JP Morgan Asset Management, said that a “sticky” inflation reading could have been a “catalyst for further volatility in the gilt market”.

The pressure in the gilt market has raised doubts about the government’s fiscal plans and even prompted calls for the Chancellor to resign.

Rachel Reeves’s fiscal plans

Economists estimate that the upward move in yields has wiped out the £10bn buffer Reeves left to meet her key fiscal rule in October. This rule forces Reeves to ensure that day-to-day spending – including the cost of servicing servicing debt – is funded through tax receipts.

But weaker price pressures suggest that the Bank of England might be able to cut interest rates at a slightly faster pace than markets expect, which would ease pressure on gilts.

Before the figures were released, markets anticipated the Bank would reduce rates just once this year, but traders now think two cuts are likely.

Ruth Gregory, deputy chief UK economist at Capital Economics, said the figures will “strengthen the case for a 25bps interest rate cut in February”.

The Bank of England cut rates twice last year, bringing the Bank Rate down to 4.75 per cent.

Still, a number of commentators warned that the Bank would continue to take a cautious approach, as concerns grow about inflationary risks in both the domestic and global economy.

A growing cadre of economists have projected that inflation could pick up to over three per cent this year due to higher energy prices and the impact of the government’s Budget.

More

Inflation falls to 2.5 per cent in boost for Chancellor Rachel Reeves

FTSE 100 rises and gilts recover but Reeves isn’t out of the woods just yet

Wednesday 15 January 2025 2:44 pm  |  Updated:  Wednesday 15 January 2025 4:27 pm

Chancellor Rachel Reeves was dealt some welcome good news after a surprise drop in inflation that saw gilt yields fall at the fastest pace in over a year on Wednesday, but some economists fear the development represents a temporary reprieve with inflation at risk of rebounding in the coming months.

New figures from the Office for National Statistics (ONS) put the headline rate of inflation at 2.5 per cent in December, down from 2.6 per cent the month before.

Services inflation – a good gauge of homegrown price pressures – slipped to 4.4 per cent. This was down from 5.0 per cent in November and well below the 4.8 per cent expected by City experts.

---- Investors moved to fully price in two interest rate cuts in the UK for 2025, helping to ease the pressure on gilts.

US inflation also came in slightly below expectations. Although the headline rate rose to 2.9 per cent, core inflation softened to 3.2 per cent, down from 3.3 per cent in November.

“The compound effect of the US and UK CPI reports, which were both better than expected, has had a profound effect on the bond market,” Kathleen Brooks, research director at XTB said.

Gilts, rates and housebuilders

Following the figures, the yield on the 10-year gilt fell by as much as 16 basis points to 4.73 per cent while the yield on the rate-sensitive two-year gilt also shed 12 basis points, falling to around 4.5 per cent.

According to Bloomberg, this was the largest fall on the 10-year yield since 2023, although it still left the yield well ahead of where it was just a couple of weeks ago.

Equities also marched higher on Wednesday, with housebuilders benefiting from hopes that the Bank of England would cut rates at a faster pace.

The FTSE 100 rose 0.88 per cent with Persimmon, Taylor Wimpey, Barratt and Berkeley all among the blue-chip’s top risers.

The FTSE 250, which is more aligned with the health of the domestic economy, climbed 2.3 per cent to trade at 20,213.37, with housebuilders also among the top performers.

“Housebuilders are on the front foot, as interest rate cuts are forecast to come a little more swiftly. That’s expected to accelerate the recovery we’ve seen in the housing market,” Susannah Streeter, head of money and markets, Hargreaves Lansdown said.

But a number of economists pointed out that the fall in inflation was largely driven by erratic movements, such as airfares and hotels, which might limit the extent of rate cuts going forward.

Airfares increased at the third lowest rate since monthly prices were first collected in 2001, the ONS said, largely because of the dates on which the data was gathered.

This single movement explained “about half” of the fall in core inflation, according to Pantheon Macroeconomics.

“The dovish news today is a temporary reprieve,” Rob Wood, chief UK economist at the consultancy said, predicting prices would bounce back in January.

The data could also signal that the economy is weakening, Kallum Pickering, chief economist at Peel Hunt, suggested.

“If the cause of the softer momentum in prices during December is that a sudden drop-off in demand has sapped firms’ pricing power, the risk to watch now is that incoming data on the real economy surprise to the downside,” he said.

More

FTSE 100 rises and gilts recover after US and UK inflation data

Covid-19 Corner

This section will continue until it becomes unneeded.

But just how “rare” is rare and what are the long term side-effects, given no long-term studies were, or are conducted?

In duping millions into getting vaccinated, “rare” will still affect thousands of innocent, trusting people.

‘Rare’ Covid jab side-effects must not undermine vaccine role, inquiry told

14 January 2025

Rare instances of vaccine side-effects must not be used to “undermine the vital public health role that vaccination plays in keeping people safe from disease”, the UK Covid-19 Inquiry has heard.

A lack of trust in the government and scientists contributed to “false narratives” about the mass vaccination programme during the pandemic, according to Hugo Keith, lead counsel to the inquiry.

This low level of trust “appears to go hand in hand with high reliance on social media, high distrust about vaccine safety and high levels of vaccine hesitancy”, he added.

Public hearings for the fourth module of the Covid-19 inquiry started in London on Tuesday.

They will run until January 31 and will look at the issues relating to the development and rollout of vaccines in the UK, as well as barriers to uptake, confidence in the jabs, access issues and issues around vaccine safety.

The probe will also explore if reforms to the UK vaccine damage payment scheme – which provides a one-off tax-free payment of £120,000 to those left disabled as a result of vaccines – are necessary.

During the hearing, the inquiry was shown a 15-minute video including accounts from a number of people who were affected by the vaccination programme, including those who suffered the rare and very rare side-effects.

Before it was played, Mr Keith said: “I think in the public interest, it’s important that I seek to emphasise that the references in this video to the obvious and well-known fact that in very rare cases, vaccination has serious side-effects, as indeed do all medicines, must not be used as a platform to seek to undermine the vital public health role that vaccination plays in keeping people safe from disease, or to try to seek to argue that at a population level, vaccination is not overwhelmingly beneficial.”

He emphasised the “rarity or often, the extreme rarity of the serious adverse effects that were suffered”, but added: “Nevertheless, they did occur, and for those who did suffer serious side-effects, and even worse, the very small number of people whose loved ones died as a result, it was, of course, a complete tragedy, and nothing that can be said about the rarity of those terrible consequences can be taken, or should be taken, to diminish that loss.”

In an opening submission, Anna Morris, representing UKCVFamily, Vaccine Injured Bereaved UK and the Scottish Vaccine Injury Group, said: “The thousands of people that these three groups represent present what is an uncomfortable truth for many – that vaccine injury and death are part of the pandemic story.”

She questioned if “political pressure” led to an environment “in which the assessment and the regulation of the safety of vaccines was not as robust as it should have or could have been”, or if a focus on jabs meant alternatives were overlooked.

Ms Morris also questioned if the public message to “follow the science” contributed to pressure around vaccines.

“Our groups question whether that mantra and that mindset contributed to a culture of political and public pressure which dictated that vaccines were inherently good and that there would be no adverse reactions expected,” she said.

More

‘Rare’ Covid jab side-effects must not undermine vaccine role, inquiry told

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.

Conflagrations are a concern for common lithium-ion packs. The flammable components can be a part of terrible blazes and explosions, though they are rare

Again, just how “rare” is rare? Is anyone even keeping a record?

Breakthrough EV battery may have the power to extinguish its own fires: 'A significant contribution'

14 January 2025

The description of a triple-layer polymer electrolyte being developed at a lab in South Korea at times calls to mind a candy bar. It has a "soft outer surface" and a "robust middle layer." 

While absent a creamy caramel center, the crucial battery component could provide better fire safety — as it can extinguish its own flames — as well as have greater longevity than other packs. Those are important metrics for battery developers in the effort to provide a cheaper, better-performing unit, all according to a lab report from the Daegu Gyeongbuk Institute of Science and Technology.

"This research is anticipated to make a significant contribution to the commercialization of lithium metal batteries using [solid polymer] electrolytes, while providing enhanced stability and efficiency [to] energy storage devices," principal researcher Kim Jae-hyun said. 

The battery includes two promising technologies. It's a lithium metal pack, using lithium as an anode material instead of graphite. Lithium metal offers reliable, long-lasting, and high-capacity storage. But the tech suffers some problems during operation that have limited its use, all per ScienceDirect. For its part, graphite is subject to sometimes troublesome foreign supply chains.

Secondly, solid electrolytes are being developed by experts at Harvard University and elsewhere because of better fire safety, reliability, and longevity, according to ScienceDirect. High cost, and the absence of a scalable manufacturing process, are some of the cons highlighted by Top Speed.

When batteries operate, ions move between the anode and cathode through the electrolyte, regardless if it's a solid or liquid, as detailed by the U.S. Department of Energy. 

DGIST's triple-layer electrolyte could solve some of the problems that have held the tech back as a mainstream power source for electric vehicles, smartphones, and even large-scale energy storage. 

A key problem with conventional solid polymer electrolytes is dendrite formation. These metal, branch-like structures grow inside batteries as they cycle, causing shorts. 

As part of the triple-layer approach, the Korean electrolyte includes decabromodiphenyl ethane, a flame retardant, for self-extinguishing fire safety. Conflagrations are a concern for common lithium-ion packs. The flammable components can be a part of terrible blazes and explosions, though they are rare

DGIST also added zeolite to provide strength. Lastly, a heavy dose of lithium salt ensures ions are moving well, all per DGIST. 

The pack performed strongly during testing. The different layers worked to boost mechanical strength and electrode contact, leading to an 87.9% performance retention after 1,000 cycles. That's an improvement over the 70% to 80% mark notched by most common packs, all according to the lab summary. 

More

Breakthrough EV battery may have the power to extinguish its own fires: 'A significant contribution'

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

World Debt Clocks (usdebtclock.org)

By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

John Maynard Keynes. 

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