Skeptical comments

Posted in: Asian shares mixed, oil steady ahead of July 4 holiday in U.S. See in context

Brent crude, the pricing basis for international trading, advanced 40 cents to $112.03 per barrel.

Go ahead . . . tell them why.

Reuters reported over the weekend that output by OPEC+ members fell by 100K bpd to 28.52 million bpd in June, well off their pledged increase of about 275K bpd. Add to that, Libya's exports have dropped down about 865K bpd compared to normal levels, and about 130K bpd of Norway’s daily oil output will soon be lost due to a planned strike by Norwegian energy sector workers. Overall, oil prices are up almost 50% this year, with the only relief being seen by reduced demand typically seen at the start of a recession. Brent crude is currently trading at 113.08 USD/bbl, up 1.30% for the day, and 1.92% WoW.

Other big news today is gold. Gold edged down to below $1,810 an ounce, close to levels not seen in 5 months, pressured by a strong dollar, as the Federal Reserve leads a global wave of aggressive interest rate hikes by central banks to combat rising prices. It is currently trading at 1806.73, down -0.19% for the day and -0.87% WoW.

Have a good day.

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Posted in: Asian shares mixed, oil steady ahead of July 4 holiday in U.S. See in context

The most optimistic scenario, a “Goldilocks outcome . . . is a tall order that is far from guaranteed at this point."

Not an understatement.

For those unaccustomed to the phrase usage in economics, economist David Shulman is widely considered to have coined the phrase in his 1992 study, "The Goldilocks Economy: Keeping the Bears at Bay." The U.S. economy in the middle to the late 1990s was considered a Goldilocks economy because it was "not too hot, not too cold, but just right."

This term describes an idealistic state for an economic system to be in, where there is full employment (the Fed believes a normal rate U2 to fall somewhere between 5% and 6.7%), economic stability, and stable GDP growth to prevent a recession, but not so hot as to push it into an inflationary status. The U.S. economy typically goes through five phases as part of the business cycle: growth or expansion, peak, recession or contraction, trough, and recovery. A Goldilocks economy may happen during the recovery and growth phases.

Most economists agree that central banks must use monetary policy tools to bring on and maintain a Goldilocks economy (welcome to Japan, Janet Yellen). They may raise interest rates to try to cool down the economy, but too much or too soon breaks one of the key pillars of the Goldilocks economy, and usually acts as a precursor to its end.

Because stubborn housing and energy inflation promises to continue to rise for the forseeable future, central banks will feel pressure to continue tightening to combat the biggest stressor seen on household incomes in generations. Consumer sentiment continues to plunge, jobless claims have surged since bottoming in late 1Q, leaving little doubt that recession is a reality. The only questions that remain is the length and depth.

Goldilocks must wait.

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Posted in: Asia stocks mixed after Wall Street down, China manufacturing up See in context

A monthly purchasing managers' index released Thursday by the Chinese statistics agency and an industry group rose to 50.2 in June from 49.6 on a 100-point scale on which numbers above 50 indicate activity is increasing.

True, this was the first expansion in factory activity since February and the steepest pace in six months.

But the contrast is more news.

Flash data shows industrial production in Japan declined by -7.2% MoM in May, compared with consensus of a 0.3% fall and after a final 1.5% drop a month earlier; a second straight month of decrease in industrial output and the steepest pace since May 2020. Preliminary YoY figures showed -2.80% in Mayover the same month in the previous year.

The other big news from Japan was Japan's housing starts. Starts declined by -4.3% YoY in May 2022, much lower than forecasts for growth, and after a 2.2% gain the prior month. This was the first drop in dwelling starts since February 2021.

The Japanese yen hit 137 yesterday, for the first time since September 1998, before recouping some losses, back to 136.01.

Have a good day.

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Posted in: Asian shares track Wall Street drop as inflation fears drag on See in context

The good news. The US GDP price index, measuring changes in the prices of goods and services produced, jumped 8.1% QoQ in the first three months of 2022, to 123.545 points, against an initial estimates of an 8% jump.

The bad news. The U.S. economy contracted an annualized -1.6% QoQ in the first three months of 2022, slightly worse than the -1.5% drop in the forcast estimate. It is the first contraction since 2020, due to a fall in exports, federal government spending, private inventory investment, and state and local government spending; while nonresidential fixed investment, PCE, and residential fixed investment increased.

The other anticipated news: U.S. Corporate Profits decreased -4.9% to 2402.90 USD Billion in 1Q 2022, from the previous +.2% of 2527.41 USD Billion in 4Q 2021. Forcast was for -4.3%.

Have a good day.

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Posted in: Asian shares track Wall Street drop as inflation fears drag on See in context

Investors are awaiting remarks expected for midweek by central bank leaders . . . They will also get another update on U.S. economic growth on Wednesday when the Commerce Department releases a report on first-quarter gross domestic product.

Expectations ahead of time are going down.

Two bell weather indicators were reported yesterday.

The U.S. Dallas Fed Services Index, the general business activity index for services in Texas, slipped to -12.4 in June of 2022, from 1.5 in the previous month, and well off the forcast reading of +3. It was the lowest reading since July 2020, suggesting activity in the Texas service sector deteriorated significantly. Also the Richmond Fed Services Index, for Service Sector Activity in the US fifth district, fell to -7 in June of 2022 from 8 in May, the lowest since December 2020, and well off the forcast of a reading of +9.

We await the numbers and speeches.

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Posted in: Asian shares track Wall Street drop as inflation fears drag on See in context

Conference Board reported that its consumer confidence index fell in June to its lowest level in more than a year, results that were much weaker than economists expected.

That in a moment.

First, the consumer confidence index in Japan dropped to an eighteen month low of 32.1 in June, down from May’s 34.1, and much lower than forcasts of 33. All sub-indexes were down. Employment perceptions were down 1.6 points to 37.4, consumer perceptions of overall livelihood were down 2.6 points to 29.8, views toward income growth were down 1.4 points to 35.8, and willingness to buy durable goods were down 2.6 points to 25.3. Reminder: A score above 50 indicates optimism, below 50 shows lack of confidence and 50 indicates neutrality.

Now the U.S. conference board. It came in at 98.7 for June, considerably lower than the forcast of 103.

Japan and the U.S. were not alone in declining consumer confidence. South Korea's consumer confidence fell by 6.2 points from the previous month to 96.4 in June, the lowest since January of 2021. Forcast was for 102,9. Declines were seen regarding current living standards, future outlook, prospective economic conditions, and prospective household income, while households’ inflation expectations for the year ahead rose to 3.9% from 3.3%, the highest since April 2012. CCSI above 100 indicates an improving outlook and below 100 a deteriorating outlook.

Consumers are generally looking ahead and not liking what they see.

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Posted in: Nikkei ends higher in 4-day rally on weak yen against U.S. dollar See in context

The U.S. dollar remained firm in the lower 135 yen range as an overnight rise in U.S. Treasury yields raised expectations that the interest rate gap between Japan and the United States would widen, dealers said.

Well, the yen is currently trading this hour at 136.114 up .53% for the day and 6.45% MoM, just off of the 24 year low of 136.7 hit earlier in June. Reflecting the reality that U.S. 10 year bonds are currently trading 3.2433, up 0.0493 overnight but down -0.03% WoW, mostly in anticipation of a host of U.S. reports due this week, along with preliminary inflation reports for major Euro Area countries this week. Japanese 10 year yield bonds are currently trading 0.2350, down -0.01% for the week.

Just today: the yield on the German 10 year Bund rose to above 1.65%, approaching an 8 1/2 year high of 1.926% hit on June 16th. This after ECB Chief Lagarde reaffirmed that the central bank would raise rates by 25bps in July, the first hike in 11 years. AND the yield on the Swiss 10-year government bond rose above the 1.4% level, edging closer to the 11 year high of 1.6% touched on June 16. AND the ECB will continue with its policy normalisation path to bring Euro Area inflation back to the 2% target, President Lagarde announced today. Lagarde confirmed that net asset purchases will end on July 1st and interest rates will be raised by 25bps in July, the first rate hike in 11 years.

Other currency news? The Indian rupee hit a fresh low of 78.9 against the US dollar, losing almost 6% YoY (currently trading at 78.9120, up 0.63% for the day) . This after the Reserve Bank of India, tracking other central banks, raised the repo rate by 50 bps in June and 40 bps in May.

Have a good day.

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Posted in: Households becoming less tolerant of surging food prices: study See in context

The company also found a growing tendency to cut back on expenses for food and beverage.

It happened.

This survey, and similar results have finally been noticed. And in a big way.

Due largely to surging energy and food prices, resulting in the highest inflation seen for decades, the world's central bank's umbrella body, the Bank for

International Settlements (BIS), Sunday called for interest rates to be raised

"quickly and decisively" to prevent the surge in inflation turning into

something even more problematic.

"The key for central banks is to act quickly and decisively before inflation becomes entrenched," Agustín Carstens, BIS general manager, said as part of the body's post-meeting annual report published on Sunday. Carstens noted that BIS still thinks that an economic soft landing - where rates rise without triggering recessions - is still possible, but accepts that it is a difficult situation.

"If this tightening generates massive losses, generates massive asset corrections, and that contaminates consumption, investment and employment - of course, that is a more difficult scenario," Carstens said.

Carstens also said that though many global central banks and the BIS itself had significantly underestimated how quick global inflation has spiralled over the last six to 12 months, they weren't about to lose hard-earned credibility overnight.

"Yes, you can argue a little bit here about an error of timing of certain actions and the responses of the central banks. But by and large, I think that the central banks have responded forcefully in a very agile fashion," Carstens said.

https://www.reuters.com/markets/europe/global-markets-bis-report-pix-2022-06-26/

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Posted in: Asian shares gain as investors shrug off downbeat data See in context

Market players . . . appeared to shrug off preliminary data showing a slowing of factory activity in several countries including Japan. The manufacturing manager surveys of “several developed economies came in lower-than-expected in both the manufacturing and services sector, which points to a broad-based moderation in economic activities," Jun Rong Yeap of IG said in a commentary.

There is a little bit more to this. Than that.

The au Jibun Bank Japan Manufacturing PMI declined to 52.7 in May 2022 from a final 53.3 a month earlier, according to a flash reading announced Thursday, the lowest figure in four months, signaling the joint-softest operating conditions since last September. Output rose at the slowest rate in the current four-month sequence of growth, and buying levels eased, while new orders contracted for the first time in nine months. Delivery times lengthened further, due to persistent material shortages and pressure on supply chains, thus contributing to the strongest increase in output prices in the survey history.

Good news? Some. Employment growth accelerated, with backlogs of works accumulating at a slower rate; and input price inflation eased. Sentiment remained positive.

Services? Better. The au Jibun Bank Japan's flash reading from yesterday showed the Services PMI climbed to 54.2 in June of 2022 from a final 52.6 in May, the third straight month of expansion in services activity and the strongest pace since October 2013. New business rose at a moderate pace for the second straight month as demand conditions were bolstered by a resumption of activity in the tourism sector. On inflation, businesses recorded a fresh series record increase in input prices, contributing to an accelerated rise in output prices, which were up at the strongest rate since October 2019. Confidence strengthened further.

The yen is trading a minute ago at 134,780, -0.05% for the day, and -0.12% for the week. The ten year benchmark bond rate yield was 0.2270, up 0.008 for the day, but away away from the 0.25% implicit yield cap. BOJ this week left its key short-term interest rate unchanged at -0.1% and that for ten year bond yields around 0%.

U.S. news? The current account deficit in the US widened to a record high of $291.4 billion in Q1 2022, from an upwardly revised $224.8 billion in the previous period, above market expectations of $273.5 billion, mostly due to a surge in imports of goods (an increase by $71.1 billion to a record US$829.7 billion), with the biggest gains in consumer goods, industrial supplies and materials, and capital goods.

Also from the U.S.: The S&P Global US Composite PMI fell to a five-month low of 51.2 in June 2022, from 53.6 previously, according to preliminary estimates released yesterday. The S&P Global Flash US Manufacturing PMI fell to 52.4 in June 2022 from 57 in May, well below market expectations of 56 and pointing to the slowest growth in factory activity for almost two years as contractions in output and new orders weighed. Production and new sales declined for the first since the depths of the pandemic in mid-2020. Goods producers registered the lowest degree of confidence in the outlook for output over the coming year for 20 months in June.

Also from yesterday, the S&P Global US Services PMI fell to 51.6 in June of 2022 from 53.4 in May, the lowest in five months and well below forecasts of 53.5, according to preliminary estimates. Primary downward pressure came from a sharp fall in new orders, with demand falling for the first time since July 2020, while new export orders decreased at the fastest pace since December 2020. On top of that, the rate of job creation eased to the softest in four months. Sentiment remained positive but was at its lowest since September 2020

In the U.S., all eyes are on the Michigan consumer sentiment. Last time, Consumers' assessments of their personal financial situation worsened about 20%, and 46% of U.S. consumers attributed their overall negative views to inflation, the biggest share since 1981, during the Great Recession.

U.S. durable goods orders MoM are due Monday, while the Japanese consumer confidence index is due out Tuesday.

Stay tuned.

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Posted in: Japan inflation stays at 7-year high in May See in context

The core consumer price index, which excludes fresh food, jumped 2.1 percent year-on-year in May

Yes, well, what about food?

Actually, food inflation in Japan edged up to the highest seen in over seven years, to a high of 4.1% in May, from 4.0% the previous month. This is the 9th straight month of increases in cost of food, with increases seen in all sectors except for prices of alcoholic beverages, which dropped to -.3%, falling for the eighth straight month.

The annual inflation rate for Japan was 2.5% in May. The 9th straight month of rises in consumer prices. What sectors were included? Food (see above), cost of fuel, light and water charges (14.4%), clothes (0.9%), housing (0.5%), furniture (3.6%), education (0.8% ), culture & recreation (1.7% ), and miscellaneous (1.1%). Those sectors that saw decreases included transport (-0.8%) and medical care (-0.8%), mostly due to government interventions.

Thannks to the Ministry of Internal Affairs & Communications.

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Posted in: For readers who are married to Japanese persons, how much does your spouse know about Japan's actions before and during World War II? See in context

This begs a followup question:

*For readers who are married to Japanese persons, how much do you know about Japan's actions before and during World War II? How much has your spouse contributed towards your knowledge and understanding of the era?*

Much of what is taught in schools up to the college level, in many countries, is either riddled with obvious errors and falsehoods, or is incomplete to the point of clouding many factors and realities that are still in play inside today's international relations.

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Posted in: Price of air tickets set to keep climbing See in context

To reduce carbon emissions, the industry focus is on sustainable aviation fuels (SAFs), which are currently two to four times more expensive than fossil-based aviation fuel . . . On Tuesday, the IATA urged governments to provide subsidies to ensure SAF production reaches 30 billion liters in 2030, up from 125 million liters in 2021. It also wants price curbs.

This, at a time that the price of jet fuel is not only rising, but since 1Q has been rising much faster than the price of oil futures, largly due too the cost of refining jet.

For perspective, the price of jet fuel, world average as of last week, in USD per barrel was 177.08. Up .3% from the previous week, up 20.8% MoM, and up a whopping 128.9% YoY.

The IATA's own figures show that the global airline industry’s fuel bill amounts to a average quarter of operating costs.

The pledge that the industry made towards the Paris Agreement requires substantial government subsidities, as there is no where near the refining capacity required to implement SAFs on any scale.

The pledge is an example of one made by a well-intention industry, knowing - even back when it was made, as especially now - that it was going to be paid by someone else. Without regard to the contributing impact on the entire travel and hospitality industries, and on global stagflation and recession.

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Posted in: How much for gas? Around the world, pain is felt at the pump See in context

Gas watch in the U.S. continues.

Overnight gasoline futures extended losses toward $3.7 per gallon, the lowest in nearly a month. Gas futures are currently trading around 3.7178, down 2.12%. Uncertainty is the name of the game today, as the U.S. president is widely expected to announce a temporary suspension of the 18.4 cents per gallon federal tax on gasoline shortly. Headwind over news that gasoline stocks in the US likely fell 0.6 million barrels last week, the 12th straight week of falls, just at the start of the (normally busy) summer travel season. The wide fear is that rising gas prices combined with rising prices in all sectors will make all forms of travel more expensive, resulting in consumers delaying and cancelling vacation and travel plans. Thus adversly affecting the spending portion of the economy through 3Q 2022. Analysts predict that this spending, when adjusted for inflation, will not fully recover to pre-pandemic levels until 2023.

Have a good day.

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Posted in: Asian stocks rebound as Wall Street futures gain after holiday See in context

Good Wednesday evening.

Strange, but here we are. The Japanese depreciated past 136 per dollar, today sinking further to its lowest levels since 1998. At the hour it is trading at 136.151, down .17%.

Minutes from the last central bank meeting reaffirmed its firm towards it's low-yield, stimulative policy at a time other major central banks continue with interest rate hikes to curb inflation. BOJ left its key short-term interest rate unchanged at -0.1%, and the one for 10 year bond yields around 0% at its June meeting, along with the offer to buy unlimited amounts of the bonds to defend an implicit 0.25% cap every day, repeating the guidance on market operations it made back in April. The mimutes reflect an awareness of the impact of a weak yenis having on businesses and the broader economy, and reaffirmed the ability to take easing steps without hesitation, if needed.

Not alone. Today, the Indian rupee weakened past 78 against the US dollar, the lowest on record amid foreign fund outflows, firm crude oil prices, and general dollar strength. At this hour it is trading at 78.2920, up .22%. The central bank last raised the policy repo rate by 50bps to 4.9% in June, still remaining below its pre-pandemic level.

The New Zealand dollar depreciated past $0.63, sliding towards a two-year low hit last week. It is current trading at 0.62600, down 1.09% for the day. Analysts see t the Reserve Bank of New Zealand will more than double its rates to 4.25% by year-end, suggesting a series of half-point rate increases. The RBNZ raised the official cash rate by 50 basis points to 2% back in May, and said rates would need to rise “by more and sooner.” That was the second 50 bps rate increase in a row, following three 25 bps increases, as the central bank acted in the face of an inflation rate of 6.9% in 1Q 2022, much higher than the central bank target range of 1% to 3%.

The Australian dollar weakened to around $0.69, sliding towards a two-year low hit in May. It is currently trading at 0.69035, down .79% for the day. The Reserve Bank of Australia surprised markets with a 50 basis point rate hike to 0.85% at its June meeting, signaling more tightening ahead with forcasts seeing inflation hitting 7% by year-end.

Have a good day.

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Posted in: Asian stocks rebound as Wall Street futures gain after holiday See in context

Japan and China . . . have avoided joining in rate hikes. On Monday, China's central bank left its benchmark rates unchanged.

The People’s Bank of China held the 1 year loan prime rate steady at 3.7%, while the 5 year LPR stayed at 4.45%. China's approach to stimulus this year has relied mainly on targeted support for their crushed property sector lowering banks’ funding costs, and putting pressure on banks to make more loans. Many analysts expect a cut in the reserve requirement ratio to free up banks’ liquidity next, as a greater amount of one-year policy loans will mature in the second half of the year.

The yen is trading at 136.231 a few moments ago, up .86% for the day.

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Posted in: Nikkei ends at 5-week low on fears over U.S. rate hikes, economy See in context

One more. The Japanese yen is trading at 134.94 a moment ago, weakening towards 135 per dollar. It briefly hit 135.55 last Tuesday, the lowest in 24 years.

-1 ( +0 / -1 )

Posted in: Nikkei ends at 5-week low on fears over U.S. rate hikes, economy See in context

Nikkei index ended at a five-week low on concerns over a worsening of the U.S. economy as the Federal Reserve is expected to maintain its aggressive rate hikes to tame soaring inflation.

That. And news that Japan's ten year government bond yield increased to .23% Monday after the BOJ’s purchase of government bonds last week totalling 10.9 trillion yen (81 billion USD), the most on record. This following benchmark yields breaching its 0.25% tolerated limit, amid global debt selloffs.

How much was that? To compare, European Central Bank asset purchases under the APP program was about 27 billion USD per month from the timeframe of January through May.

Under the radar: Anyone see that Michio Saito was appointed to the Finance Ministry? He will head a division that covers the bond market. Nicknamed, "Mr. JGB," his solid credentials date back to the market unrest felt back in the 1990s. His influence may be key, as cooperation between the ministry and BoJ will be important to ease BoJ from its huge bond purchase practices as of late.

Other big news today. Rice futures were trading around $16.22 per hundredweight, the lowest in eight weeks, on news of that India (world's biggest rice exporter) indicated that it has no plans to restrict exports. And also news that Thailand (second-largest exporter) expects to ship more than seven million tons of rice this year, exceeding its initial target. In the January to April period, the country exported over 2.2 million tons of rice, an increase of over 52%.

Have a good day.

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Posted in: WTO reaches initial deal as India's defiance tempered See in context

So, what did they come up with?

Here is the Agreement on Fisheries Subsidies:

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W22.pdf&Open=True

Herre is the Agreement on Trade-related Aspects of IP Rights

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W15R2.pdf&Open=True

Main Page:

https://www.wto.org/english/news_e/news22_e/mc12_17jun22_e.htm

Documents:

https://www.wto.org/english/thewto_e/minist_e/mc12_e/documents_e.htm

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Posted in: Bank of Japan keeps monetary easing policy despite U.S., Europe rate hikes See in context

The Bank of Japan on Friday stuck to its monetary easing policy . . . to hold rates at minus 0.1 percent.

Not unexpected.

Also not unexpected was the decision to offer to buy unlimited amounts of the bonds to defend an implicit 0.25% cap every market day, repeating the guidance on market operations it made in April. Once upon a time it raised eyebrows. Now it is the market expectation. But the benchmark ten year bond yield fell toward 0.22%, thus moving away from the 0.25% implicit yield cap

It buys time. Policymakers opine that Japan's economy has picked up, and will continue to do so, what with private consumption, exports and industrial output growing modestly. Should any of the three of these start trending downward, or the 2% CPI outlook proves too optimistic, then the games changes, and the bank and ministry hope that they can catch the falling blade before it cuts too many people on the way down.

Because of all of the above, watch the yen for the next week or so. As of this writing, it is at 134.647. up 1 ½ % for the day, 5% for the month. And 22% YoY.

May we live in interesting times.

-3 ( +1 / -4 )

Posted in: Asia shares mixed after Fed assurance on rates lifts Wall Street See in context

The economy is still largely holding up amid a red-hot job market, but it has shown some signs of distress recently. Sales at U.S. retailers unexpectedly slumped in May from April.

The gift of understatement.

The reality that was yesterday showed retail sales in the U.S. fell 0.3% MoM in May of 2022, against expeectations towards a .2% rise, the first decline this CY. It didn't end there, though. The rise first reported in April was revised downwarded to .7%. Sectors that are sensitive to higher borrowing costs were hit harderst: Auto sales, electronics & appliance stores, furniture stores, etc.

Thursday will see U.S. housing data posted. Building permits and housing starts are forcast to decline. Along side housing will be initial unemployment claims, which are expected to rise to skirt the top of the 200K-250K range (viewed widely as consistent with a healthy labor market). Concernful increase for a second week inside what was hoped to be a robust summer travel and recreation season. This could also throw a wrench in the Fed's projections for unemployment to rise a modest 3.7% at the end of this year, 3.9% next year, and 4.1% the year following that.

Impact on markets will be unclear, although investors had overnight to chew on the words of the Fed Chair, himself, when he admitted that Fed officials had been expecting progress, and they did not get it. “In many ways, we got the opposite.” Combined with release of the Fed’s GDP tracker - tracking down to zero- the Fed revised its predictions of growth to a far more realistic 1.7% forecast, and trimmed down next year's projection by half a percent. The Fed said that a zero print with a couple of weeks left in the quarter creates the risk of a second consecutive quarter of negative growth.

Gone, now, is all talk about peak inflation, as the last Trimmed Mean inflation rate (a measure of inflation without outliers in either direction) rose by a disturbingly high 6.5% YoY, showing expanding inflation instead of focal inflation, and short term turning into long term.

All eyes also on the U.K. today, after the Bank of England raised its key rate by 25bps to 1.25% (as expected), pushing borrowing costs to thirteen year highs. Inflation in the UK is running at forty year highs, and is expected to hit double digits in Q3, with fresh estimates around 11% for October. Recession remains a concern, as the economy contracted 0.3% in April and 0.1% in March.

Switzerland also surprised analysts when the Swiss National Bank hiked its rate by 50bps, the first rate hike by the central bank since 2007. Yield on the Swiss ten year government bond rose to 1.5%, the highest in since July of 2011, SNB revised year-end inflation expectations higher to 2.8% compared to previous projections of 2.1%.

Have a good day.

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Posted in: Biggest rate hike in years expected as Fed tackles inflation See in context

The exception among major central banks is Japan, whose central bank has kept its ultra-low rates amid inflation that's weaker than in the U.S. and Europe. That is causing the value of the yen to drop as investors shift money to countries with higher interest rates.

The rest of the story, as of this afternoon?

A shift in perspective may be in the works, as the government now says that it hopes that the central bank will take “necessary measures appropriately” in light of the currency’s sharp fall, combined with the uncontrollable rising cost of living. Pressure on the BoJ from the finance ministry, who is telling reporters that “currency intervention, or any other available options” are not ruled out. Which is different from BoJ’s own Haruhiko Kuroda, who insists that Japan must not target exchange rates in guiding policy.

Results: The bank continues full speed ahead with its expanded bond buying operations; BoJ has ramped up bond buying for a wide range of maturities to defend its yield cap on the 1 ten year JGB. In addition to an unlimited fixed-rate buying that covers three latest ten year JGB issues, it also added to the list of purchase targets JGBs with over seven years until maturity.

Foreign investors read the tea leaves to means that BOJ may tweak its current yield control policy afterall, and started selling JGBs, resulting in even greater upward pressure on interest rates. Which, when combined with a falling yen and a sense that ‘everybody else is doing it’ among other major central banks, lends itself to even more pressure on BoJ to intervene. All of which, historically, was the rationale that BoJ uses to show why intervention is ill advised.

Hope this helps to show what is happening behind the curtain.

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Posted in: Yen slides to 24-year low against dollar See in context

The increasingly polar policies have strengthened the greenback, and on Monday one dollar bought 135.19 yen.

Currently trading at 134.49 and bouncing more than I have seen for a while.

I guess it is to be expected after the Nikkei 225 Index sank 3%, while the Topix Index was down 2.2% on Monday, lowest levels in two weeks.

More food for thought: Japan’s benchmark 10-year bond yield rose to a six-year high of 0.255% today, exceeding the 0.25% upper limit of the Bank of Japan’s tolerated trading band. This following the BoJ announcement that it will conduct an additional, unscheduled outright purchases of Japanese government bonds on June 14. The central bank said it would offer to buy 500 B yen worth of notes with maturity of more than 5 and up to 10 years.

Markets may also have been spooked by today's release of the business survey index of large manufacturing firms in Japan (the percentage of firms that expect the business environment to improve from the previous quarter minus the percentage that expect it to worsen). It showed a decrease of 9.9% in the 2Q 2022, after posting a 7.6% decline the previous quarter.

Other big news today came from the U.K., with news that their economy shrank 0.3% MoM in April, following a 0.1% contraction in March and missing market expectations of a 0.1% expansion. GDP is now 0.9% above its pre-coronavirus level in February 2020.

Have a good day.

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Posted in: High grain prices prompt Japanese farmers to grow wheat rather than rice See in context

The government has promoted crop conversions by providing farmers with subsidies.

This might be the answer, at least for myself, over this article; and how strange it seems considering today’s rice market. And reasonable expectations thereof.

Which seems right now to be pretty health. Rice futures were trading around $16.25 per hundredweight, which is truly down from prices seen after a one year high of $17.80 seen about a month ago. Reasonable forecasts expect this commodity to trade around $16.51 into 3Q, and potentially back up to around the 17.33 level by 3Q 2023.

Consider, for a moment, also that the talk of the markets that India (largest rice exporter) is stepping up orders for future deliveries, following concerns that their leaders may set restrictions against overseas sales, as with wheat and sugar. Strong futures contracts are being seen coming in from some near Eastern and Chinese buyers.

But, farmers rely heavily on subsidies. For them, it is a matter of survival.

Keep this topic on the economic radar.

4 ( +7 / -3 )

Posted in: How important and reliable are opinion polls in this day and age? See in context

Important and reliable?

Let’s take important first.

To be important at all, it must disclose information over how it was done. And who paid for it. Not disclosed? Then not important. And then we move on to reliable.

Reliability? If they disclosed how it was done, and who paid for it, next we will give small value to 'instant polls.' Anything that asks anyone to “vote on our website,” or “use your smart phone to call,” are meaningless. Full stop.

Next it must be random. How were potential participants selected? If a specific person is selected for a particularly anticipated response, based on past polling answers, then we must move on from it as well. Not random? Then useless.

Next, was it representative of the desired population? For example, if 60% of the voters in a prefect are under the age of 40, but the poll only had 15% of those from that group, then it is not representative. And it will not be accurate.

Next, how was it designed? What were the questions. Anyone in sociology or political science will tell you how (very easy) it is to put the fat thumb on a scale when you are measuring public opinion. Extreme example, perhaps, but when you ask a voter, “do you prefer a thoughtful, family oriented candidate like _ , or would you whether vote for a confused, nearly broke, felon-in training candidate like __ ." This matters most, so if it is fixed, it is worthless, and we move on.

Size matters. If you found a truly representative demographic, say for an upcoming election in a voting location, but the sampling size was pathetically small, then it is likely useless, and we move on.

Factors such as margins of error, statistical and discrepancies between multiple surveys, and variability and bias, also matter.

And the people who conduct polls, and the people who pay for them, know all of the above. So if they won’t disclose the details, do yourself a favor, and ignore them. And move on.

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Posted in: Canada to require a warning be printed on every cigarette See in context

Here's an idea that's going up in smoke.

5 ( +5 / -0 )

Posted in: N Korea appoints veteran diplomat as first female foreign minister See in context

Speaking only for myself? She is many things. An experienced interpreter. And adapt in international relations practice. An intelligence services agent, researcher, and advisor. And a foreign ministry official. And intelligent, ambitious, very well connected in North Korean politics and society. And perhaps can edge North Korea's word view even a fraction off of crazy. And great to see women at this level.

But they can ease off of referring to her as a "seasoned" or "veteran" diplomat. Regrettably, backchannel work does not complete her dossier. She has never served an ambassadorship or served as a consulate official or chief officer, or as a location delegate to an international body, and there is no evidence that she, by herself, was fully or topic specifically credentialed and previously possessed the power and/or was appointed by the party to conduct, by herself, official diplomatic negotiations. Or by herself to direct state policy. At least until now. Welcome to the diplomatic corp. Finally. And I will join in with anyone wishing her success and the best of luck in her new job. She will need both.

-1 ( +0 / -1 )

Posted in: Asian shares slip after rate jitters pull Wall Street lower See in context

One more note, this from the U.S.

The Michigan consumer sentiment index in the US fell sharply to a record low of 50.2 in June, according to preliminary figures released today. Considerably below forecasts of 58. The current economic conditions subindex sank to an all-time low of 55.4, from 63.3 previously, and the expectations gauge plunged to 46.8, the lowest since May of 1980. Consumer assessments about their personal financial situation worsened about 20%.

Worse, still: Nearly half (46%) of consumers attributed their negative views to inflation, the biggest share since 1981, during the Great Recession.

Reminder: This is a widely anticipated index, which reflects how U.S. consumers view prospects for their own financial situation, how they view prospects for the general economy over the near term, and their view of prospects for the economy over the long term.

Not good news, since consumers are largely holding this economy together just right now.

0 ( +0 / -0 )

Posted in: Asian shares slip after rate jitters pull Wall Street lower See in context

For those who keep track of some historic highs and lows, some important side notes:

The U.S. annual inflation rate, as just reported at 8.6%, is the highest since December 1981. Energy prices rose 34.6%, the most since September 2005. Gasoline (48.7%) and fuel oil (106.7%) are the most on record. Electricity (12%), is the highest since August 2006, and natural gas (30.2%) is highest July 2008.

U.S. food prices zoomed up 10.1%, the first double digit increase since 1981. Also housing; shelter contributed a 5.5% rise, the most since 1991.

1 ( +1 / -0 )

Posted in: Asian shares slip after rate jitters pull Wall Street lower See in context

The latest report on the U.S. consumer price index is due later Friday morning

Good Friday morning.

And the numbers are in: The U.S. inflation rate MoM is up 1%, well over last month’s rise of .3%, and well over the forecast 0.6%. Which lead to YoY rate of 8.6%, a modest jump from 8.3% from the consensus and the forecast of 8.3%. Core inflation MoM came in at 0.6%, slightly down from the forecast 0.8%, but in line with last. Core inflation YoY came in at 6%, in line with forecast.

Result: The dollar index extended gains to approach 104 on Friday, close to levels not seen in about 20 years. The major U.S. stock markets are trending down as of a minute ago.

India watch. Industrial production YoY came in today at a whopping 7.1%, well above projected consensus of 5.1%, while manufacturing production came in at an impressive 6.3%, well above consensus .7%. About those numbers: Industrial output accelerated for all sectors, BUT fell 9.2% monthly when compared to the 12.9% surge seen last month. While manufacturing gains were attributed to increased production of wearing apparel, coke, refined petroleum products, and basic metals.

1 ( +1 / -0 )

Posted in: Nissan exec: Turnaround plan working, U.S. factories to grow See in context

@ Samit Basu: With respect, the new and improved system that builds upon the existing ETS, that Brussels wants to do many things -- including a phase out of combustion engines, requiring all new cars registered in the EU as of 2035 to be zero-emission, and ending sales of new combustion-engine vehicles -- ran into late road bumps (no pun intended). But the part about internal combustion cars did survive, according to Euronews.

But . . . The approved legislation still has to be approved by the European Parliament and the EU Council. This may be no easy feat, considering what happened Wednesday.

What happened Wednesday?

As of late on 8 June the large package deal from the environmental committee, ran into trouble when late amendments were voted on. The drama continued when the final measure was "rejected by 340 votes against and 265 votes in favour, with 34 abstentions." Per Euronews, rejection of the ETS report caused a domino effect, bringing down two other key votes, since MEPs considered the three files to be too interlinked to be voted separately. Thus, "scheduled votes on three key climate laws were postponed over last-minute political disagreements." Per Euronews at https://www.euronews.com/my-europe/2022/06/08/chaos-erupts-at-the-european-parliament-as-three-key-climate-laws-are-postponed.

Confusion and finger pointing ensued.

Stay tuned!

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