Macro-News round-up:
#MarketNews
Fed officials say there’s no reason to lower rates just now. After warning of premature rate cuts and inflation risks, Fed’s Mester ended by saying “I expect the Fed to gain the confidence to cut later this year”. Meanwhile, Boston Fed’s Susan Collins said, “Interest rates may be higher than pre-pandemic levels in the future”.
However, the dollar has continued to retreat from this week’s highs at the previously mentioned 104.50 targets. While yields on the 10Y UST increased by 2.1bp to 4.121%, 2Y yields increased 2.5bp. EURUSD takes advantage of pauses and dollar’s retreat to gain ground, tentatively rising above 1.0780.
If this week I talked about the fall in German exports and the contraction of PPIs in the euro zone, as possible indicators of a fall in global demand and deflationary risks. Data from China released today shows declines in its inflation rates not seen since 2009, and PPIs continuing to fall into negative territory, exacerbating those same global fractional risks.
However, most analysts are not touching on this crucially important issue. perhaps we are once again anticipating the headlines to come in the coming weeks.
China has inflation rates at 14-year lows and its PPIs are negative. If this responds to falls in global demand, there will be a supply adjustment that will bring a Global Recession.
In the meantime, the concerns about Chinese market keep rising. The head of China’s securities watchdog has been removed, according to the official Xinhua news agency, and has been replaced by an experienced regulator known for taking firm action, when necessary, as policymakers attempt to stabilise the nation’s stock markets.
China has named Wu Qing, a former head of the Shanghai Stock Exchange and important deputy in Shanghai’s city government, as the new chairman of the China Securities Regulatory Commission (CSRC), succeeding Yi Huiman.
Since 2019, the Chinese markets have been engulfed in near-constant turbulence, initially due to a trade conflict with Washington and then as a result of China Evergrande, an indebted developer, collapsing amid the crisis that has ripped through the nation’s real estate sector.
Several market-focused support measures, such limitations on short sales or lower trading fees, as well as several vaguely supportive government pronouncements, have not succeeded in stopping the selloff.
Geopolitics: Tucker Carlson will publish his dreaded interview with Putin tonight. Western media have repeatedly told us that independent journalism is persecuted in Russia, yet yesterday the European Union threatened to block the journalist’s entry in retaliation for his reporting. Is Europe becoming the very thing it claims to criticise?
No doubt the expectations and repercussions this interview will achieve will be stratospheric. What impact will it have on the conflict in Ukraine and the tensions of war between NATO and Russia?
Meanwhile, the Swedish government has announced the end of the investigation into the Nord stream II explosion. The resolution of this investigation has been disappointing for all parties concerned, as it concludes simply that “Sweden has no jurisdiction to continue this investigation”, leaving the resolution of this enigma even more mysterious. It should also be noted that the international cooperation in this investigation was done with affected countries such as Germany, but surprisingly excluding Russia, the main affected country, from the investigation.
The American journalist and Pulitzer Prize winner Seymour Hersh has published an update on his investigations in this regard. Headlining the issue on his blog he goes on to say the following “How America Took Out The Nord Stream Pipeline”. In which he openly accuses the Biden administration of running a sabotage operation with the help of the CIA, preventing trade relations between Germany and Russia from flourishing, which is the main reason for the economic recession Germany is currently facing. Germany, however, has since declined to comment on the matter.
