The ECB increased rates by 25bps to a record 4%. Lagarde couldn’t promise that it was the end of rate hikes, because inflation forecasts only see hitting near 2% in 2025. So, that’s a long time to get to “price stability,” which is their mandate. The Euro is down to its lowest level since May.
US crude is over $90/barrel for the first time since 2022. This will eventually makes its way into inflation readings, which will frustrate the Fed. PPI hit its fastest monthly increase in more than a year due to a 20% increase in gas, which affected the number. Ex gas and food, the number was only 0.1%. Services were up too, at +0.2%.
US retail sales were strong in August, up +0.6% since July. This figure, alongside the low filings for unemployment insurance last week, means that companies are keeping their workers, and they are spending.
BBG is out with a story about the record 212 trading days that the 10-yr UST yield has been below the 3-mo rate. Historically, it was a signal of a recession, but this time around we have a lot of “first-times” coming out of a pandemic, with massive QE then QT, with tons of handouts and pauses for consumers, with supply shocks then eases…and the list goes on. Right now, we don’t expect the Fed to ease in response to a weak economy because that’s not what they have. Instead, in the future, they may be able to lower rates once inflation looks like it is under control (or the economy worsens enough).
Amazon is filling a void left by Shopify by fulfilling the logistics required for orders on non-Amazon sites. Buy With Prime lets merchants offer fast delivery of their products, and Amazon (and merchants) has seen an increase in sales due to this. Sales conversions are up 25% with this new solution. So, more new people + higher conversions = more money + stronger moat.
The easiest-to-reach crude has been extracted, so now oil producers are drilling more than the typical 3 miles horizontally, and BBG is out with a story on the increasing costs and challenges to the practice. Think of this—it is more than 50 football fields. What could go wrong? Two years ago, there were none that big. Now, they expect 1 in 5 new wells in their Permian Basin will be that big.
No flashy title here, but obviously companies need to pay attention to the cyber attack on MGM, which has caused major problems for 3 days running now. The co’s email, restaurant reservation, and hotel booking systems were offline (including digital room keys). Moody’s swooped in to warn of a credit rating downgrade.
BBG also is out with a story about home owners associations foreclosing on people’s homes because of dues. In one instance they mention, the family never missed a mortgage payment, and most of the dues/fees were from lawyers trying to collect on smaller charges for a dead tree and oil stained pavement. As of 2021, roughly 74mm people (almost 25% of the US) lived in community associations, groups that call their own shots with complex rules. There is no national regulation governing how HOAs can set fines, do assessments or enforce payments, so expect that to change.
The UAW labor strike is still looming over our collective heads. Don’t lose sight of that.