The gov of China and Japan are getting ready to defend their currencies further because of a strong USD, which causes inflation to rise in their countries. The yuan hasn’t been this weak relatively since 2007, down -6% since May alone. The Japanese yen is down -8% since mid-July. The Fed’s higher-for-longer story has propped up our currency, and so has US economic resilience. Recent CFTC data shows that traders are not very long the dollar. So, it has room to grind up further.
A study by the SF Fed found that increasing interest rates has a major negative impact on economic output for at least 12 years.
While the Fed is expected to raise its US economic forecasts, more signs of stagflation in the EZ and China keep coming. Germany factory orders tanked in July. Stagflation is much more of a reality overseas.
Bloomberg notes that businesses globally are expected to issue ~$120bn in high-grade debt this month, after a slow few months. Worried about indebtedness? Nah… Kind of like analysts claiming the recession risk is over. See the chart below by DB. It basically looks at prior cycles and shows that we’re just getting to the point when recession risk comes into view.
At the end of Sep, around $24bn in gov aid for childcare runs out. The Century Foundation estimates that 3.2mm kids could lose their care, and it would have a greater impact on working women. Post pandemic, women have been on a roll. But that can’t happen if kids are at home. The Fed should take note. Want further labor pressure on inflation? Take away opportunities for women to work. Because costs have increased so much for centers, they have relied on this aid to stay open. As you can see from the chart below, when push comes to shove, women stay home for the kids when it is required.
OK, not an actual eternity, but in stock market terms, it’s pretty much an eternity. Reuters noted that Apple signed a deal with Arm for chip technology that goes beyond 2040, per its IPO filing.
We saw oil above $90 for the first time this year after the Saudis and the Russians extended their production cuts, as we reported yesterday. The Fed must be livid. Bloomberg claims that gas prices are near their highest seasonal level in more than a decade, even though the summer driving season is over. Add in weather problems, and Congress sees the writing on the wall. Bloomberg noted that Congress is getting ready to sell 1mm barrels of emergency gas reserves that were authorized back in 2014 post Hurricane Sandy.
Out of the EZ, Nagel is telling folks that it’s wrong to bet on peak ECB rates and expecting rate cuts, per Bloomberg. To dampen the party further, the ECB’s Knot mentioned that markets may underestimate the odds for a Sep rate hike, per Bloomberg.
You know things must be bad for retired party elders in China to reprimand Xi, per the Nikkei. Given how folks disappear over there…they must feel secure to chide their leader. On a positive China note, which seems rarer these days, property developer stocks rose on a bet that there will be further stimulus, per Bloomberg.
A note from MS explained how consumers are prioritizing essentials like groceries and household items over non-essentials like electronics, toys, leisure/entertainment.