Category: Economics and Banking

Another Dose Of “Hope-ium” Kicks Markets Higher!

US stocks rose broadly in their last trading day before a long weekend, despite painfully slow progress on debt ceiling negotiations and disappointing inflation data. Chip stocks surged for a second straight day on optimism about artificial intelligence.

Investors were closely watching debt ceiling talks as Biden and McCarthy still seemed at odds over several issues heading into the long weekend, with the U.S. stock market closed on Monday for the Memorial Day holiday. but strategists warned there was still a prospect of a sell-off if debt ceiling negotiations break down. Any agreement would have to pass the Republican-controlled House of Representatives and the Democratic-controlled Senate, with the June 1 deadline fast approaching.

The S&P 500 climbed 1.30% to end at 4,205.45 points. The Nasdaq gained 2.19% at 12,975.69 points, while Dow Jones Industrial Average rose 1.00% to 33,093.34 points. This means the Dow Jones Industrial Average ended a five-day losing streak, while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022, with the S&P 500 above 4,200 points. And for the week, the S&P 500 rose 0.3%, the Dow fell 1.0% and the Nasdaq jumped 2.5%.

But Data showed U.S. consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month. A measure of inflation most closely watched by Federal Reserve officials picked up in April, reflecting the difficult path ahead for economic policymakers as they weigh whether to raise interest rates again to bring down stubborn price increases.

  • CONTENT*

0:00 Start
0:15 Introduction
0:30 AI
1:24 Debt Ceiling Issues
3:00 US Markets
3:40 US Retail Sales
4:15 PCE Data Higher
5:00 Rate Hikes Coming?
7:20 Treasuries
7:40 Europe
8:20 UK Retail Sales
9:50 Asia
12:30 Oil
13:45 Gold
16:13 Australia
18:50 RBA To Lift Again
21:20 Crypto
22:05 Summary and Close

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After The Holding Pattern?: With Tarric Brooker…

My latest Friday chat with journalist Tarric Brooker, as we look at the latest outlook for rates, inflation and recession.

https://avidcom.substack.com/p/charts-and-links-from-appearance-8eb

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The Recession We’ve Gotta Have!

Data today showed Germany went into recession earlier in the year, and yet the ECB is firmly backing more rate rises. And US recession expectations are still on the horizon, even if a bit later, as rate rises bite.

From New Zealand and beyond, recession is expected – and it seems unlikely Australia can resist. Are we facing a recession we have to have?

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The Reserve Bank Of New Zealand Inflicts More Interest Rate Pain!

The RBNZ Monetary Policy Committee voted to raise the Official Cash Rate (OCR) from 5.25% to 5.50%.

They said:

The combination of weaker demand and improved supply has reduced inflation in New Zealand. Annual consumers price inflation declined from 7.2% in the December 2022 quarter to 6.7% in the March 2023 quarter. Prices for some goods and services that change a lot — such as petrol prices and airfares — have also declined.

Inflation declined by more than expected, but it remains too high. While many measures of inflation expectations have declined in the last 3 months, they remain elevated. Most measures of persistent or ‘core’ inflation have stayed near recent peaks. Inflation is expected to take some time to return to the mid-point of the MPC’s 1 to 3% target range.

Inflationary pressure continues to be supported by a tight labour market, with employment above its maximum sustainable level. The unemployment rate remained very low at 3.4% in the March 2023 quarter. Although most indicators show that labour market pressures have eased since last year, they remain strong.

Overall, high interest rates are still needed to further slow demand. This will help to reduce upward pressure on prices, leading to lower headline inflation.

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The UK’s Pesky High Inflation!

The latest inflation figures from the UK showed that whilst headline inflation dropped a bit thanks to the base effects relating to energy a year ago dropping out, core inflation and services inflation were higher than forecast (again). Markets reacted pushing the cash rate expectations higher. Once again it appears the Bank of England are behind the curve.

New Zealand meantime lifted their cash rate to 5.5%, in a market leading attempt to get inflation under control!

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The Regulation Of “Duck Quacking” Buy Now Pay Later Loans!

The Federal Government has [finally] declared Buy Now Pay Later products as credit products and has outlined a path to regulation in the months ahead, recognizing that the products can harm customers.

Big players like CBA pushed the Government into a more gentle regime than I think is idea,, but at least its a step in the right direction. But two questions, will BNPL appear on credit files, and what about those thousands of customers of these products who are already in over the heads. We note from our surveys significant growth in use of these products as inflation and interest rate rises bite.

This is too little too late!

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More Digital Banking BS…

We look at the latest Senate hearings on Regional Branch closures, and discuss the continued misdirection coming from the cost-cutting banks – justified – so called – by the migration to digital banking.

But as discussed during the hearings, the banks do not want to talk about what they are doing, and a peoples bank is required to offer a real alternative.

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More Debt Ceiling Handbrake Turns Casts A Volatile Outlook…

Just a couple of days ago, markets bounced on the back of hopes talks on raising the US debt limit were in play, on growing confidence a deal to raise the $31.4 trillion debt limit could be reached in coming days, with the benchmark S&P 500 climbing more than 2%. But as this came to a sudden halt, the optimism that had been building through the week fell away. As a result, U.S. stocks ended lower and the dollar lost ground on Friday as the negotiations to raise the U.S. debt ceiling were put on hold, yet moving closer to the deadline to avoid default. Then reports were made suggesting talks had recommenced.

Initial reports that debt ceiling negotiations had reached an impasse rattled markets even as investors were scrutinizing Federal Reserve Chairman Jerome Powell’s remarks in a panel discussion for clues regarding next month’s interest rate decision. In his remarks, Powell said that uncertainties surrounding the lagging impact of past rate hikes and recent bank credit tightening made it unclear whether more monetary tightening will be necessary.

All this is creating febrile markets, where big players can trade the volatility. But others may be best on the sidelines!

CONTENTS

0:00 Start
0:15 Introduction
1:00 Debt Ceiling Impasse?
2:15 Powell On Inflation, Credit and Rates
6:24 US Markets
11:08 Europe and UK
13:40 Asian Markets
17:15 Gold
18:32 Oil
19:40 Australian Markets
21:20 Crypto
22:54 Summary And Close

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DFA Live Replay With Leith van Onselen: Housing And The Population Ponzi

This is an edited version of my latest live stream, featuring Leath van Onselen, joint founder of Macrobusiness and Chief Economist at Nucleus Wealth.

We explored the consequences of the massive waves of migration now forecast in the budget pages (hidden in an appendix) and the potential impact of home prices and quality of life.

The original show is available here: https://youtube.com/live/_DxR9F4l20g

This version tidied up the audio, as we had renovators noises off during the live show.

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Mortgage Prisoners, Cash Backs Going And Rates Rising: With Steve Mickenbecker!

I caught up with Steve from Canstar to discuss the latest mortgage rate moves, and how this is playing out across households and banks. With the expectation that rates might well go higher still, what can be done?

https://www.canstar.com.au/team-members/steve-mickenbecker/

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