It appears the Biden administration is pulling out all the stops to distract from the Afghan shitshow.
First, it unveils the most authoritarian health mandates since the pandemic began.
And now, following what appears to have been a completely useless call with China's Xi (that reportedly lasted 90 minutes - can anyone really see President Biden speaking coherently that late at night for that long?), Bloomberg reports that, according to people familiar with the matter, the Biden administration is weighing a new investigation into Chinese subsidies and their damage to the U.S. economy as a way to pressure Beijing on trade.
Top Biden economic advisers, including U.S. Trade Representative Katherine Taiand Commerce Secretary Gina Raimondo, are reportedly meeting Friday afternoon to discuss the potential probe and enforcement options along with a path forward for roughly $300 billion in tariffs imposed on Chinese imports.
USTR has reportedly asked outside consultants to help quantify the damage from Chinese subsidies in order to measure the kind of response that’s appropriate should the investigation proceed.
Bloomberg adds that one of the anonymous sources confirmed that The White House is taking into account any collateral damage that may result from taking action on China, and how potential Chinese retaliation could impact American workers and farmers.
For now, no major reaction in stocks but the Yuan is being sold...
Did 'detente' with China not poll well with the Biden base?
Of course, the result of this probe into Beijing's actions will not in any way look like Trump's trade war actions... nothing like it at all, completely different.
Oh, and one more thing, perhaps, as @StanphylCap noted satirically, an alternative headline for this story could be: "Biden trade team looks to create even MORE inflation than we already have."
Weekly investment update – Transitory gets a boost
Recent rises in Covid cases are being monitored closely, not least for the possibility that a pickup in caseloads may affect reopening plans and crimp…
Recent rises in Covid cases are being monitored closely, not least for the possibility that a pickup in caseloads may affect reopening plans and crimp consumer confidence, capping the economic recovery. Brighter news from the US came this week in signs that inflationary pressures are now easing, vindicating the view of many central bankers.
Globally, daily new Covid cases have continued to ease and are now around 550 000 per day, led by an easing in infection rates in Asia and Africa over the past week.
In the US, infection rates have receded marginally to around 150 000 new cases a day, with hospitalisations reaching a plateau.
In China, after two weeks of close to zero transmissions, locally transmitted cases have risen, albeit just in one region. The country’s zero-tolerance approach to Covid-19 presents a downside risk to economic growth if transmissions pick up more broadly.
This point was underlined recently by the Singapore government’s decision to pause reopening plans after an increase in the caseload among the country’s 80% vaccinated population.
The Delta variant has already had a negative impact on consumer confidence and hiring in the US. This may well extend to August retail sales, which is scheduled for release on 16 September.
Sentiment among US consumers is expected to remain subdued through September. While infection rates appear to have eased, a more sustained reduction is probably needed before confidence rebounds.
Pace of US inflation slowed slightly in August
Data published on 14 September showed US consumer prices rose at a more moderate pace in August, suggesting that inflationary pressures associated with the economic reopening from Covid lockdowns are easing slightly after inflation reached a 13-year high in July.
The US consumer price index (CPI) rose by 5.3% in August from a year ago — just below the 5.4% reported previously. This was in line with the 5.3% consensus forecast. Month-on-month, price gains slowed to 0.3%. That is a significantly slower pace than the 0.9% jump between May and June, and a fall from the most recent 0.5% rise from June to July.
Core CPI (excluding volatile items such as food and energy) also decelerated. The monthly pace fell to 0.1%, marking the smallest increase since February. Over the last year, core inflation was up by 4% after a 4.3% rise in July.
Looking more transitory
The slowing of US inflation in August reflects a partial unwind of the large increases in the prices of used cars, transportation and hotel accommodation in late spring.
This supports the view that the inflation surprises of a few months ago would, in the language of the US Federal Reserve, prove ‘transitory’. As such, it will be welcomed by Fed chair Jay Powell.
Back to low-flation?
Few, however, ever believed that prices would continue to rise at nearly 1% a month indefinitely. The debate has always really been about what rate inflation would return to once the large demand/supply imbalances in sectors such as consumer services abate.
The real question is:
whether the US will see sustained inflation near or above 3% a year, or will the low-flation forces that dominated during the years before the pandemic return?
A key part of the answer to this question is housing prices. Housing is a major part (40%) of US core CPI and is correlated with the business cycle. The high weight means relatively small shifts in this component of US inflation can move the needle on the overall inflation outlook.
The Fed is hoping that inflation ultimately settles at a level a little above 2% once Covid moves into the rear-view mirror. A slightly higher rate of housing-related inflation than that seen before the pandemic might be a necessary part of that. Whether that slightly higher rate turns out to be 3.75% a year or 4.25% will matter a lot.
Supply chain distortions
In the near term, there are clearly still supply chain effects at work in the data. Assembly of new cars has been severely affected by a shortage of semiconductors, which has forced up the price of both new and used cars. Various other durable goods prices (e.g., furniture, TVs and the like), have risen due to Covid-related plant shutdowns in Asia and transportation cost pressures.
These factors look set to support higher inflation for at least several more months. Higher vaccination rates will be a key part of resolving these production issues.
News from the ECB
At its 9 September council meeting, the European Central Bank announced a moderate slowdown in the pace of asset buying under its pandemic emergency purchasing programme (PEPP), in line with market expectations. President Lagarde reiterated the view that inflationary forces in the eurozone were temporary in nature.
Details on the future of the PEPP are expected in December. The programme may end next March, perhaps replaced by an expanded and more flexible asset purchase programme.
With prolonged monetary accommodation maintained by the ECB, eurozone front-end interest rates are well anchored.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
Writen by Andrew Craig. The post Weekly investment update – Transitory gets a boost appeared first on Investors' Corner - The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.inflation monetary markets reserve interest rates fed central bank inflationary
What is the Federal Reserve?
The Federal Reserve is the central bank of the United States and is considered to be the most powerful financial institution in the world.
The post What…
The Federal Reserve, also often known as the Fed, is the central bank of the United States and is considered to be the most powerful financial institution in the world. The Federal Reserve was founded in 1913 to provide the US with a safe, flexible and stable monetary and financial system.
The purpose of a central bank is to create a financial institution that has privileged control over the production and distribution of money and credit for the nation or group of nations that it serves. Other examples of central banks include the Bank of England, the European Central Bank and the Swiss National Bank.
How the Federal Reserve works
The Federal Reserve is composed of 12 regional Federal Reserve Banks that are each responsible for a specific geographic area of the US. They are:
- Federal Reserve Bank of Boston
- Federal Reserve Bank of New York
- Federal Reserve Bank of Philadelphia
- Federal Reserve Bank of Cleveland
- Federal Reserve Bank of Richmond
- Federal Reserve Bank of Atlanta
- Federal Reserve Bank of Chicago
- Federal Reserve Bank of St. Louis
- Federal Reserve Bank of Minneapolis
- Federal Reserve Bank of Kansas City
- Federal Reserve Bank of Dallas
- Federal Reserve Bank of San Francisco
There are two main objectives of the Federal Reserve, to foster economic conditions that achieve stable prices and maximum sustainable employment. The duties of the Federal Reserve can be further categorized into four key areas:
The Federal Reserve was founded in response to the financial panic of 1907. Prior to its inception, the US was the only major financial power without a central bank.
- Conducting national monetary policy by influencing monetary and credit conditions in the US economy to ensure maximum employment, stable prices, and moderate long-term interest rates.
- Supervising and regulating banking institutions to ensure the safety of the US banking and financial system and to protect consumers’ credit rights.
- Maintaining financial system stability and containing systemic risk.
- Providing financial services, including a pivotal role in operating the national payments system, depository institutions, the US government, and foreign official institutions.
The organizational structure of the Federal Reserve consists of seven members on the Board of Governors. Each is nominated by the president and approved by the US Senate. A governor can only serve a maximum of 14 years on the board and their appointment is staggered by two years.
It is also dictated by law that appointments of governors must represent broad sectors of the US economy. In addition, each of the 12 Federal Reserve banks has its own president.
The Board of Governors are responsible for setting reserve requirements, the amount of money banks are required to hold to meet the demands of sudden withdrawals. They also set the discount rate, which is the interest rate the Federal Reserve charges on loans made to financial institutions and other commercial banks.
Central banks across the world play an important role in quantitative easing to expand private credit, lower interest rates and drive investment and commercial activity through FOMC decision making.
Quantitative easing is used to stimulate economies during periods of uncertainty such as recessions when credit is thin on the ground. An example of when quantitative easing was used was during and following the 2008 financial crisis.
Advantages of the Federal Reserve
The advantages of the Federal Reserve include:
During times of recession and periods of uncertainty, the Federal Reserve can help remove panic and provide help to financial institutions and their depositors in times of severe economic crisis.
Good risk containment system
The Federal Reserve regularly runs checks on the nation’s banks and financial institutions. It runs stress tests and reviews financial statements to make sure that the public is dealing with institutions that are in good financial standing, and are not overloaded with risk.
Disadvantages of the Federal Reserve
The disadvantages of the Federal Reserve include:
Not completely transparent
Many believe that private interest and lobby groups have significant influence over the Federal Reserve, allowing individuals to benefit rather than actions that benefit the whole society.monetary markets reserve policy interest rates fed central bank monetary policy
What is Fundamental Analysis?
Fundamental analysis is a method that is used to measure a security’s intrinsic value by examining and analyzing related economic and financial factors.
Fundamental analysis is a method that is used to measure a security’s intrinsic value by examining and analyzing related economic and financial factors. These can include macroeconomic factors such as the state of the economy and current industry conditions to microeconomic factors like how effectively a company is managed.
The purpose of fundamental analysis is to determine a number that investors can compare with a security’s current price to inform them whether it is overpriced or underpriced. Fundamental analysis is considered to contrast technical analysis which focusses on historical market data including price and volume.
How fundamental analysis works
Experienced fundamental analysts can identify buy or sell signals, calculate a security’s intrinsic value and assess factors that could impact the value of an asset.
Even at the most basic level, a fundamental analysis strategy will include the following primary factors to assess the security:
- The structure and revenue of the company
- Growth of revenue in recent years
- Profit made by the company
- The debt structure of the company
- The company’s rate of turnover
- Employee management and managements approach to employees
Fundamental analysis can help investors determine whether to buy or sell an asset by looking at public data.
Types of fundamental analysis
The fundamental variables used in fundamental analysis can be categorized in two ways: quantitative and qualitative.
Quantitative fundamentals are typically any variables that can be measured or expressed in numbers. This type of fundamentals is useful if you are comparing securities in the same asset class or industry. Examples of qualitative fundamentals include P/E ratios, revenue and current liabilities – all of which can be found in a company’s financial statements.
Qualitative fundamentals are anything that cannot be measured or expressed in numbers. These can include trends, a country’s media presence or a company’s board of directors. These factors are driven by opinion and can be harder to compare.
Although each requires a different approach, both are equally as important to complete a full analysis of a company’s share price.
The approach fundamental analysts can be either top-down or bottom-up. The top-down approach concentrates on the qualitative fundamentals first and then digs deeper into the numbers, whereas a bottom-up approach looks at the quantitative fundamentals first and then at the macroeconomic and microeconomic factors.
Advantages of fundamental analysis
The advantages of fundamental analysis include:
Fundamental analysis looks at both the financial performance of a company as well as other factors that could affect the value of its share gives a comprehensive and detailed analysis, enabling investors to make informed decisions.
This type of analysis can identify long-term opportunities for investors as it considers multiple areas that can impact the stocks and securities value.
Can highlight early warnings
Undertaking fundamental analysis can highlight early warnings and provide insights into the effect of fiscal and monetary policy and the direction of global markets.
Disadvantages of fundamental analysis
The disadvantages of fundamental analysis include:
Can be time-consuming
The process of conducting fundamental analysis can be time-consuming. As a detailed method of analysis, it involves a variety of approaches that can take more time than other analytical methods.
Following on from the previous point, the amount of time fundamental analysis takes could lead to missed opportunities where an investor needs to make a quick investment decision. In these instances, investors should look at alternative analysis methods.
As this method of analysis considers all the micro and macro factors together and analyzes them simultaneously, it can become complicated and subjective. Placing a numerical value against different factors will usually be a combination of experience and personal biases.monetary markets policy monetary policy
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