Month: September 2022

Authored by Bill Blain via MorningPorridge.com,

“If you are feeling depressed, then stop reading the Daily Mail. It will most certainly help.”

The news looks bleak. A cataclysm of gloom is set to sink Europe and the UK – but, maybe things aren’t as bad as we think. Good news and a realisation things can get better could stabilize sentiment, and build a recovery base. Maybe?

Perhaps the most important of Blain’s many Market Mantras is: “Things are never as bad as we fear, but seldom as good as we hope.” 

Try to remember it as you read about the multiple challenges facing Occidental Economies:

• The Ukraine War: Uncertainty on what may happen next and how it could further escalate, and otherwise remain a long-term barrier to growth.

• The Energy Spike and Energy Insecurity: A massive lightbulb moment for governments, with the threat of economies being destroyed by the rise in energy costs. Power outages and energy rationing are set to cripple Europe – apparently.

• Embedded inflation and rising social discontent on the back of wage inflationary pressures: increasing discord is expected across Europe

• Ongoing Supply Chain disorder: China no longer exporting deflation through cheap goods, while key strategic products (including chips) remain scarce.

• Geopolitical Instability changing established relationships: the support the West traditionally assumed from the Gulf and Asia is no longer apparent as China eyes Taiwan and digests Hong Kong.

• Political Instability: Populist politics in the US, UK and Europe raise increasing doubts on currencies, bond markets and economic growth. Italy’s next government will call for Europe to reach an accommodation with Russia

Plus, all the usual stuff:

• Unravelling the massive stock and bond market distortions following 14 years of monetary experimentation and mispriced money

• Inflation, inflation and inflation…

• Consumer Cost of Living Crisis hitting debt sustainability.

• Central Banks hiking interest rates to combat inflation – even as governments are splurging on fiscal rescues.

• The rising risk of recession and stagflation.

It’s not a pretty picture out there…

But maybe we are being unduly gloomy?

Get over it. Things are never as bad as we fear! Markets, expectations and outcomes evolve – and when things look bleakest, they often tend to move in a more generally positive direction than feared. (True – sometimes they get worse…)

The thing is… we like to scare ourselves.

Any newspaper editor will confirm horror headlines garner most hits, and sell more subscriptions than good news. Negative headlines drive and magnify negative reactions, and curiously are easier to accept than good news. We are biased to always assume the worst – which is why if you put 5 market talking-heads in a room to talk about growth, they will always agree the world is about to end in a cataclysm – which never happens. (In my experience..)

If you are feeling particularly nervous – then whatever you do, not read the new Nouriel Roubini end-of-everything book: “MegaThreats: Ten Dangerous Trends that Imperil our Future”. It’s classic Econo-dysto-Porn. It is apparently so miserable it will sell millions of copies. You would never have heard of Roubini if his books were about how successful the US economy is – he would be correct, but who wants to read about it?

Dr Doom appeals to the current doom and gloom zeitgeist. He called the 2008 crisis. Now he says were heading for the ultimate economic disaster; “a great stagflation that will make the 1970s look moderate.”. Oh dear. I guess I better get the bunker ready. The “preppers” who blame the Davos Cabal and other rich conspiracy theories for all our woes, will say he underestimates the coming “great reset”. Whacky populist Politicians will use it to argue for economic isolationism. A chum was joking the right portfolio composition now is 40% Gold, 40% Tinned Goods, and 20% Small Arms.

If you are of a nervous disposition, don’t buy the Roubini (actually, it’s not published till October..) He will upset you with his recipe for debt crises, geopolitical tension, serial pandemics, migration, climate change and host of other nasty things… They will only upset you further. That other voice of professional global economic misery, Nassim Taleb says: “I have never read a more lucid and nuanced account of our financial condition.”

Again, I say… Relax. Get over it.

Things are not going to be easy… but the end of the World is a long, long way away…

So even though Liz Truss has packed her cabinet with yes-men, and binned anyone who even shook Rishi Sunak’s hand, while Europe is scrabbling to find ways to bailout consumer and small business energy bills through windfall taxes and unravelling renewable pricing agreements…. things could yet surprise us to the upside.

I’m serious. When everyone else is fearful, when everyone else is out… that’s the time to be brave. (Or to put it another way – if we’re doomed.. go out with a boom!)

Humanity is generally more inventive and innovative than we give ourselves credit for. Give us a chance and we tend to find solutions. (Even Americans will eventually stumble on the right solution – after first exhausting every other possibility!) The work-around, muddle-through process works best in market economies, rather than in stultified command economies – meaning Russia and China are set to suffer most, a lesson their new friends in the Gulf, Asia and Latin America will come to rue.

Long term I have zero doubt the West will emerge from the current crisis in stronger shape! We will definitely emerge stronger than either Russia or China. Tech, health and welfare are going to be so much better here. Demographics and taxes – the two most powerful forces in the galaxy – will ensure it. The Occident is ageing, but wealthy (and marginally more healthy!) Russia is poor and old. China got old without getting rich.

The cycle of despair can turn very quickly – one piece of good news can trigger a chain reaction of positivity.

Let’s start with the Ukraine war. It’s a desperate bloody affair for Ukraine, and even more so for Russia. The losses, and the unsustainability of the logistical inventories on both sides, mean a peace is likely. An increasing number of analysts believe Putin will shortly announce he has won, and offer a peace based on the current front lines. He will put the onus on Europe to pressure Ukraine to accept by playing his energy card.

Matteo Salvin of the Italian League, who will be in the next Italian government, has called for an end to Russian sanctions across Europe, to support Italian consumers. Italy is demanding Europe reopens the gas taps by kowtowing to Moscow.

But, much as it will pain the Ukrainian people, we’d be wrong to accept. Winning is important. Whatever the Russian troll-bots would have you believe, there is no moral equivalency between Ukraine and Putin. Letting Putin win would be appeasement, and just be a problem delayed. Russia is the aggressor and must be seen to lose and lose badly. We don’t give folk the credit for understanding that.

It can happen. Europe’s energy situation is not nearly as bad as we think. We don’t need to be beholden to Russia. Putin’s big bluff is founded on persuading us he holds all the keys and has an absolute lock on our energy. He does not. Once we realise Russia can lose, the mood changes.

The latest numbers show Europe’s gas reserve tanks are ahead of the expected curve – the winter storage facilities will soon by 90% full, even with NordStream 1 pipeline remaining shut and not a molecule more from Russia. Even Germany has been able to replenish stocks faster than expected. It’s been costly. Europe has paid top dollar – filling the tanks by buying at the top of a highly distorted market. Europe has paid the cost – now we have to figure out how we afford it without bankrupting SMEs, beggaring consumers and destroying our economies. The blueprints on how to do so are still there from the Pandemic.

Even though I gleefully read that JP Morgan is going to repatriate bank staff from Frankfurt to London because of power cut risks, if we get a normal European winter (as opposed to a very cold one) Europe, including Germany, will avoid power cuts. Things are not as bleak as we fear.

Meanwhile, European businesses are successfully diversifying their energy and raw material supply chains – I was hearing how BASF is keeping fertiliser markets open by importing ammonia from the USA, which ends up being cheaper overall, is less energy dependent, and has the advantage of taking fertiliser security out of Russia or Chinese control. That’s just one single example of how the entire Occidental economy is cutting its reliance on the outside world, and making the group economy of the Democratic West stronger.

Liz Truss is going to announce an imperfect £100-150 bln bailout package. It shows UK government can deliver; biting the bullet to absorb the massive increases in consumer and SME energy bills. It will keep inflation closer to 10% than Goldman’s 22% horror snapshot.

Solving for Europe is not without challenge. Bailing out consumers and SMEs is not so simple – although the EU is talking windfall taxes. How the EU and EBC hold together the Euro in the wake of growing social unrest, recession, job cuts, denied wage demands, the apparent income inequality in society, and the cost of living crisis, is going to spawn a host of naysayers saying the Euro will collapse.

But here’s the thing. It’s easy to explain how Euro will disappear in a puff of logic – but historically that’s not what happens. It’s more likely to surprise its detractors by surviving – external pressures pulling it together rather than apart. Europe is not stupid – they have seen what Brexit has done – and is doing – to the UK.

How quickly market sentiment shifts depends on how quickly we can bring down inflation. That’s a problem for smart governments and aware Central Banks to coordinate. In Europe, the big fear is the new right-wing (and probably kompromated) Italian government will cave, and demand Europe surrenders also. Europe might do best to simply sling them out – why not?

Rather than the end of the World, what we have is a crisis. It doesn’t necessarily end the way we fear most. Yes, there will be problems, unrest and instability, but the reality is better than we think: Europe will survive the winter. That’s a good starting point.

The UK will stagger through yet another likely Tory embarrassment till the next election, and idiots will continue to tell me anything is better than a Labour government. No its not – a change will do us all good. We will survive the winter, and while inflation still has to work its way through the economy – it will not be the end of everything.

Head to the grindstone, keep the portfolios under review. Crisis is coming, but it’s never the end of the World – well, not yet anyway.

Liz Truss was sworn in as the new UK Prime Minister yesterday. As the successor to Boris Johnson who quit after an historic number of ministerial resignations, Truss is also a member of the Tory party and will be the third female prime minister to lead the country.

However, as Statista’s Anna Fleck details below, Truss appears to have garnered little support in the UK.

You will find more infographics at Statista

According to a poll taken by YouGov, only 12 percent of UK respondents think she will make a “good” or a “great” prime minister. Where 55 percent of respondents said they thought Johnson was a “poor” or “terrible” PM, Truss has fared little better with 52 percent holding the view. Looking back beyond Johnson, a majority of Britons said Truss would be worse than every past leader going back to Thatcher. This includes 34 percent of respondents saying she would be worse than Theresa May.

The survey also found that while on the whole people have not made their mind up about the incoming PM, 38 percent of people agreed that she was “hardworking” and 65 percent of people said she was “out of touch with ordinary people.”

Authored by Alex Newman via The Epoch Times (emphasis ours),

The United Nations Educational, Scientific and Cultural Organization, better known by its acronym, UNESCO, is escalating its global war on ideas and information it considers to be “misinformation” and “conspiracy theories.”

According to the Paris-based U.N. education agency, which released a major report on the subject for educators this summer, conspiracy theories cause “significant harm” and form “the backbone of many populist movements.”

Among other concerns, conspiracy theories “foster and reinforce harmful thinking patterns and exclusive worldviews,” the report said.

They also “reduce trust in public institutions” and “scientific institutions,” which can drive people to violence or decrease their desire to “reduce their carbon footprint,” UN officials argued in the document.

While “all conspiratorial thinking threatens human rights values,” the document says without elaborating, some conspiracy theories are more dangerous than others.

In some cases, teachers are even encouraged to report their students to authorities.

Examples of “conspiracy theories” cited in the report include everything from widely held and respectable beliefs such as “climate change denial” and “manipulation of federal elections” in the United States, to more far-fetched notions such as the “earth is flat” or “Michelle Obama is actually a lizard.”

“There are plenty of crazy thoughts on the Internet, many of which are patently false,” explained Citizens for Free Speech Director Patrick Wood. “The only thoughts being ‘corrected’ are those contrary to the globalist narrative. This proves that the focus is on protecting their own narratives and nothing else.”

“UNESCO joins a censorship cartel that now includes the European Union, the U.S. government, the World Economic Forum, social media giants like Facebook and Twitter, and notably, Google,” Wood told The Epoch Times. “Anyone who does not parrot the globalist narrative is by default considered to be a ‘conspiracy theorist.’”

At the heart of the global program to combat these ideas and theories are teachers and schools, according to the U.N. agency. Also central is the battle online and in the media, UNESCO documents explain.

The latest strategy was unveiled at UNESCO’s “International Symposium on Addressing Conspiracy Theories through Education.” Held in late June in Brussels, the summit brought together academia, governments, civil society, and the private sector to promote “joint action” against conspiracy theories and those who believe or spread them.

The plan includes strategies to prevent people from believing in conspiracy theories in the first place as well as tools for dealing with those who already believe them.

Several experts on propaganda and free speech, however, warned that the U.N. effort represents a “dangerous” escalation in what they portrayed as a global war on free speech, free expression, questioning official narratives, and dissent more broadly.

“What they mean by ‘conspiracy theory’ is any claim or argument or evidence that differs from the propaganda pumped out by the government and media,” warned New York University Professor of Media Studies Mark Crispin Miller, who studies propaganda and government misinformation.

“I can’t think of anything more dangerous to free speech and free thought—and, therefore, democracy—than this effort by the U.N., which has no business telling us what’s true and what is not,” Miller told The Epoch Times. “That distinction is not theirs to make, but ours, as free people capable of thinking for ourselves, and unafraid of civil argument.”

The Global War on Conspiracy Theories

Official efforts to clamp down on “conspiracy theories” and “misinformation” are not new. In fact, Western governments—including the U.S. government—have for years been leading the charge.

In 2010, the U.S. State Department, with help from its “Counter Misinformation Team,” published “Conspiracy Theories and Misinformation” on America.gov claiming to debunk various “conspiracy theories.”

More recently, the Biden administration has also turned its focus to “conspiracy theories.” Last year, the U.S. Department of Homeland Security repeatedly suggested that belief in widespread voter fraud or alternative views on COVID-19 and public health measures represented a major terrorism threat to the United States.

While the Biden administration’s proposed “Disinformation Governance Board” appears to have been shelved for now following a public outcry, the U.S. government has been working closely with technology giants to suppress speech surrounding election fraud, Hunter Biden’s laptop, alternative views on COVID-19, and more.

National Public Radio, a tax-funded operation, has published numerous pieces over the last month echoing UNESCO’s talking points about the alleged danger and prevalence of conspiracy theories in schools and beyond.

Outgoing senior health official Dr. Anthony Fauci has chimed in recently, too. “What we’re dealing with now is just a distortion of reality, conspiracy theories which don’t make any sense at all pushing back on sound public health measures, making it look like trying to save lives is encroaching on people’s freedom,” he said on MSNBC’s “The Rachel Maddow Show” on Aug. 22.

The World Economic Forum, which has become a lightning rod for criticism around the world over its “Great Reset” agenda, is also working to counter ideas it labels misinformation and conspiracy theories.

“Key to stopping the spread of conspiracy theories is educating people to be on the lookout for misleading information—and teaching them to be suspicious of certain sources,” senior WEF writer Charlotte Edmond wrote two years ago in a piece for the organization’s website.

The U.N. has been central to the global effort. Indeed, the new program is actually an extension of a 2020 initiative by UNESCO and the European Commission dubbed #ThinkBeforeSharing to combat conspiracy theories online.

That effort included urging citizens to post links to fact-checking services and even report journalists who may be engaged in conspiracy theorizing to “your local/national press council or press ombudsperson.”

In an October 2020 World Economic Forum podcast on “Seeking a cure for the infodemic,” U.N. global communications chief Melissa Fleming boasts of having enlisted over 100,000 volunteers to amplify the U.N.’s views and squelch competing narratives.

“So far, we’ve recruited 110,000 information volunteers, and we equip these information volunteers with the kind of knowledge about how misinformation spreads and ask them to serve as kind of ‘digital first-responders’ in those spaces where misinformation travels,” the U.N. communications chief said.

The revelation came after years of U.N. and governmental efforts to quash what it describes as extremism, misinformation, and more on the internet. In 2016, the U.N. Security Council launched a “framework” to fight “extremism” online on the heels of a program from the previous year to battle “ideologies” that could lead to violence.

But the fresh UNESCO efforts in education signal a dramatic escalation in the battle—especially in the targeting of school children.

Combating ‘Conspiracy Theories’ at School

Education and schools are at the center of the new UNESCO plan to combat conspiracy theories.

“The fight against conspiracy theories, and the antisemitic and racist ideologies they often convey, begins at school, yet teachers worldwide lack the adequate training,” said UNESCO Director-General Audrey Azoulay about the new effort. “That is why today, UNESCO is launching a practical guide for educators, so they can better teach students how to identify and debunk conspiracy theories.”

Beyond working through education, the U.N. agency also hopes to expand its efforts to combat the spread of what it refers to as conspiracy theories in the realms of press and social media.

“This builds on the wider work we’re doing to strengthen media and information literacy to better prepare learners to navigate a world of algorithms, artificial intelligence and invasive data collection,” added Azoulay, who served in the French government as a member of the Socialist Party before taking over the UN education organization.

The UN strategy for fighting conspiracy theories in education lists a number of major objectives for educators.

These include teaching teachers how to “identify and dismantle conspiracy theories,” how to develop students’ “resilience to conspiracy theories,” and how to tell the difference between a “real conspiracy” and a “conspiracy theory.”

One of the ways offered for educators to determine the veracity of information is to check fact-checking services, which have come under repeated criticism in recent years for being highly politicized and often inaccurate. Many of the services are funded by individuals, such as billionaire founder of Microsoft Bill Gates, who UNESCO says are frequently the target of conspiracy theories.

The document also contains multiple strategies for combating conspiracy theories. To fight “harmful information” among students, for example, UNESCO urges teachers to engage in what the agency describes as “prebunking.”

“Prebunking is also sometimes called ‘inoculation,’” the report reads. “Psychologists have proven that weakened forms of harmful information, carefully introduced and framed, can help to strengthen the resilience against wider harmful messages, much like a vaccine.”

When students believe in ideas because of parental influence, teachers are instructed to seek help from school officials and consider a “mediated conversation with parents.”

If a student were to express concerns about the COVID-19 vaccine, teachers are instructed to “state that the vaccine has been scientifically proven to be safe” and “that it is important to get vaccinated to curb the pandemic.”

It was not immediately clear whether the relevant section of the UNESCO document was written before public health authorities in the United States and around the world began acknowledging that the COVID-19 injections do not prevent infection from or transmission of the CCP virus that causes COVID-19.

In some cases where conspiracy theories involve alleged hate or discrimination, teachers are urged to consider reporting students to “safeguarding authorities or safeguarding officers.”

What Is a Conspiracy Theory?

The document, titled “Addressing conspiracy theories – what teachers need to know,” defines a conspiracy theory as: “The belief that events are being secretly manipulated by powerful forces with negative intent. Typically, conspiracy theories involve an imagined group of conspirators colluding to implement an alleged secret plot.”

The UNESCO report moves on to offer warnings about, and definitions for, misinformation, disinformation, hate speech, and fake news.

One term that is not defined in the document, however, is the word “conspiracy” itself. Most dictionaries define it as an illegal or immoral plot carried out in secret involving two or more individuals. State and federal law-enforcement authorities charge large numbers of people with the crime of “conspiracy” each year.

In its short guide for telling the difference between “real” conspiracies and mere “theories,” the U.N. report divides the thinking into two broad categories.

The first, dubbed “conventional thinking” in the UNESCO document, uses Watergate as an example of a real conspiracy uncovered by following evidence and having “healthy” skepticism.

The other mode of thinking, labeled “conspiratorial thinking,” features a “birds aren’t real” theory that concludes birds are robots spying on people and the government creates replica eggs to cover it all up. This conclusion is reached as a result of “overriding suspicion” and “over interpreting evidence,” UNESCO said.

In the real world, experts say the line between conspiracy theory and conspiracy fact is far less obvious.

According to a 2020 YouGov-Cambridge Globalism poll cited in the UNESCO document, strong majorities believe in overarching “conspiracy theories” in many nations. Almost eight in 10 Nigerians, for example, said they believed in “a single group of people who controlled world events.” Almost six out of 10 Mexicans, 56 percent of Greeks and 55 percent of Egyptians believed that, too, the poll showed.

One of the reports at the center of the new UNESCO effort, “The Conspiracy Theory Handbook” by Stephan Lewandowsky and John Cook, also acknowledges that conspiracies exist and are not uncommon.

“Real conspiracies do exist,” the report admits at the start. “Volkswagen conspired to cheat emissions tests for their diesel engines. The U.S. National Security Agency secretly spied on civilian internet users. The tobacco industry deceived the public about the harmful health effects of smoking. We know about these conspiracies through internal industry documents, government investigations, or whistleblowers.”

The U.N. documents also outline various reasons why people believe in conspiracy theories. These include feelings of powerlessness, coping mechanisms for handling uncertainty, or seeking to claim minority status. Evidence is not listed as a reason why people might believe in a conspiracy theory.

One of the “case studies” listed in the UNESCO document refers to Mikki Willis’s documentary “Plandemic.” Among other points, the film and the experts who are interviewed argue that COVID-19 may have been created in a laboratory for sinister purposes.

Reached by The Epoch Times, Willis slammed the U.N. and its effort to “indoctrinate” people.

“When I hear that the U.N. is now directing its indoctrination towards teachers, I become concerned about the well-being of our future generations,” he said, adding that the U.N.’s attack on “conspiracy theories” was an effort to stop the truth.

“The fact that they continue to use my film series as an example of what they’re fighting against says everything we need to know,” continued Willis, saying the vast majority of scientists now agree with key points in his film and yet “propagandists” keep trying to “perpetuate the lies.”

Critics Sound the Alarm

Multiple experts in the field of propaganda warned The Epoch Times that the UNESCO initiative was a major threat to free expression.

Organisation for Propaganda Studies Co-Director Piers Robinson said these kinds of developments are “extremely dangerous.”

“Basic principles of freedom of expression remind us that, because we can never be sure who is right and who is wrong, all ideas and arguments need to be evaluated through a process of rational scrutiny and debate,” Robinson told The Epoch Times. “Censoring arguments and opinions believed to be wrong means we risk censoring the truth.”

Explaining that these dangers have long been understood, Robinson quoted the great 19th-century British philosopher John Stuart Mill.

“First: the opinion which it is attempted to suppress by authority may possibly be true. Those who desire to suppress it, of course deny its truth; but they are not infallible,” Mill said. “All silencing of discussion is an assumption of infallibility.”

Robinson, who also serves as co-editor of Propaganda in Focus and sits on the executive committee of Pandemics Data & Analytics (PANDATA.org), also cautioned that powerful actors with large budgets would likely be involved in deciding what is true and not.

“This means allowing powerful actors to define reality and, as history shows, they will define reality in a way that serves their own interests,” he said. “This is all contradictory to democracy and, of course, the reason why freedom of expression is understood to be so important: we must be free to scrutinize and criticize those in power in order to guard against tyranny and abuse of power.”

Robinson also blasted the use of the term “conspiracy theory” as “deeply problematic,” saying it was a term often used to shut down discussion on serious issues and questions about powerful actors.

“If we value democracy and the ideas of freedom of expression and rational debate, UNESCO could do useful work on helping people of the world to think for themselves, and develop their own critical skills,” he concluded. “They should not be in the business of telling people what to think.”

Another expert on propaganda, environmental political theory Professor Tim Hayward at the University of Edinburgh, also warned that efforts to demonize and silence “conspiracy theories” was really an effort to pathologize dissent and inconvenient lines of questioning.

“Instead of reasoned arguments put forward by critics and dissidents being met with proper consideration and rebuttal, they are just dismissed out of hand; and the critics themselves are smeared with the name conspiracy theorists,” warned Hayward, who has written a number of peer-reviewed academic papers on the subject in recent years.

“Worse, of course, is that the general denigration of dissent is used to whip up moral panic about ‘disinformation’ and to try and justify increased censorship,” he added.

Hayward views the focus on education to combat “conspiracy theories” as particularly concerning.

“It is truly worrying when those responsible for the strategic communications challenged by dissidents get to infiltrate education systems and implant prejudices in favor of ‘official stories’ which are only official because they are backed by political authority rather than actual epistemic authority,” he said.

While Hayward cautioned that he was not necessarily accusing UNESCO of doing this, he warned that the organization and its programs needed to be watched as this was a troubling trend.

It would be better to teach children “the fundamentals of critical reasoning” so they can detect falsehoods on their own, he told The Epoch Times.

“You cannot reasonably identify disinformation or reject a ‘conspiracy theory’ unless you have a robust and defensible grip on what is reliable information,” he said, calling for “logical thinking” and “broad knowledge” to help people guard against disinformation from adversaries or even their own leaders. “That should be the focus of education.”

Truth or Misinformation?

The fresh push to quash “misinformation” and “conspiracy theories” online comes as the U.S. Centers for Disease Control and Prevention (CDC) and other federal agencies increasingly admit that much of what was labeled false during the pandemic turned out to be correct.

Read more here…

US equities and US Treasury bond prices tumbled this morning following a report by the new Fed whisperer himself – WSJ’s Nick Timiraos – suggesting The Fed’s inflation-fighting stance means 75bps is very much on the table for September’s FOMC meeting. While careful not to leak any inside scoop, the mere fact that Timiraos is reporting this story – after his CPI/75bps move earlier in the year is enough to spook traders.

Federal Reserve Chairman Jerome Powell’s public pledge to reduce inflation even if it increases unemployment appears to have put the central bank on a path to raise interest rates by 0.75 percentage point rather than 0.50 point this month.

Fed officials have done little to push back against market expectations of a third consecutive 0.75-point rate rise in recent public statements and interviews ahead of their Sept. 20-21 policy meeting.

“We will keep at it until we are confident the job is done,” Powell said in Jackson Hole.

Mr. Powell’s speech showed he “very much did not want to leave the impression that the Fed would fall short on fighting inflation,” said Tim Duy, chief U.S. economist at research firm SGH Macro Advisors.

Specifically, Timiraos notes that Fed officials have been uncomfortable by how markets rallied – easing financial conditions – following their July 26-27 meeting, when Mr. Powell at a news conference signaled the central bank would at some point slow its rate rises. The rally risked undoing some of the Fed’s work to slow the economy.

And so today’s story by a well-known Fed whisperer seems well-timed to front-run any attempted short-squeeze higher in stocks ahead of the Fed meeting.

The market’s odds of a 75bps hike surged to 90%…

Which sent stocks lower…

And short-dated yields higher…

Notably,  Mr. Powell is set to speak Thursday in a moderated discussion at the Cato Institute, his last scheduled public remarks before the coming Fed meeting, and few if any expect any reduction in his hawkish J-Hole tone.

S&P futures swung in illiquid overnight trading, first sliding below the key 3,900 level after the Japan open, only to recover all losses after Europe opened, with the dollar storming to new record highs and steamrolling all FX competitors as traders braced for a slew of hawkish Fed speakers to assess the path of monetary policy and its impact on the economy. S&P 500 futures edged 0.1% higher at 7:15 a.m. in New York after the underlying benchmark fell six out of the last seven sessions, while Nasdaq 100 futures rose 0.3%, as both European and Asian market slumped. The Bloomberg Dollar index hit a new record high as the Yen plunge below 144 for the first time since 1998 and the Chinese yuan flirted with the key 7.00 level. Bitcoin recovered modestly after tumbling to new 2022 lows and oil erased a decline after Russian President Vladimir Putin underlined that his country won’t supply oil and fuel if price caps on the country’s exports are introduced..

In premarket trading, UiPath tumbled 21% after the application software company gave weaker-than-expected third-quarter revenue forecast. Meanwhile, Gitlab gained 3% in US premarket trading after second-quarter earnings. While analysts were broadly positive on the software development platform’s increased revenue guidance, especially given a tough backdrop, Piper Sandler flagged “noise” around a deceleration in billings. Here are the other notable premarket movers:

• Coupa Software (COUP US) rises about 12% in premarket trading on Wednesday after boosting its full-year earnings guidance and posting better-than-expected second-quarter results, helped by strong billings in North America. While analysts were positive about the results, they remained cautious about softness in Europe.
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• Keep an eye on shares in US utilities and energy suppliers, incuding PG&E (PCG US), Edison International (EIX US) and Sempra Energy (SRE US) amid a deepening power crisis in California, where a heat wave is piling pressure on the US state’s power grid.
• Watch US digital health companies, as Truist initiates coverage on 16 firms, with a positive view on the industry overall. Progyny (PGNY US), Privia Health (PRVA US), Accolade (ACCD US), Agilon (AGL US) and R1 RCM (RCM US) all started with buy ratings.
• Watch Petco (WOOF US) stock as it was initiated with an outperform rating and $17 PT at RBC, with the broker saying near-term risks are reflected in the shares and the long-term picture is positive for the pet health company.
• Keep an eye on Guidewire (GWRE US) as RBC Capital Markets says that the software company has reported a “mixed” quarter amid macroeconomic headwinds with “muted” guidance.
• Alvotech (ALVO US) stock may be in focus as it was initiated with an equal-weight rating at Morgan Stanley, with broker flagging “many knowns” and a wide range of possible outcomes of the biotech’s US launch of its lead product, the biosimilar Humira.
• Newell Brands (NWL US) fell 4.6% in US postmarket trading on Tuesday after the consumer-products company cut its normalized earnings per share guidance for the full year. The firm has “limited” visibility and is buffeted by macroeconomic pressures, Morgan Stanley says.

On today’s calendar, no less than four Fed officials including Vice Chair Lael Brainard and Cleveland President Loretta Mester are set to speak before the release of the US Beige book later this afternoon. Richmond President Thomas Barkin already said rates must stay high until inflation eases. Investors will closely monitor their comments for clues about the pace of interest rate hikes in the face of slowing growth and still-elevated inflation. The consumer-price index reading due next week will also be paramount for the Fed’s September decision.  Bets on another 75 basis points Fed interest-rate hike to tackle high inflation have spurred a selloff in Treasuries, while traders are bracing for a European Central Bank rates decision due on Thursday, with the potential for a similar-size move.

Aside from tightening monetary settings and an apparently unstoppable dollar, markets are also contending with a debilitating energy crisis in Europe and Covid lockdowns in China. Concerns are growing about the outlook for company earnings given the various global economic headwinds and a rebound seen in equity markets since mid-June is fading.

The S&P 500 rose too much in July and is overvalued by about 10% compared to macroeconomic fundamentals, according to Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. He expects the Federal Reserve to hike rates by 75 basis points even if inflation declined in August. “The current wait-and-see mode of the US market should be short-lived,” he said. “We expect another leg down in the S&P 500 into the fourth quarter before we find a bottom.”

“At this point, we see no positive triggers to keep the rally going, while there are rising risks moving into autumn amid a gloomier economic backdrop,” Amundi SA Chief Investment Officer Vincent Mortier and his deputy, Matteo Germano, wrote in a note. “To cope with this environment, we believe investors should adjust their asset allocation stances.”

Europe’s Stoxx 600 Index fell 0.4%, with tumbling miners leading the declines; IBEX outperforms, adding 0.4%, FTSE 100 lags, dropping 0.7%. Banks, miners and retailers are the worst-performing sectors.

Earlier in the session, Asiun stocks were pressured amid spillover selling from Wall St owing to the higher yield environment and as participants digested the latest Chinese trade data. ASX 200 weakened from the open with the index dragged lower by the energy and mining-related sectors and with somewhat mixed GDP data not doing much to spur risk appetite. Hang Seng and Shanghai Comp were subdued amid the ongoing COVID woes and following the softer than expected Chinese trade data in which all metrics missed forecasts.

Japanese stocks also fell as the yen slumped to a level that leaves it on track for its worst year on record, prompting government warnings and putting traders on edge as volatility rises.  The Topix Index fell 0.6% to 1,915.65 as of market close Tokyo time, while the Nikkei declined 0.7% to 27,430.30. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 2.3%. Out of 2,169 stocks in the index, 492 rose and 1,610 fell, while 67 were unchanged.  While currency weakness is generally seen as favorable for exporters, rapid depreciation raises input costs and can complicate business decisions.  “With the yen this weak, it’s difficult for the stock market to rally,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Limited.

In Australia, the S&P/ASX 200 index fell 1.4% to close at 6,729.30, dragged by declines in banks and mining shares.  Energy-related shares fell after oil retreated to the lowest level since January on concern a global slowdown will cut demand in Europe and the US just as China’s Covid Zero strategy hurts consumption.  In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,548.30.

In India, key equity indexes dropped on Wednesday, tracking a selloff in Asia, with companies such as ICICI Bank and Reliance Industries putting pressure on the market. The S&P BSE Sensex closed 0.3% lower at 59,028.91 in Mumbai, while the NSE Nifty 50 Index fell 0.2%, extending its decline for a second day. Still, all but five of the 19 sector sub-gauges compiled by BSE Ltd. gained, led by an index of basic material companies. Automobile stocks were the worst performers. However, the broader market, including mid- and small-cap companies, gained as basic material stocks advanced on the back of recent decline in commodity prices. The S&P BSE MidCap Index fell as much as 0.5%, before closing higher by an equal measure and climbing to its highest level since Jan. 17.

In FX, the Bloomberg dollar index surged to a fresh record as strong US data and hawkish comments from a Federal Reserve official reinforced aggressive tightening bets.   The Bloomberg Dollar Spot Index gained as much as 0.4% fuelling weakness among all of its Group-of-10 peers.

Fed’s Richmond President Thomas Barkin said in an interview with the Financial Times that the central bank must raise interest rates to a level that restrains economic activity and keep them there until policy makers are “convinced” that rampant inflation is subsiding.

• The yen fell to a fresh 24-year low, prompting Japan’s top spokesman Hirokazu Matsuno to say he’s concerned about recent rapid, one-sided moves in the yen and the country would need to take “necessary action” if these movements continue. But despite this verbal intervention, “markets appear quite happy with testing their tolerance” and 145.00 might be the line in the sand, Francesco Pesole, a strategist at ING Groep NV wrote in a note. USD/JPY rose as high as 144.99. The Bank of Japan said it would boost scheduled bond purchases as Japan’s benchmark 10- year yield hit 0.24% — approaching the 0.25% upper limit of the BOJ’s tolerated trading band
• GBP/USD fell 0.4% to 1.1471 erasing gains made after reports of Prime Minister Liz Truss’s energy support package. The pound has managed to “discount much of the bad news but that does not mean that it will bound higher anytime soon,” Steve Barrow, a strategist at Standard Bank wrote in a note.
• AUD/USD lost 0.2% to 0.6722; a drop below the July 14 low of 0.6682 would take it to the lowest since 2020

In rates,Treasuries hold gains, reversing some of Tuesday’s declines, amid a bull-steepening rally in gilts where 2-year yields are richer by around 25bp on the day as BOE speakers discuss inflation outlook amid proposed government action. US yields richer by 2bp to 4bp across the curve with gains led by front-end, steepening 2s10s spread by around 1bp; 10-year yields at 3.33%, richer by 2.5bp and underperforming bunds and gilts in the sector by 3.5bp and 6bp.Sharp bull-steepening in gilts follows dovish comments from BOE’s Tenreyro; UK 2s10s, 5s30s spreads widen 8bp and 7bp into the front-end led rally.Fed speaker slate includes Vice Chair Brainard on the economic outlook; Chair Powell has an appearance scheduled for Thursday; August CPI report to be released Sept. 13 falls during the blackout period.IG dollar issuance slate includes IFC $2b 3Y SOFR and IADB 7Y SOFR; more than $35b priced Tuesday with issuers paying just over 10bps in concessions on deals 2.8x covered, and at least three borrowers stood down.

WTI crude drifts 0.6% higher to trade near $87.38 after Putin said Russia won’t supply oil, fuel or gas if price caps are introduced; gold adds about ~$3 to $1,705.  Bitcoin prices slipped overnight to under USD 19,000 whilst Ethereum tested 1,500 to the downside; and gold recovered to trade above $1,700 an ounce.

To the day ahead now, and there’s plenty on the central bank side, as the Bank of Canada announce their latest policy decision and the Fed release their Beige Book. We’ll also hear from Bank of England Governor Bailey, as well as the BoE’s Pill, Mann and Tenreyro as they testify before the Treasury Select Committee. In addition, there are scheduled remarks Fed officials, including Vice Chair Brainard, Vice Chair Barr, and Mester and Barkin. Otherwise, data releases include German industrial production and Italian retail sales for July.

Market Snapshot

• S&P 500 futures up 0.1% to 3,915.00
• STOXX Europe 600 down 0.5% to 412.19
• MXAP down 1.3% to 150.62
• MXAPJ down 1.2% to 496.50
• Nikkei down 0.7% to 27,430.30
• Topix down 0.6% to 1,915.65
• Hang Seng Index down 0.8% to 19,044.30
• Shanghai Composite little changed at 3,246.29
• Sensex down 0.2% to 59,092.96
• Australia S&P/ASX 200 down 1.4% to 6,729.34
• Kospi down 1.4% to 2,376.46
• Brent Futures down 0.3% to $92.56/bbl
• Gold spot up 0.1% to $1,703.64
• U.S. Dollar Index little changed at 110.31
• German 10Y yield little changed at 1.59%
• Euro up 0.1% to $0.9916
• Brent Futures down 0.3% to $92.57/bbl

Top Overnight News from Bloomberg

• The Federal Reserve must raise interest rates to a level that restrains economic activity and keep them there until policy makers are “convinced” that rampant inflation is subsiding, Fed Richmond President Thomas Barkin said in an interview with the Financial Times
• All 31 economists surveyed by Bloomberg expect Bank of Canada policy makers led by Governor Tiff Macklem to raise the benchmark overnight rate by at least 50 basis points, and most say it will be 75 basis points
• The ECB’s interest-rate hikes may fail to fully filter through into markets without a shift in its policies. Interest-rate rises are already struggling to be reflected across money markets because there’s too much cash chasing scarce high-quality securities, depressing their yields
• The euro-area economy expanded by more than initially estimated in the second quarter, with the revision revealing greater support from consumer and government spending. Output rose 0.8% from the previous three months — stronger than an earlier reading of 0.6%
• “Give us turbines and we’ll turn on Nord Stream tomorrow, but they won’t give us anything,” President Vladimir Putin said at the Eastern Economic Forum in Vladivostok
• The European Commission recommends member states cap the price of electricity from producers like wind farms, nuclear and coal plants at EU200 per MWh, the Financial Times reported, citing a draft of proposals it has seen
• The yen has slumped to a level that leaves it on track for its worst year on record, prompting the strongest warnings to date from senior Japanese government officials aimed at stemming the slide
• The world’s original and longest-running experiment in negative interest rates will finally end this week as Denmark raises borrowing costs in tandem with the euro zone. The move is likely as the ECB delivers a large hike on Thursday, because Danish monetary policy often shadows such moves to protect the krone’s peg to the single currency
• Developed economies are taking a hit from the dollar’s appreciation to multi-decade highs in ways that were once more familiar to their emerging-market peers
• China’s export growth slowed in August and imports stagnated, a sign of a darkening global economic picture and weak domestic growth hit by Covid lockdowns and a property slump. Exports in US dollar terms expanded 7.1% last month from a year earlier, far weaker than economists had predicted
• China sent its most powerful signal yet on its discomfort with the yuan’s weakness by setting its reference rate for the currency with the strongest bias on record

A more detailed look at global markets courtesy of Newsquawk

Asia stocks were pressured amid spillover selling from Wall St owing to the higher yield environment and as participants digested the latest Chinese trade data. ASX 200 weakened from the open with the index dragged lower by the energy and mining-related sectors and with somewhat mixed GDP data not doing much to spur risk appetite. Nikkei 225 declined despite a further weakening in the JPY as the recent rapid currency depreciation raised further questions surrounding the BoJ’s dovish resolve. Hang Seng and Shanghai Comp were subdued amid the ongoing COVID woes and following the softer than expected Chinese trade data in which all metrics missed forecasts.

Top Asian News

• Japanese Chief Cabinet Secretary Matsuno believes relaxation of border control measures could be an advantage with the weak JPY, while they are concerned by recent rapid, one-sided currency moves and are ready to take appropriate action on FX market moves if necessary, according to Reuters.
• Japanese Finance Minister Suzuki, when asked about the chance of currency intervention, says will take necessary steps, according to Reuters.
• Japan’s former MOF FX head Watanabe said there is no need for Japan to intervene in the currency market to stem the yen’s declines and that Japan intervening solo in the FX market would be meaningless as current FX moves are driven by broad dollar gains, while he noted that intervening solo would be a waste of money as markets would know Tokyo has limited to how much reserves it can tap to continue with such actions. Wakatabe also stated that USD/JPY is overshooting somewhat now and may briefly reach 145 later this month but such increases likely won’t last long, while he doesn’t think the BoJ will raise rates just to stem JPY’s declines.
• Xi, Putin to Meet for First Time Since Russia’s War in Ukraine
• China’s Xi Has Broad Support for Continued Rule, Envoy Says
• Korean Won Still Near 13-Year Low After Central Bank Warning
• Vietnam Wins Rating Upgrade From Moody’s on stronger Growth
• China State-Backed Expo Pulls Ukraine Trade Event at Last Minute
• Goldman Sachs, BNP Paribas at Odds Over Asia Earnings Outlook

European bourses have trimmed the losses seen at the open, but still trade mostly lower. European sectors are mostly lower after opening with a mild defensive bias – that bias has since eased somewhat, with some cyclicals making their way up the ranks. Stateside, US equity futures were softer in early trade, but to a lesser extent than peers across the pond, and have since mostly moved into the green as yields ease

Top European News

• UK PM Truss spoke with US President Biden with Truss said to be looking forward to working with Biden to tackle shared challenges, particularly extreme economic problems from Russian President Putin’s war, while they discussed domestic issues and agreed on the importance of protecting the Good Friday Agreement, according to Downing Street.
• UK PM Truss will not activate the emergency Article 16 override provision in the Northern Ireland protocol in the coming weeks and pulling away from an early confrontation with the EU over Brexit, according to FT citing the PM’s allies.
• BoE Governor Bailey noted that we have had volatile markets in the last six weeks, still seeing extreme volatility in energy markets. On the UK exchange rate, said there are dollar-specific factors in play; said the Fed is more focussed on bringing demand shock under control. Bailey added a review of the Bank’s mandate would not be a recognition that the BoE regime is failing.
• BoE Chief Economist Pill said he does not want to comment on fiscal stimulus without seeing the details. He expects headline inflation to decline in the short-term. Pill emphasised the importance of BoE inflation target as an anchor, not considering new regime.
• BoE’s Mann said trade, financial flows, and GBP may have heightened role in the next year. Mann added that more forceful bank rate moves open door for policy to be on hold or a reversal later. She added that short-term inflation spikes are getting increasingly embedded in domestic prices.
• BoE’s Tenreyro said demand is already weakening, and added when close to equilibrium rate, gradual hikes allow BoE to react before it tightens too far into contractionary territory. “Even without rate increases in August, rates were at a sufficient level to return inflation to target over the medium-term.”

FX

• DXY maintains bullish momentum but remained under 110.50 throughout most of the European session in a 110.17-69 range (at the time of writing).
• JPY underperforms with USD/JPY extending above 144.00 despite a slew of verbal intervention by Japanese officials, whilst the Yuan shrugged off another firm CNY fixing by the PBoC.
• EUR, and CHF are all trading mid-range vs the USD whilst the NZD, AUD, and CAD track risk sentiment.

Fixed Income

• Debt futures are hovering just below best levels having extended rebounds to fresh intraday highs in the run up to UK and German auctions that saw solid demand.
• Bunds sit under their 145.24 peak (+44 ticks vs -33 ticks at one stage), Gilts skirt 106.00 from 106.11 (+38 ticks vs -59 ticks at the Liffe low).
• 10yr T-note holds closer to 115-27 than 115-13+ following some hefty block purchases (two 10k clips in particular)

Commodities

• WTI and Brent futures have been bouncing off worst levels after printing multi-month lows.
• Spot gold fluctuates on either side of USD 1,700/oz, driven largely by bond yields.
• Base metals are mostly lower with upside hampered by disappointing Chinese trade data overnight.
• Indian PM Modi said keen to boost ties with Russia; said Russia and India can work closely on coking coal supply.

US Event Calendar

• 07:00: Sept. MBA Mortgage Applications, prior -3.7%
• 08:30: July Trade Balance, est. -$70.2b, prior -$79.6b
• 14:00: U.S. Federal Reserve Releases Beige Book

Fed Speakers

• 09:00: Fed’s Barkin Speaks at MIT
• 10:00: Fed’s Mester speaks at MNI virtual event
• 12:40: Fed’s Brainard Discusses the Economic Outlook
• 14:00: Fed’s Barr Speaks on Financial System Fairness and Safety

DB’s Jim Reid concludes the overnight wrap

The air of feral fog will lift from our house this morning as the kids go back to school. Only about 12-50 years, depending on the debts we collectively leave to our children, until they leave home. After the summer she’s had looking after them I’m slightly worried my wife will leave first. A big fingers crossed she doesn’t.

On this theme, today I’ve just launched a back-to-school survey as part of our regular monthly series. This month we ask whether you think Europe will make it through winter without gas rationing, whether you are thinking about using less energy, at recession probabilities, whether the next big move in bonds and equities will be up or down, your inflation expectations and which if any central banks are likely to make a policy error and in which direction. All help filling it in very much appreciated as usual. See here for the survey.

Yesterday I released my latest chartbook, which also has a back-to-school vibe as we review where we are on important issues facing global markets and the economy over the coming months. Among the charts, we look at how August was the worst month for European bonds in decades, why inflation isn’t going away over the medium-to-longer term, the latest on the European energy crisis, and also briefly examine the upcoming Italian election and the Chinese property sector’s troubles. As ever, it’s full of big easy-to-read figures and titles that explain our biases. Here’s the link. ***

With different asset classes swinging between gains and losses over the last 24 hours, it’s been difficult to point to a single factor behind the various moves. On the one hand, investors remain cautious about the growing array of risks on the horizon, ranging from the European energy situation to Chinese lockdowns to hawkish central banks. But on the other hand, the latest ISM services index for August added to the recent run of US data releases that’s pointed to an improving outlook, suggesting that the Fed can afford to be more aggressive in raising rates, which in turn led to a sharp selloff in Treasuries that leaves them on track for their 6th consecutive weekly decline.

In terms of the details of that ISM print, the headline measure unexpectedly rose in August to a 4-month high of 56.9 (vs. 55.3 expected), with improvements in the new orders and employment components as well. That follows in the footsteps of the ISM manufacturing reading last Thursday that was similarly better than expected, the weekly initial jobless claims that fell for a 3rd week running, and the Conference Board’s consumer confidence measure that hit a 3-month high in August. Now all this might be a last hurrah before our long expected 2023 recession, but there’s no doubt that recent data has been more positive than expected, and is coming alongside some other tailwinds of note like falling gasoline prices.

Given the stronger data, there were growing expectations (again) that the Fed might hike by 75bps in a couple of weeks’ time, with the hike priced in for September up by +2.9bps to 68.0bps. Treasury yields surged across the curve in response (with also a small catch-up after being closed on Monday), with some of the increase likely exacerbated by a banner day for corporate debt issuance ahead of the next Fed meeting (not to mention ahead of the next crucial CPI print), with the 10yr yield up +16.0bps on the day to 3.35%, and the 30yr yield (+15.6bps) even hitting a post-2014 high of 3.50%. That was driven by a rise in real yields, with the 10yr real yield (+15.0bps) rising to a post-2019 high of 0.87%. This morning in Asia, yields on the 10yr USTs are fairly stable. Bear in mind that it was less than -1% in early March after Russia invaded Ukraine, so we’ve seen an incredible shift in real borrowing costs over the last 6 months.

With US real yields reaching new heights, the dollar index advanced +0.62% to reach its strongest level in over two decades. However, it was bad news for equities and the S&P 500 (-0.41%) built on its run of 3 consecutive weekly declines to close at a 7-week low. The more interest-sensitive sectors were particularly affected, and the NASDAQ (-0.74%) and the FANG+ index (-1.50%) saw even larger declines, while there was a clear preference for defensive sectors with real estate (+1.02%) and utilities (+0.22%) outperforming the rest of the pack. Over in Europe there was a moderately better performance however, with the STOXX 600 up +0.24%, and the German Dax (+0.87%) recovering somewhat from the previous day’s heavy losses. Futures are weak this morning though with contracts on the S&P 500 (-0.52%), NASDAQ 100 (-0.53%) and DAX (-1.15%) lower.

When it comes to the energy situation, there wasn’t much respite yesterday as we look forward to Friday’s meeting of EU energy ministers. Natural gas futures in Europe fell by -2.47% to €240 per megawatt-hour, and German power prices for next year were also down -6.02% to €536 per megawatt-hour. But relative to their levels from last year they are still incredibly elevated. One piece of news we did get was from German Chancellor Scholz, who said that when it came to a cap on power prices, “If we have our way, it will take weeks rather than months”. In the meantime, European sovereign bonds lost further ground, with yields on 10yr bunds (+7.4bps), OATs (+3.5bps) and BTPs (+3.3bps) all moving higher.

Here in the UK, Liz Truss was appointed as the new Prime Minister yesterday, succeeding Boris Johnson after three years in the job. In her initial speech in front of Downing Street, she said that action would be taken on the energy crisis this week, so that’s one to keep an eye out for, with reports across the press (as we previewed yesterday) indicating that bills will be frozen around current levels rather than going up in October. That came as gilts strongly underperformed their continental counterparts yesterday, with 10yr yields up by +15.7bps to 3.09%, which is their highest closing level since 2011. Interestingly however, there was a major steepening in the yield curve, with 2yr yields down -2.0bps as investors reacted to the prospect of lower short-term inflation in light of the potential freeze on bills.

Asian equity markets are weak this morning with the Hang Seng (-1.65%) leading losses followed by the Kospi (-1.50%) and the Nikkei (-0.95%). Over in Mainland China, the Shanghai Composite (-0.05%) and the CSI (-0.08%) are wavering between gains and losses in early trade.

The latest trade data coming out of China this morning showed exports growing at a slower pace in August (+7.1% y/y) against market forecast of a +13.0% increase and compared to July’s +18.0% rise as global demand continued to soften. At the same time, imports rose only +0.3%, falling short of expectations for a +1.1% gain. Elsewhere, Australia’s GDP expanded +0.9% in the second quarter, in-line with market expectations as consumers kept spending while energy exports boomed. The growth figure for the previous quarter (+0.7%) was downwardly revised though.

In FX news, the Japanese yen (-0.90%) this morning slid to a fresh 24-year low of 144.09 against the US dollar. Widening rate differential is the main reason for yen’s depreciation while yesterday’s better than expected US data probably also pushed the yen weaker. Separately, the People’s Bank of China (PBOC) fixed the yuan at 6.9160 to the dollar, its strongest bias on record and the 11th successive increase as the authorities continue to fight the global trend of a strong dollar against virtually every currency.

In energy markets, oil prices are trading lower in Asian trade with Brent futures down -1.45% at $91.48/bbl as the demand could remain under pressure amid China’s Covid-19 lockdowns.

There wasn’t a great deal of other data yesterday, though in Europe we did get the German and UK construction PMIs for August, which were both in contractionary territory at 42.6 and 49.2 respectively. German factory orders in July also contracted by a faster-than-expected -1.1% (vs. -0.7% expected). Otherwise in the US, the final composite and services PMI for August painted quite a different picture to the ISM numbers, with the final services PMI revised down to 43.7 (vs. flash 44.1) and the final composite PMI revised down to 44.6 (vs. flash 45).

To the day ahead now, and there’s plenty on the central bank side, as the Bank of Canada announce their latest policy decision and the Fed release their Beige Book. We’ll also hear from Bank of England Governor Bailey, as well as the BoE’s Pill, Mann and Tenreyro as they testify before the Treasury Select Committee. In addition, there are scheduled remarks Fed officials, including Vice Chair Brainard, Vice Chair Barr, and Mester and Barkin. Otherwise, data releases include German industrial production and Italian retail sales for July.