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Asian Markets Embrace That Friday Feeling

Asian Markets Embrace That Friday Feeling

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Asian markets already have one eye on the weekend it appears, with price action subdued across the board after a cautious New York overnight session. The data calendar is a threadbare cupboard for the region today, meaning that markets are only likely to move forcefully on unexpected headline surprises.

Overnight US jobless data was unimpressive, with both Initial and Continuing Claims disappointing. The headline figures showed a sliver of improvement over last week though that they did not derail the hopes of the V-shaped recovery mafia populating the equity markets. Never let the facts get in the way of momentum and a preferred narrative.

US markets appear to be balanced for now. On one side, geopolitical concern, along with Covid-19 worries in the US and China are tempering the bullish optimism. Likely also helped by the sheer weight of bullish positioning in the markets. On the other, there have been no armageddon data prints, and the world’s central banks continue to restate; that they will ease to the end of the universe and back to support a global recovery.

The US Dollar continued strengthening overnight, suggesting that nervousness persists. The aforementioned bullish positioning probably has as much to do with that, as any headlines dominating the wires. With the weekend upon us, and plenty of risks to go around for everybody, further downside corrections to equities cannot be ruled out.

Asian equities trading flat ahead of the weekend.

Volatility has flatlined in equity markets this morning, with most major indices ranging each side of unchanged. The Nikkei 225 is 0.30% higher, the Kospi is down 0.50%, and Mainland China’s Shanghai Composite and CSI 300 are both 0.70% higher. Singapore is down 0.70%, and Hong Kong is unchanged.

One exception is Australia, where preliminary retail sales data for May boosted local markets. Having fallen by 17.70% in April, the preliminary May figure is showing a sharp rebound of 16.30%. That has lifted the Lucky Country’s stock markets. The ASX200 and All Ordinaries are both 1.10% higher.

With a lack of material drivers today, and with the weekend upon us, regional investors are likely to reduce risk, meaning that any rallies will be small in scale and probably short in duration.

The US Dollar continues to strengthen.

In contrast to equity markets, currency markets continued to take risk off the table overnight. The US Dollar strengthening across the board, with the US index rising 0.27% to 97.42 overnight. As in previous days, the strongest recipients of the Dollar malaise of the past weeks, continued suffering the most. EUR/USD retreated by 0.35% to 1.1200, with GBP/USD falling 1.10% to 1.2410, after the Bank of England increased its quantitative easing target by GBP 100 billion.

Among the commodity currencies, the AUD/USD came in for more unwelcome attention. It fell by another 0.50% overnight against both the Dollar and the Yen. AUD/USD has critical support at 0.6800, with a daily close below that level signalling the downward correction has further to go.

Asian markets are moribund today, with regional currencies almost unchanged versus the greenback.

The currency markets reluctance to find a floor versus the US Dollar, even as equity markets steady, hints that the culling of bullish global recovery positioning is not yet complete.

Iraq lifts oil prices.

If other markets are nervously long now, oil can thank Iraq for a stay of execution. Overnight, Iraq said that it would meet its OPEC+ production cuts and would make good in coming months, the targets it had previously missed. Signs that European consumption is rebounding also assisted supporting prices.

Brent crude rose 2.0% overnight to $41.40 a barrel, helped by the slight backwardation at the front end of the curve. WTI rose an impressive 3.0% to $38.85 a barrel. This morning, both Brent and WTI continue trading on the positive side, rising to $41.85 and $39.20 respectively.

The price action on both contracts shows solidity at these levels, as oil markets ignore the concerns rolling across other asset classes at the moment. That suggests that prices are supported by physical buyers, and not speculative ones. That news is welcome as it implies that physical demand across the globe is recovering, with its implications for economic growth.

What oil prices do lack, though, is momentum. Both contracts appear to be in consolidative mode at these price levels, lacking the momentum to break higher. The key resistance levels to overcome to change that equation, are $43.80 a barrel for Brent crude, and $40.00 a barrel for WTI.

Gold prices continue to be dominated by short-term flows.

For the 6th day running, Gold has settled within a 10-dollar range despite some decent intra-day volatility. That highlights that the price action is being dominated by short-term fast money flows, with longer-term players content to bide their time on the side-lines. Gold continues to see patient buyers on dips to $1710 to $1715.00 an ounce, with equally patient sellers lying in wait on any spikes towards $1740.00 an ounce.

Gold prices seem to be at equilibrium for now. Balanced between geopolitical and Covid-19 concerns on one side, and economic recovery hopes on the other. Gold has edged higher by 3 dollars to $1725.50 an ounce this morning on light volumes, as regional investors quietly add weekend risk hedges to their portfolios.

Looking at the price action in other asset classes as well, Asia seems to be settling in for a quiet and low-stress end to the week.

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BRV China Holds Singapore Explorer Day at SMU

BRV China Holds Singapore Explorer Day at SMU
PR Newswire
SINGAPORE, Sept. 29, 2022

Brings Together Leading Entrepreneurial Minds Across China, Southeast Asia, North America
SINGAPORE, Sept. 29, 2022 /PRNewswire/ — BlueRun Ventures China (BRV Chin…

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BRV China Holds Singapore Explorer Day at SMU

PR Newswire

Brings Together Leading Entrepreneurial Minds Across China, Southeast Asia, North America

SINGAPORE, Sept. 29, 2022 /PRNewswire/ -- BlueRun Ventures China (BRV China), a leading early-stage technology-focused venture firm, yesterday hosted Explorer Day in Singapore in collaboration with the Institute of Innovation & Entrepreneurship of Singapore Management University and SGInnovate, a government-owned innovation platform in Singapore to support deep technology entrepreneurship. The event brought together more than 80 founders and pioneers – local entrepreneurs, government associations, academics and venture capitalists – who discussed the company's global investment strategy and emerging trends in the fields of artificial intelligence (AI), enterprise services, Web3, robotics and the global expansion plans of start-ups.

BRV China sees significant opportunity for technology investment globally and shared the following insights during the event:

  • Despite market volatility, BRV China remains confident in the fundamental value of many portfolio companies as high-quality start-ups capable of developing disruptive innovations have continued to demonstrate an ability to secure third-party capital.
  • BRV China remains bullish on the long-term prospects of key frontier areas such as AI, robotics, new energy solutions and biotechnology (powered by innovative algorithms).
  • Unlike internet services like mobile apps and e-commerce services that are specifically designed for a geographical region, deep technologies possess substantial business development potential with increasing demand in the global market that will lead to an expected rise in demand for deep technology talent.
  • BRV China believes there's significant long-term potential in the global market with investment flows into the region expected to bounce back following global economic recovery in the coming years.
  • With great changes unseen in a generation will come greater opportunities. Venture capitalists, entrepreneurs and startups were called on to re-evaluate the economic cycle and establish long-term plans so they are ready to "surf the wave" upon eventual recovery in the near-term.

Having first-mover advantages in deep technology and a strong track record across market cycles, BRV China shared its experiences on the opportunities and challenges faced by early-stage startups in areas such as accessing financing solutions and commercialization of technologies ultimately helping promising companies be fully prepared for the many hurdles they face on their growth journey.

"We continue to witness a rapid transition towards a digitalized economy that was accelerated by the pandemic leading to a gamut of opportunities for start-ups that continues to contribute to the growth of the technology sector," said Jui Tan, Managing Partner of BRV China. "To help Chinese start-ups survive a crisis of such unprecedented magnitude, BRV China has been providing continuous support helping many companies adapt and reconfigure their business models while speeding up their R&D and commercialization processes."

The event also featured guest speakers from startups such as Gaussian Robotics and HPC-AI, two fast growing portfolio companies, who shared their journey to success.

"China has leading competitive advantages in deep technologies such as robotics, new energy, AI infrastructure and applications, consumer technology and semiconductors which are in hot demand across the world," said Terry Zhu, Managing Partner at BRV China. "To go global, it is necessary for startups and entrepreneurs to leverage the country's competitive edge and weigh between political influence from different markets while formulating their plan of development. BRV China will help China start-ups to achieve their goal, seizing development opportunities as they arise due to the digital transformation of supply chains, growth in market size and globally distributed Chinese talents."

"Singapore has a flourishing ecosystem as it has a fertile ground for start-ups which are supported by a forward-looking government, a strong research base and a skilled talent pool. BRV China will leverage its experience and help connect researchers, entrepreneurs and investors in order to build a robust ecosystem for innovation," said Jui Tan.

About BRV China

BlueRun Ventures China (BRV China) is a leading early-stage venture firm in China with offices in Beijing and Shanghai. Having its heritage in Silicon Valley since 1998 and entered China in 2005, BRV China has managed over $2 billion through multiple USD and RMB funds, with over $1 billion cash distributions. BRV China focuses on investing in entrepreneurs who create a sustainable impact through technological innovations across enterprise services, transportation and smart machine, digital healthcare, and consumer technology sectors in China. The firm has invested in more than 150 portfolio companies, including Li Auto (NASDAQ: LI), QingCloud (688316.SH), WaterDrop (NYSE: WDH), Energy Monster (NASDAQ: EM), Mogujie/Meilishuo (NYSE: MOGU), Qudian (NYSE: QD), Ganji/58.com, PPTV, Guazi, Meishubao, Nanyan, Shanzhen, Gaussian Robotics, Yi Auto, Pinecone, etc. The firm has been recognized as the "No.1 Early-Stage Investment Firm" in China by Zero2IPO and ChinaVenture, and "Consistent Performing Venture Capital Fund Manager" by Preqin. For further information, please visit https://www.brv.com.cn/en/.

View original content to download multimedia:https://www.prnewswire.com/news-releases/brv-china-holds-singapore-explorer-day-at-smu-301636758.html

SOURCE BRV China

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Butter, garage doors and SUVs: Why shortages remain common 2½ years into the pandemic

The bullwhip effect describes small changes in demand that become amplified as they move down the supply chain, resulting in shortages. The pandemic put…

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Consumers have been seeing empty shelves throughout the pandemic. Diana Haronis/Moment

Shortages of basic goods still plague the U.S. economy – 2½ years after the pandemic’s onset turned global supply chains upside down.

Want a new car? You may have to wait as long as six months, depending on the model you order. Looking for a spicy condiment? Supplies of Sriracha hot sauce have been running dangerously low. And if you feed your cat or dog dry pet food, expect empty shelves or elevated prices.

These aren’t isolated products. Baby formula, wine and spirits, lawn chairs, garage doors, butter, cream cheese, breakfast cereal and many more items have also been facing shortages in the U.S. during 2022 – and popcorn and tomatoes are expected to be in short supply soon.

In fact, global supply chains have been under the most strain in at least a quarter-century, and have been pretty much ever since the COVID-19 pandemic began.

I have been immersed in supply chain management for over 35 years, both as a manager and consultant in the private sector and as an adjunct professor at Colorado State University - Global Campus.

While each product experiencing a shortage has its own story as to what went wrong, at the root of most is a concept people in my field call the “bullwhip effect.”

What is the ‘bullwhip effect’?

The term bullwhip effect was coined in 1961 by MIT computer scientist Jay Forrester in his seminal book “Industrial Dynamics.” It describes what happens when fluctuations in demand reverberate and amplify throughout the supply chain, leading to worsening problems and shortages.

Imagine the physics of cracking a whip. It starts with a small flick of the wrist, but the whip’s wave patterns grow exponentially in a chain reaction, leading to the tip, a snap – and a sharp pain for anyone on the receiving end.

The same thing can happen in supply chains when orders for a product from a retailer, say, go up or down by some amount and that gets amplified by wholesalers, distributors and raw material suppliers.

The onset of the COVID-19 pandemic, which led to lengthy lockdowns, massive unemployment and a whole host of other effects that messed up global supply chains, essentially supercharged the bullwhip’s snap.

How the bullwhip effect works.

Cars and chips

The supply of autos is one such example.

New as well as used vehicles have been in short supply throughout the pandemic, at times forcing consumers to wait as long as a year for the most popular models.

In early 2020, when the pandemic put most Americans in lockdown, carmakers began to anticipate a fall in demand, so they significantly scaled back production. This sent a signal to suppliers, especially of computer chips, that they would need to find different buyers for their products.

Computer chips aren’t one size fits all; they are designed differently depending on their end use. So chipmakers began making fewer chips intended for use in cars and trucks and more for computers and smart refrigerators.

So when demand for vehicles suddenly returned in early 2021, carmakers were unable to secure enough chips to ramp up production. Production last year was down about 13% from 2019 levels. Since then, chipmakers have began to produce more car-specific chips, and Congress even passed a law to beef up U.S. manufacturing of semiconductors. Some carmakers, such as Ford and General Motors, have decided to sell incomplete cars, without chips and the special features they power like touchscreens, to relieve delays.

But shortages remain. You could chalk this up to poor planning, but it’s also the bullwhip effect in action.

The bullwhip is everywhere

And this is a problem for a heck of a lot of goods and parts, especially if they, like semiconductors, come from Asia.

In fact, pretty much everything Americans get from Asia – about 40% of all U.S. imports – could be affected by the bullwhip effect.

Most of this stuff travels to the U.S. by container ships, the cheapest means of transportation. That means goods must typically spend a week or longer traversing the Pacific Ocean.

The bullwhip effect comes in when a disruption in the information flow from customer to supplier happens.

For example, let’s say a customer sees that an order of lawn chairs has not been delivered by the expected date, perhaps because of a minor transportation delay. So the customer complains to the retailer, which in turn orders more from the manufacturer. Manufacturers see orders increase and pass the orders on to the suppliers with a little added, just in case.

What started out as a delay in transportation now has become a major increase in orders all down the supply chain. Now the retailer gets delivery of all the products it overordered and reduces the next order to the factory, which reduces its order to suppliers, and so on.

Now try to visualize the bullwhip of orders going up and down at the suppliers’ end.

The pandemic caused all kinds of transportation disruptions – whether due to a lack of workers, problems at a port or something else – most of which triggered the bullwhip effect.

The end isn’t nigh

When will these problems end? The answer will likely disappoint you.

As the world continues to become more interconnected, a minor problem can become larger if information is not available. Even with the right information at the right time, life happens. A storm might cause a ship carrying new cars from Europe to be lost at sea. Having only a few sources of baby formula causes a shortage when a safety issue shuts down the largest producer. Russia invades Ukraine, and 10% of the world’s grain is held hostage.

The early effects of the pandemic in 2020 led to a sharp drop in demand, which rippled through supply chains and decreased production. A strong U.S. economy and consumers flush with coronavirus cash led to a surge in demand in 2021, and the system had a hard time catching up. Now the impact of soaring inflation and a looming recession will reverse that effect, leading to a glut of stuff and a drop in orders. And the cycle will repeat.

As best as I can tell, these disruptions will take many years to recover from. And as recent inflation reduces demand for goods, and consumers begin cutting back, the bullwhip will again work its way through the supply chain – and you’ll see more shortages as it does.

Michael Okrent does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Searches For “Real Estate Market Crash” Highest In Internet History

Searches For "Real Estate Market Crash" Highest In Internet History

Another milestone for the extremely confused elderly citizen in the White…

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Searches For "Real Estate Market Crash" Highest In Internet History

Another milestone for the extremely confused elderly citizen in the White House basement.

Analysis of Google Trends data reveals that searches for ‘real estate market crash’ exploded 284% in the United States as of September 2022 – the highest level in Google Trends history.

The analysis by the Malibu real estate experts at RubyHome reveals that search interest for ‘real estate market crash’ exploded within the past month, an unprecedented increase in Americans looking for information and prognostication about the real estate market, according to Google search data.

This comes at a time when the US housing market sees mortgage rates rising at the fastest pace in history, surging above 7% after touching 6% just two weeks ago!

Pointing out the obvious, RubyHome CEO Tony Mariotti said that “we know home sales are down. Tuesday’s report from Case-Shiller confirmed the broad price reductions, which also showed U.S. home prices continued their deceleration in July at their fastest rate in the history of the index. We're keeping an eye on this because market activity is seasonally low - we'll know a heck of a lot more about how soft the market is come next spring.”

“Mortgage rates continue to rise beyond the Federal Reserve’s reported 6.29% on September 22. However, we’ve seen this accelerate; mortgage approvals on 30-year fixed loans this week reached 7% for some of our buyers. Going forward, if this trend holds, buyers will afford smaller homes unless they are cash buyers.”

"Sellers who've been holding out for pandemic-inflated prices are going to have to eventually lower their prices. This is just a psychological shift taking place - one that takes a few months to play out."

Tyler Durden Thu, 09/29/2022 - 05:45

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