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Australian Labour Data Deepens the Gloom

Australian Labour Data Deepens the Gloom



The risk-off tone has rolled into Asia this morning from North America despite the PBOC cutting its 14-day reverse repo by 20bps to 2.35%. Covid-19 fears in Beijing and parts of the United States and geopolitical concerns in Asia continue to weigh on sentiment. The gloom was deepened by Australian Unemployment data, which came in below expectations.

Australia’s headline unemployment, encompassing both full-time and part-time jobs, fell by 227,700 versus a forecast drop of 125,000. The Australian Bureau of Statistics added another negative footnote. It stated that the headline rate would have been above 9.0%, instead of 7.1%, had they included those laid off but not officially looking for work. The fallout was most noticeable in the currency market, AUD/USD falling 0.50% to 0.6850, and AUD/JPY falling 0.60% to 73.20.

Relations between the US and China are set to worsen further as President Trump signed into law, a bill authorising sanctions on Chinese officials over its mass detainment of Uighurs. China has, of course, vowed retaliation. With disputes also ongoing over Hong Kong, Taiwan, the South China Sea, in addition to the very tense standoff with India in the Himalayas, along with disputes with Canada and Australia, Chinese diplomats must be worked off their feet now. The net result is a geopolitical maelstrom with China at its centre, that seems to be quietly evolving as a potential roadblock to recovery that the world doesn’t need in a post-COVID-19 world.

Today will see Indonesia and Taiwan announce rate decisions. With both countries’ currencies having strengthened impressively in recent weeks, we expect further cuts from both. That though is unlikely to lighten Asia’s sombre mood today. Equities and local currencies set to remain on the back foot.

From the authors perspective, however, the underlying driver of the global peak-virus trade remains intact. That is, the seemingly infinite amounts of central bank money sloshing around the world’s financial system to keep credit ultra-easy. The Bank of England will likely add more to that pot this afternoon, increasing their quantitative easing targets. Against this backdrop, the negative tone still looks like a bull market correction, rather than a structural change in sentiment. The risks are more balanced now though, meaning that the outsized gains since the mid-March capitulation trade, will likely proceed at a slower, and less linear, pace.

Asian equities are a sea of red following a mixed New York session.

Asian equity markets continue to ease this morning, as aftermarket US stock futures resume their sell-off after a mixed Wall Street session. COVID-19 and geopolitical concerns continue to weigh on sentiment, despite soothing noises from various central bank officials that they stand ready to support a recovery for as long as necessary.

The S&P 500 e-mini, NASDAQ and Dow futures are all down by over 1.0% in aftermarket trading in Asia today. That has lent a negative tone to Asia after the leading indices had a mixed finish in New York.

The Nikkei 225 is down 1.15%; the Kospi is down 0.40% with China’s Shanghai Composite and CSI 300 lower by 0.50%. Singapore is down 0.50% with the Hang Seng lower by 1.15%, receiving no boost from trading starting in today. Australian indices are 1.50% lower on the day.

Regionally, the negative picture is much the same. We expect the negative tone to continue as markets watch closely, Beijing’s COVID-19 containment efforts, and the India/China standoff. At this stage, the price action of the past few days continues to look corrective rather than structural, although it may persist for some days yet. A complete lockdown of Beijing would change that outlook markedly.

The US Dollar continues rising as investors hedge geopolitical risk.

The US Dollar continued strengthening overnight, driven by strong demand for new 20-year Treasury issues, and risk hedging flows by investors. Like equities though, the overall price action looks more consolidative than structural, after a concerted period of losses for the Dollar as investors jumped into the peak-virus trade.

The majors continued to give ground, notably the Euro and GBP, with the dollar index rising 0.20% to 97.12 overnight. The AUD, used as a proxy for China growth and risk sentiment in general, continued easing overnight. That pace increased this morning after the weak Australian employment data, AUD/USD falling 0.50% to 0.6850. The 0.6800 region remains the critical support level for AUD/USD. A daily close below their signals that the price action is no longer consolidative and that a deeper correction in risk positioning is occurring.

Another critical risk barometer, the Japanese Yen, also appears to be signalling a deeper pullback in risk sentiment is on the cards. USD/JPY has failed multiple times in the past week to reclaim its 50-day moving average at 107.50. USD/JPY is at 106.90 this morning, with nearby support at 106.60. However, a failure at 106.00 signals the potential for much deeper losses and would potentially signal that the global asset market rally has temporarily run out of steam.

Oil’s momentum continues to fade.

Oil is certainly not immune to geopolitical risks, most notably a potentially widening lockdown in Beijing, or the escalating COVID-19 cases across America’s Southern states. That has sapped confidence in oil’s rally but has not yet chopped the legs from under it.

Brent crude continues to outperform, probably because the near-term curve is in a slight backwardation of prices. Its grip on the $40.0 a barrel level is starting to look tenuous, however, having failed to close its March chart gap to $45.00 a barrel. Brent has fallen by 0.50% to $40.30 a barrel in Asia, a victim of the general risk aversion environment. A daily close below $40.00 a barrel will signal a deeper correction to its 100-day moving average around $38.00 a barrel.

WTI has also eased lower by 0.60% to $37.50 a barrel. WTI needs to maintain a daily close above $37.00 to protect its recent gains. A failure there signals a much deeper correction lower, possibly as far as its 100-day moving average at $33.50 a barrel.

Gold finds support near $1700.00 an ounce.

The headline number shows that gold finished almost unchanged again at $1727.00 an ounce overnight. That though does not tell the entire story. Gold, yet again, suffered another sharp intra-day sell-off, this time to $1712.00 overnight. Yet again, however, it staged a strong comeback to finish almost unchanged.

The price action suggests that even in a risk-averse environment, longer-term players are content to be patient, preferring to buy dips rather than chase the market higher. That preferred region appears to be between $1700.00 and $1715.00 an ounce. That said, gold has well-denoted resistance above $1745.00 an ounce.

With both sides content to bide their time for gold to arrive at their preferred levels, gold’s multi-week range trading environment looks set to continue for some days yet.

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Yom Kippur is coming soon – what does Judaism actually say about forgiveness?

Many religions value forgiveness, but the details of their teachings differ. A psychologist of religion explains how Christian and Jewish attitudes co…




Two women embrace before a Yom Kippur service held outdoors during the COVID-19 pandemic in Los Angeles. Al Seib/Los Angeles Times via Getty Images

The Jewish High Holidays are fast approaching: Rosh Hashana and Yom Kippur. While the first really commemorates the creation of the world, Jews view both holidays as a chance to reflect on our shortcomings, make amends and seek forgiveness, both from other people and from the Almighty.

Jews pray and fast on Yom Kippur to demonstrate their remorse and to focus on reconciliation. According to Jewish tradition, it is at the end of this solemn period that God seals his decision about each person’s fate for the coming year. Congregations recite a prayer called the “Unetanah Tokef,” which recalls God’s power to decide “who shall live and who shall die, who shall reach the ends of his days and who shall not” – an ancient text that Leonard Cohen popularized with his song “Who by Fire.”

Forgiveness and related concepts, such as compassion, are central virtues in many religions. What’s more, research has shown that it is psychologically beneficial.

But each religious tradition has its own particular views about forgiveness, as well, including Judaism. As a psychologist of religion, I have done research on these similarities and differences when it comes to forgiveness.

Person to person

Several specific attitudes about forgiveness are reflected in the liturgy of the Jewish High Holidays, so those who go to services are likely to be aware of them – even if they skip out for a snack.

In Jewish theology, only the victim has the right to forgive an offense against another person, and an offender should repent toward the victim before forgiveness can take place. Someone who has hurt another person must sincerely apologize three times. If the victim still withholds forgiveness, the offender is considered forgiven, and the victim now shares the blame.

The 10-day period known as the “Days of Awe” – Rosh Hashana, Yom Kippur and the days between – is a popular time for forgiveness. Observant Jews reach out to friends and family they have wronged over the past year so that they can enter Yom Kippur services with a clean conscience and hope they have done all they can to mitigate God’s judgment.

The teaching that only a victim can forgive someone implies that God cannot forgive offenses between people until the relevant people have forgiven each other. It also means that some offenses, such as the Holocaust, can never be forgiven, because those martyred are dead and unable to forgive.

Many people dressed in black and white stand in a courtyard between ancient walls.
Thousands of Jewish pilgrims attend penitential prayers at the Western Wall in Jerusalem ahead of the Jewish High Holiday of Rosh Hashana. Menahem Kahana/AFP via Getty Images

To forgive or not to forgive?

In psychological research, I have found that most Jewish and Christian participants endorse the views of forgiveness espoused by their religions.

As in Judaism, most Christian teachings encourage people to ask and give forgiveness for harms done to one another. But they tend to teach that more sins should be forgiven – and can be, by God, because Jesus’ death atoned vicariously for people’s sins.

Even in Christianity, not all offenses are forgivable. The New Testament describes blaspheming against the Holy Spirit as an unforgivable sin. And Catholicism teaches that there is a category called “mortal sins,” which cut off sinners from God’s grace unless they repent.

One of my research papers, consisting of three studies, shows that a majority of Jewish participants believe that some offenses are too severe to forgive; that it doesn’t make sense to ask someone other than the victim about forgiveness; and that forgiveness is not offered unconditionally, but after the offender has tried to make things right.

Take this specific example: In one of my research studies I asked Jewish and Christian participants if they thought a Jew should forgive a dying Nazi soldier who requested forgiveness for killing Jews. This scenario is described in “The Sunflower” by Simon Wiesenthal, a writer and Holocaust survivor famous for his efforts to prosecute German war criminals.

A color photograph of an older, balding man in a blue shirt and striped tie.
Simon Wiesenthal at the White House during the Reagan administration. Diana Walker/The Chronicle Collection via Getty Images

Jewish participants often didn’t think the question made sense: How could someone else – someone living – forgive the murder of another person? The Christian participants, on the other hand, who were all Protestants, usually said to forgive. They agreed more often with statements like “Mr. Wiesenthal should have forgiven the SS soldier” and “Mr. Wiesenthal would have done the virtuous thing if he forgave the soldier.”

It’s not just about the Holocaust. We also asked about a more everyday scenario – imagining that a student plagiarized a paper that participants’ friends had written, and then asked the participants for forgiveness – and saw similar results.

Jewish people have a wide variety of opinions on these topics, though, as they do in all things. “Two Jews, three opinions!” as the old saying goes. In other studies with my co-researchers, we showed that Holocaust survivors, as well as Jewish American college students born well after the Holocaust, vary widely in how tolerant they are of German people and products. Some are perfectly fine with traveling to Germany and having German friends, and others are unwilling to even listen to Beethoven.

In these studies, the key variable that seems to distinguish Jewish people who are OK with Germans and Germany from those who are not is to what extent they associate all Germans with Nazism. Among the Holocaust survivors, for example, survivors who had been born in Germany – and would have known German people before the war – were more tolerant than those whose first, perhaps only, exposure to Germans had been in the camps.

Forgiveness is good for you – or is it?

American society – where about 7 in 10 people identify as Christian – generally views forgiveness as a positive virtue. What’s more, research has found there are emotional and physical benefits to letting go of grudges.

But does this mean forgiveness is always the answer? To me, it’s an open question.

For example, future research could explore whether forgiveness is always psychologically beneficial, or only when it aligns with the would-be forgiver’s religious views.

If you are observing Yom Kippur, remember that – as with every topic – Judaism has a wide and, well, forgiving view of what is acceptable when it comes to forgiveness.

Adam B. Cohen 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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EasyJet share price has collapsed by 53% in 2022. Is it a buy?

The EasyJet (LON: EZJ) share price has hit turbulence as concerns about demand and soaring costs remain. It dropped to a low of 293p, which was the lowest…



The EasyJet (LON: EZJ) share price has hit turbulence as concerns about demand and soaring costs remain. It dropped to a low of 293p, which was the lowest level since November 2011. It has plummeted by more than 82% from its all-time high, giving it a market cap of more than 2.5 billion pounds.

Is EasyJet a good buy?

EasyJet is a leading regional airline that operates mostly in Europe. It has hundreds of aircraft and thousands of employees. In 2021, the firm’s revenue jumped to more than 1.49 billion pounds, which was a strong recovery from what it made in the previous year.

EasyJet’s business is doing well as demand for flights rises. In the most recent results, the firm said that forward bookings for Q3 were 76% sold and 36% sold for Q4. For some destinations, bookings have been much higher than before the pandemic.

EasyJet’s business made more than 1.75 billion in revenue in the first half of the year. This happened as passenger revenue rose to 1.15 billion while ancillary revenue jumped to 603 million pounds. The firm managed to make a loss before tax of more than 114 million pounds. It attributed that loss to higher costs and forex conversions.

As I wrote on this article on IAG, EasyJet share price has collapsed as investors worry about the soaring cost of doing business. Besides, jet fuel and wages have jumped sharply in the past few months. Also, analysts and investors are concerned about flight cancellations in its key markets.

Still, there is are two key catalysts for EasyJet. For one, as the stock collapses, it could become a viable acquisition target. In 2021, the management rejected a relatively attractive bid from Wizz Air. Another bid could happen if the stock continues tumbling.

Further, the company could do well as the aviation industry stabilizes in the coming months. A key challenge is that confidence in Europe and the UK.

EasyJet share price forecast

EasyJet share price

The daily chart shows that the EasyJet stock price has been in a strong bearish trend in the past few months. During this time, the stock has tumbled below all moving averages. It has also formed what looks like a falling wedge pattern, which is usually a bullish sign.

The Relative Strength Index (RSI) has dropped below the oversold level while the Awesome Oscillator has moved below the neutral point.

Therefore, in the near term, the stock will likely continue falling as sellers target the support at 270p. In the long-term, however, the shares will likely rebound as the falling wedge reaches its confluence level.

The post EasyJet share price has collapsed by 53% in 2022. Is it a buy? appeared first on Invezz.

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August data shows UK automotive sector heading for a “cliff-edge” in 2023

With an all-out macroeconomic storm brewing in the UK, the Bank of England (BoE) has been forced to intervene in the tumultuous gilt markets, particularly…



With an all-out macroeconomic storm brewing in the UK, the Bank of England (BoE) has been forced to intervene in the tumultuous gilt markets, particularly towards the tail end of the yield curve (details of which were reported on Invezz here).

Car manufacturing is a key industry in the UK. Recently, it registered a turnover of roughly £67 billion, provided direct employment to 182,000 people, and a total of nearly 800,000 jobs across the entire automotive supply chain, while contributing to 10% of exports.

Just after midnight GMT, data on fresh car production for the month of August was released by the Society of Motor Manufacturers and Traders Limited (SMMT).

Strong annual growth but monthly decline

Car production in the UK surged 34% year-over-year settling at just under 50,000 units. This marked the fourth consecutive month of positive growth on an annual basis.

However, twelve months ago, production was heavily dampened by a plethora of supply chain bottlenecks, work stoppages on account of the pandemic, and a worldwide shortage of microchips. The August 2021 output of 37,246 units was the lowest recorded August volume since way back in 1956.

Although the improvement in output is a good sign, equally it is on the back of a heavily depressed performance.

Source: SMMT

To place the latest data in its proper context, production is still 45.9% below August 2019 levels of 92,158 units, showing just how far adrift the industry is from the pre-pandemic period.

Since July, production in the sector fell 14%.

The fact that the UK is facing a deep economic malaise becomes even more evident when we look at full-year numbers for 2020 and 2021.

In 2020, total output came in at 920,928 units, while 2021 was even lower at 859,575. The last time that the UK automotive sector produced less than one million cars in a calendar year was 1986.  

Unfortunately, 2022 has seen only 511,106 units produced thus far, a 13.3% decline compared to January to August 2021.

In contrast, the 5-year pre-pandemic average for January to August output from 2014 – 2019 stands well above this mark at 1,030,527 units.

With car manufacturers tending to pass price rises on to consumers, demand was dampened by surging costs of semiconductors, logistics and raw materials.

The SMMT noted,

The sector is now on course to produce fewer than a million cars for the third consecutive year.

Ian Henry, managing director of AutoAnalysis concurred with the SMMT’s analysis,

It is expected that by the end of this year car production will reach 825,000, compared to 850,000 a year ago, but that’s 35% down on 2019 and a whopping 50% on the high figure of 2017.

Sector challenges

Other than the obvious fact that the UK’s economic atmosphere is in hot water, the automotive industry (including component manufacturers) has been struggling to stave off the high energy costs of doing business.

In a survey, 69% of respondents flagged energy costs as a key concern. Estimates suggest that the sector’s collective energy expenditure has gone up by 33% in the last 12 months reaching over £300 million, forcing several operations to become unviable.

Although the government enacted measures to cap the price of energy and ease obstacles to additional production, Mike Hawes, the CEO of SMMT, said,

This is a short-term fix, however, and to avoid a cliff-edge in six months’ time, it must be backed by a full package of measures that will sustain the sector.

Due to the meteoric rise in costs across the automotive supply chain, 13% of respondents were cutting shifts, 9% chose to downsize their workforce and 41% postponed further investments.

Bleak outlook

Uncertainties around Brexit and the EU trade deal are yet to be resolved.

Moreover, the energy crisis is poised to get even more acute unless Russia withdraws from the conflict, or international leaders ease restrictions on Moscow. Last week, I discussed the evolving energy crisis here

With global central banks expected to tighten till at least the end of the year, demand is likely to be squeezed further pressurizing British car manufacturers.

Electric vehicles made up 71% of car exports from the UK in August, but robust growth in the sector looks challenging in the near term, in the absence of widespread charging infrastructure, high electricity prices and globally low consumer confidence.

Although energy subsidies could provide some relief in the immediate future, the industry will remain in dire straits while investments stay low and the shortage in human capital persists, particularly amid the push for EVs.

Given the prevailing macroeconomic environment, and severe market backlash to Truss’s mini-budget (which I discussed in an earlier article), the sector is unlikely to turn the corner any time soon.

The post August data shows UK automotive sector heading for a “cliff-edge” in 2023 appeared first on Invezz.

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