Connect with us


Dollar Jumps

Overview: A less hawkish Reserve Bank of New Zealand and a
slightly softer than expected January CPI from Australia appears to have
sparked a broad US…



Overview: A less hawkish Reserve Bank of New Zealand and a slightly softer than expected January CPI from Australia appears to have sparked a broad US dollar rally. The Dollar Index is up almost 0.25%, which, if sustained, would be its best day since the US CPI was reported on February 13. Most of the greenback's strength was seen in the Asia Pacific region, and it has steadied in the European morning. The dollar approached JPY150.80 and there are large options at JPY151 that expire today. The yen is the strongest of the G10 currencies, off less than 0.15%. The Antipodeans have been hit the hardest. The Australian dollar is off around 0.75% and the New Zealand dollar has been tagged for 1.2%. The euro briefly traded below $1.08 for the first time in a week. Emerging market currencies are also weaker, with the South African rand, Thai baht leading the drop with 0.65%-0.85% declines. With herculean efforts the dollar continues to hold slightly below CNY7.20. 

Equities are under pressure. All the large markets in the Asia Pacific region but South Korea, sold off. That included a 2% slide in the Chinese shares that trade in Hong Kong and a 3.8% slump in the Shenzhen Composite. Europe's Stoxx 600 is giving back yesterday's nearly 0.2% gain. US index futures are modestly softer after a mixed performance yesterday. European 10-year yields are mostly softer, but UK Gilts are flat. The 10-year US Treasury yield is a basis point lower near 4.29%. The stronger dollar has weighed on gold. It had poked above $2039 yesterday but settled lower on the day and follow-through selling today has seen in slip below $2025 before finding support. April WTI rallied more than $3 a barrel from Monday's low to $79 yesterday. An 8 mln-barrel build in US stocks according to API estimates seemed to blunt the speculation that OPEC+ will extend its output cuts. April WTI is trading softer, around $78, but within yesterday's range.

Asia Pacific

Japan's slightly firmer than expected January CPI (core rate at 2.0% target instead of falling to 1.9% from 2.3% as economists expected) seemed to renew speculation of a BOJ rate hikes after the unexpected economic contraction in Q4 23 fanned doubts. Tomorrow, the pendulum may swing again on the back of what is likely to be dismal data, fanning fears of another quarterly contraction. The preliminary January industrial production is like to fall sharply (nearly 7%), disrupted by the earthquake at the start of the year. Also, Japanese housing starts, which rose 6.6% year-over-year last January may be 7.8% last month and will also be reported tomorrow. And even where there is an uptick in activity, like January retail sales (median forecast in Bloomberg's survey is for a 0.5% rise) seems lackluster after falling an average of 1.1% in Q4 23, the weakest since the early days of the pandemic.

Different institutional arrangements product different response to similar challenges. For more 35 years, people have been talking about a "Fed put." If the stocks market slide threatens the Fed's third mandate, financial stability, it will take action, such as lowering rates. Remember the attention drawn to the so-called Plunge Protection Team? As part of its qualitative and quantitative easing, the Bank of Japan has bought stocks as well as bonds. Its preferred vehicle has been ETFs, and the BOJ owns around 2/3 of the equity ETFs, which account for about a quarter of the central bank's assets. The Swiss National Bank bought foreign equities as a way to expand its balance sheet. How does China do it? Reports suggest that state-owned funds, apparently similar to sovereign wealth funds, have stepped into to support the market this year. One bank estimates these funds have bought a little more than CNY400 bln (~$57 bln) of equities this year. The bank estimates than around 3/4 of the inflows were for products that track the CSI 300. 

The Reserve Bank of New Zealand kept rates steady as expected but were less hawkish than previously. The central bank said that inflation risks were more balanced, suggesting less of a risk of a rate hike this year. Yesterday, the swaps market was pricing in around a 50% chance of a May hike. That has been cut to near 10% today. The market had the implied target rate around 5.18% at the end of November and now it is slightly above 5.0%. Australia's January CPI was unchanged at 3.4%. The median forecast in Bloomberg's survey was for 3.6%. The swaps curve hardly changed. Yesterday, it was pricing 40 bp of cuts this year and now it is almost 42 bp. The first cut continues to be fully discounted for September, with a slightly higher chance (80%) of a cut in August. It was closed to 75% chance yesterday. 

The dollar bottomed yesterday in early North American turnover near JPY150 but recovered to almost JPY150.60 as US 10-year yields traded higher, even though the seven-year auction saw solid even if not spectacular interest. It returned to JPY150.80 in late Asia Pacific turnover and found sellers in early Europe. For the past five sessions, the settlement has been gravitated around JPY150.50. There are options for $1.8 bln at JPY151 that expire today. The Australian dollar set a five-day low in the local session yesterday near $0.6525. It recovered but stalled near $.06560. It has been sold to $0.6490 today, so far, its lowest level since February 15. Nearby support is seen near $0.6470 and then the month's low near $0.6445. The break of $0.6500 weakens the technical tone. Retail sales tomorrow should show a recovered from the dreadful 2.7% drop in December. The New Zealand dollar is also trading much lower. It settled near $0.6170 and is pushing below $0.6100 in the European morning. Initial support now is seen near $0.6075 and then $0.6040-$0.6050. The broad US dollar gains today lifted it a bit closer to CNY7.20, which it continues to hover near but remains below. Press reports says state banks sold dollars and, of course, if the dollar meets resistance at CNY7.20, the largest market participants are involved. The PBOC set the dollar's reference rate at CNY7.1075 (CNY7.1057 yesterday). The average in Bloomberg's survey was CNY7.2004 (CNY7.1966 yesterday). 


There are two metrics of stress in Europe. The first is Italy's premium over Germany. Italy's two-year yield was almost 95 bp above German yields at the 2023 peak (in late October). It fell below 50 bp last month and is slightly above there now. The 2022 and 2023 low was about 35 bp. Italy's 10-year premium peaked early last year near 215 bp. It narrowed by around 50 bp in H1 23 but widened back above 200 bp last October and is now a little below 145 bp, near two-year lows.

The second metric is the euro-Swiss franc cross. The euro has fallen for the past six years against the Swiss franc and in nine of the past ten years. However, the euro has traded higher against the franc this year and has risen for six of the past eight weeks. The euro rose almost 3.3% from the end of last year through yesterday's nearly three-month highs near CHF0.9560. Perhaps, speculation that the Swiss National Bank would cut rates ahead of the European Central Bank weighed on the franc. That said, the momentum indicators are stretched and the chart resistance near CHF0.9570 has been approached. The euro looks vulnerable to near-term setback.

The euro made a marginal new three-day high in Asia Pacific on Tuesday ($1.0865) and was sold in Europe and North American to slightly through $1.0835. It held barely above the five- and 200-day moving averages, which converge near $1.0830. Follow-through selling today saw if dip below $1.08 in early European turnover before finding bids, allowing it to recovery toward $1.0820. The technical tone looks more fragile, though the intraday momentum indicators are oversold. A break of the $1.0770-$1.0790 area would weaken the outlook. Sterling recorded its third consecutive inside day yesterday but broke down today. It saw nearly $1.2620 in early Europe. It has recovered to almost $1.2650. Still, it remains within last Thursday's range (~$1.2610-$1.2710). A move back above $1.2660 would help stabilize the tone. 


GDP revisions tend not to move the markets, and the second look at Q4 23 US GDP is not expected to be revised by much. Investors and businesses are forward-looking and more interested in Q1 24 GDP. The Atlanta Fed's GDP tracker was updated yesterday, and it is now at 3.2% from 2.9% on February 16. The January trade and inventory data will be reported. The market is also looking ahead to tomorrow's personal; income, consumption and deflators and the Atlanta Fed's GDP tracker will be updated after the day. Income is expected to have risen more than consumption and this will be consistent with a moderation in consumption that is expected to unfold here in H1 24. A 0.3% rise in the headline deflator will translate into a three-month annualized rate of 1.6% and about 1.8% at a six-month annualized rate. The core rate is seen accelerating by around 0.4%. That would be the most since the 0.5% increase in January 2023. The three-month annualized pace would be about 2.5% and the six-month annualized pace would be near 2.6%. Three Fed officials speak today, Atlanta's Fed's Bostic, NY Fed's Williams, and the Boston Fed President Collins. The former two vote at the FOMC. So far, officials seem to be on the same page as Fed Chair Powell. They are encouraged by recent trends but need to see more to be sufficiently confident to cut rates.

Canada runs a small current account deficit. It was 2% of GDP in 2019 and 2020 but has been below 1% more recently. Canada's Q4 23 current account is due today and C$2 bln deficit is expected, which would be the smallest in six quarters. That should keep the deficit below 1% of GDP. It is not a market mover. Tomorrow, Canada reports December and Q4 23 GDP. Canada contracted by almost 1.1% in Q3 23 but looks to have returned to growth in Q4. It probably not enough to fully recoup the loss of output in Q3. True to form, Mexico's trade balance deteriorated in January. It was the 14th consecutive January that the seasonal pattern played out. Still, the shortfall was well above expectations as exports fell and imports rose. Still, the seasonal pattern points to a sharp improvement in February, which has been better than January for 17 consecutive Februarys. Mexico's central bank's inflation report will be released later today. It will help shape expectations for the March 21 central bank meeting. The statement after the last meeting suggested rate cuts in the coming months.

The US dollar had gone nowhere against the Canadian dollar and remained in the range set on February 13 when the US reported January CPI (~CAD1.3440-CAD1.3585). Yesterday, the greenback dollar closed at its best level in nearly two weeks and posted an outside up day. Follow-through buying today lifted it to almost CAD1.3590. Nearby resistance is in the CAD1.3600-CAD1.3620 area. The intraday momentum indicators are stretched. There is scope back toward CAD1.3540 initially. The larger than expected Mexican trade deficit did not prevent the peso for strengthening to its best level in three days. The US dollar fell to almost MXN17.04 but remains in the range set last Thursday (~MXN17.0120-MXN17.1570). The downtrend line from the January 23 high comes in near MXN17.10 today and is bumping against it. The trendline has frayed on an intraday basis but has held at settlement.



Read More

Continue Reading


Comments on February Employment Report

The headline jobs number in the February employment report was above expectations; however, December and January payrolls were revised down by 167,000 combined.   The participation rate was unchanged, the employment population ratio decreased, and the …



The headline jobs number in the February employment report was above expectations; however, December and January payrolls were revised down by 167,000 combined.   The participation rate was unchanged, the employment population ratio decreased, and the unemployment rate was increased to 3.9%.

Leisure and hospitality gained 58 thousand jobs in February.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 17 thousand jobs since February 2020.  So, leisure and hospitality has now essentially added back all of the jobs lost in March and April 2020. 

Construction employment increased 23 thousand and is now 547 thousand above the pre-pandemic level. 

Manufacturing employment decreased 4 thousand jobs and is now 184 thousand above the pre-pandemic level.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 years old participation rate increased in February to 83.5% from 83.3% in January, and the 25 to 54 employment population ratio increased to 80.7% from 80.6% the previous month.

Both are above pre-pandemic levels.

Average Hourly Wages

WagesThe graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.3% YoY in February.   

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of people employed part time for economic reasons, at 4.4 million, changed little in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons decreased in February to 4.36 million from 4.42 million in February. This is slightly above pre-pandemic levels.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.3% from 7.2% in the previous month. This is down from the record high in April 2020 of 23.0% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is above the 7.0% level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.203 million workers who have been unemployed for more than 26 weeks and still want a job, down from 1.277 million the previous month.

This is down from post-pandemic high of 4.174 million, and up from the recent low of 1.050 million.

This is close to pre-pandemic levels.

Job Streak

Through February 2024, the employment report indicated positive job growth for 38 consecutive months, putting the current streak in 5th place of the longest job streaks in US history (since 1939).

Headline Jobs, Top 10 Streaks
Year EndedStreak, Months
6 tie194333
6 tie198633
6 tie200033
1Currrent Streak


The headline monthly jobs number was above consensus expectations; however, December and January payrolls were revised down by 167,000 combined.  The participation rate was unchanged, the employment population ratio decreased, and the unemployment rate was increased to 3.9%.  Another solid report.

Read More

Continue Reading


Immune cells can adapt to invading pathogens, deciding whether to fight now or prepare for the next battle

When faced with a threat, T cells have the decision-making flexibility to both clear out the pathogen now and ready themselves for a future encounter.

Understanding the flexibility of T cell memory can lead to improved vaccines and immunotherapies. Juan Gaertner/Science Photo Library via Getty Images

How does your immune system decide between fighting invading pathogens now or preparing to fight them in the future? Turns out, it can change its mind.

Every person has 10 million to 100 million unique T cells that have a critical job in the immune system: patrolling the body for invading pathogens or cancerous cells to eliminate. Each of these T cells has a unique receptor that allows it to recognize foreign proteins on the surface of infected or cancerous cells. When the right T cell encounters the right protein, it rapidly forms many copies of itself to destroy the offending pathogen.

Diagram depicting a helper T cell differentiating into either a memory T cell or an effector T cell after exposure to an antigen
T cells can differentiate into different subtypes of cells after coming into contact with an antigen. Anatomy & Physiology/SBCCOE, CC BY-NC-SA

Importantly, this process of proliferation gives rise to both short-lived effector T cells that shut down the immediate pathogen attack and long-lived memory T cells that provide protection against future attacks. But how do T cells decide whether to form cells that kill pathogens now or protect against future infections?

We are a team of bioengineers studying how immune cells mature. In our recently published research, we found that having multiple pathways to decide whether to kill pathogens now or prepare for future invaders boosts the immune system’s ability to effectively respond to different types of challenges.

Fight or remember?

To understand when and how T cells decide to become effector cells that kill pathogens or memory cells that prepare for future infections, we took movies of T cells dividing in response to a stimulus mimicking an encounter with a pathogen.

Specifically, we tracked the activity of a gene called T cell factor 1, or TCF1. This gene is essential for the longevity of memory cells. We found that stochastic, or probabilistic, silencing of the TCF1 gene when cells confront invading pathogens and inflammation drives an early decision between whether T cells become effector or memory cells. Exposure to higher levels of pathogens or inflammation increases the probability of forming effector cells.

Surprisingly, though, we found that some effector cells that had turned off TCF1 early on were able to turn it back on after clearing the pathogen, later becoming memory cells.

Through mathematical modeling, we determined that this flexibility in decision making among memory T cells is critical to generating the right number of cells that respond immediately and cells that prepare for the future, appropriate to the severity of the infection.

Understanding immune memory

The proper formation of persistent, long-lived T cell memory is critical to a person’s ability to fend off diseases ranging from the common cold to COVID-19 to cancer.

From a social and cognitive science perspective, flexibility allows people to adapt and respond optimally to uncertain and dynamic environments. Similarly, for immune cells responding to a pathogen, flexibility in decision making around whether to become memory cells may enable greater responsiveness to an evolving immune challenge.

Memory cells can be subclassified into different types with distinct features and roles in protective immunity. It’s possible that the pathway where memory cells diverge from effector cells early on and the pathway where memory cells form from effector cells later on give rise to particular subtypes of memory cells.

Our study focuses on T cell memory in the context of acute infections the immune system can successfully clear in days, such as cold, the flu or food poisoning. In contrast, chronic conditions such as HIV and cancer require persistent immune responses; long-lived, memory-like cells are critical for this persistence. Our team is investigating whether flexible memory decision making also applies to chronic conditions and whether we can leverage that flexibility to improve cancer immunotherapy.

Resolving uncertainty surrounding how and when memory cells form could help improve vaccine design and therapies that boost the immune system’s ability to provide long-term protection against diverse infectious diseases.

Kathleen Abadie was funded by a NSF (National Science Foundation) Graduate Research Fellowships. She performed this research in affiliation with the University of Washington Department of Bioengineering.

Elisa Clark performed her research in affiliation with the University of Washington (UW) Department of Bioengineering and was funded by a National Science Foundation Graduate Research Fellowship (NSF-GRFP) and by a predoctoral fellowship through the UW Institute for Stem Cell and Regenerative Medicine (ISCRM).

Hao Yuan Kueh receives funding from the National Institutes of Health.

Read More

Continue Reading


Stock indexes are breaking records and crossing milestones – making many investors feel wealthier

The S&P 500 topped 5,000 on Feb. 9, 2024, for the first time. The Dow Jones Industrial Average will probably hit a new big round number soon t…




Major stock indexes were hitting or nearing records in February 2024, as they were in early 2020 when this TV chyron appeared. AP Photo/Richard Drew

The S&P 500 stock index topped 5,000 for the first time on Feb. 9, 2024, exciting some investors and garnering a flurry of media coverage. The Conversation asked Alexander Kurov, a financial markets scholar, to explain what stock indexes are and to say whether this kind of milestone is a big deal or not.

What are stock indexes?

Stock indexes measure the performance of a group of stocks. When prices rise or fall overall for the shares of those companies, so do stock indexes. The number of stocks in those baskets varies, as does the system for how this mix of shares gets updated.

The Dow Jones Industrial Average, also known as the Dow, includes shares in the 30 U.S. companies with the largest market capitalization – meaning the total value of all the stock belonging to shareholders. That list currently spans companies from Apple to Walt Disney Co.

The S&P 500 tracks shares in 500 of the largest U.S. publicly traded companies.

The Nasdaq composite tracks performance of more than 2,500 stocks listed on the Nasdaq stock exchange.

The DJIA, launched on May 26, 1896, is the oldest of these three popular indexes, and it was one of the first established.

Two enterprising journalists, Charles H. Dow and Edward Jones, had created a different index tied to the railroad industry a dozen years earlier. Most of the 12 stocks the DJIA originally included wouldn’t ring many bells today, such as Chicago Gas and National Lead. But one company that only got booted in 2018 had stayed on the list for 120 years: General Electric.

The S&P 500 index was introduced in 1957 because many investors wanted an option that was more representative of the overall U.S. stock market. The Nasdaq composite was launched in 1971.

You can buy shares in an index fund that mirrors a particular index. This approach can diversify your investments and make them less prone to big losses.

Index funds, which have only existed since Vanguard Group founder John Bogle launched the first one in 1976, now hold trillions of dollars .

Why are there so many?

There are hundreds of stock indexes in the world, but only about 50 major ones.

Most of them, including the Nasdaq composite and the S&P 500, are value-weighted. That means stocks with larger market values account for a larger share of the index’s performance.

In addition to these broad-based indexes, there are many less prominent ones. Many of those emphasize a niche by tracking stocks of companies in specific industries like energy or finance.

Do these milestones matter?

Stock prices move constantly in response to corporate, economic and political news, as well as changes in investor psychology. Because company profits will typically grow gradually over time, the market usually fluctuates in the short term, while increasing in value over the long term.

The DJIA first reached 1,000 in November 1972, and it crossed the 10,000 mark on March 29, 1999. On Jan. 22, 2024, it surpassed 38,000 for the first time. Investors and the media will treat the new record set when it gets to another round number – 40,000 – as a milestone.

The S&P 500 index had never hit 5,000 before. But it had already been breaking records for several weeks.

Because there’s a lot of randomness in financial markets, the significance of round-number milestones is mostly psychological. There is no evidence they portend any further gains.

For example, the Nasdaq composite first hit 5,000 on March 10, 2000, at the end of the dot-com bubble.

The index then plunged by almost 80% by October 2002. It took 15 years – until March 3, 2015 – for it return to 5,000.

By mid-February 2024, the Nasdaq composite was nearing its prior record high of 16,057 set on Nov. 19, 2021.

Index milestones matter to the extent they pique investors’ attention and boost market sentiment.

Investors afflicted with a fear of missing out may then invest more in stocks, pushing stock prices to new highs. Chasing after stock trends may destabilize markets by moving prices away from their underlying values.

When a stock index passes a new milestone, investors become more aware of their growing portfolios. Feeling richer can lead them to spend more.

This is called the wealth effect. Many economists believe that the consumption boost that arises in response to a buoyant stock market can make the economy stronger.

Is there a best stock index to follow?

Not really. They all measure somewhat different things and have their own quirks.

For example, the S&P 500 tracks many different industries. However, because it is value-weighted, it’s heavily influenced by only seven stocks with very large market values.

Known as the “Magnificent Seven,” shares in Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla now account for over one-fourth of the S&P 500’s value. Nearly all are in the tech sector, and they played a big role in pushing the S&P across the 5,000 mark.

This makes the index more concentrated on a single sector than it appears.

But if you check out several stock indexes rather than just one, you’ll get a good sense of how the market is doing. If they’re all rising quickly or breaking records, that’s a clear sign that the market as a whole is gaining.

Sometimes the smartest thing is to not pay too much attention to any of them.

For example, after hitting record highs on Feb. 19, 2020, the S&P 500 plunged by 34% in just 23 trading days due to concerns about what COVID-19 would do to the economy. But the market rebounded, with stock indexes hitting new milestones and notching new highs by the end of that year.

Panicking in response to short-term market swings would have made investors more likely to sell off their investments in too big a hurry – a move they might have later regretted. This is why I believe advice from the immensely successful investor and fan of stock index funds Warren Buffett is worth heeding.

Buffett, whose stock-selecting prowess has made him one of the world’s 10 richest people, likes to say “Don’t watch the market closely.”

If you’re reading this because stock prices are falling and you’re wondering if you should be worried about that, consider something else Buffett has said: “The light can at any time go from green to red without pausing at yellow.”

And the opposite is true as well.

Alexander Kurov 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.

Read More

Continue Reading