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The week ahead is packed with several central bank meetings and important high-frequency economic data.  The week begins off with China’s April PMI over…

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The week ahead is packed with several central bank meetings and important high-frequency economic data.  The week begins off with China's April PMI over the weekend.  The world's second-largest economy is being hit by the lockdowns as part of the policy response to the outbreak of Covid. However, the economic impact seems somewhat milder than when the pandemic first arose in Q1 20, and the economy shrank by 10.3% quarter-over-quarter.  Still, more stimulus measures from Beijing and the PBOC seem likely. 

The Reserve Bank of Australia meets on May 3. The market's perception of the likelihood of a hike increased markedly after last week's stronger than expected Q1 CPI.  It rose to 5.1% year-over-year from 3.5% in Q4 21 and was above the 4.6% median (Bloomberg survey) forecast.  The underlying measures quickened to above 3% and more than expected.  Before the inflation report, the cash rate futures implied a 1-in-4 chance of a 25 bp hike.  Now there is about there was about a 60% chance of a such a move, but a 15 bp move is fully discounted.  Previously, the conventional wisdom was that the RBA would wait for June after the May 21 elections.  Like other central banks, Governor Lowe emphasized developments in the labor market. Perhaps, the pullback in the Australian dollar (~4.2% in April) provides extra encouragement, but it should not be over-emphasized. The RBA's trade-weighted index did pull back after approaching last year's high, but it is still relatively firm and near mid-March levels, almost 6% above the late January low.  

The Federal Reserve meets on May 4.  A 50 bp hike is a foregone conclusion.  The Fed funds futures market has priced a 50 bp hike not only at this meeting but also at the following three meetings (June, July, and September).  The Federal Reserve will also announce its balance sheet roll-off strategy. The forward guidance has suggested a short ramp-up period in June and reaching a maximum of $95 bln a month.  Investors (and reporters) may have some questions about the bill holdings and if the Fed would consider selling some MBS outright to achieve its goals. The market has shown a recent pattern by which it reacts one way to the Fed's statement and reverses it during Chair Powell's press conference.  The economic highlight is the April employment report at the end of the week.  The early estimate is for around a 400k gain in nonfarm payrolls.  Under normal circumstances, it would be regarded as robust.  However, if the forecast is accurate, it would be the smallest increase since last April. Subject to revisions, job growth averaged 562k in Q1 22.  Still, and even if average earnings growth slows, Powell's assessment that the labor market is strong (perhaps "too strong") will not interrupt the Fed's "expeditious" course to neutrality.  

The Bank of England and Norway's Norges Bank meet on May 5. Despite some poor economic data, including the squeeze on the cost of living that has seen retail sales, excluding gasoline, falling in nine of the past 11 months, the market is confident that the BOE will deliver its fourth hike in the cycle that began in December.  That will lift the bank rate to 1.0%.  The swaps market is looking at another 100-125 bp hikes this year.  Also, on May 5, England and Wales hold local elections.  The Tories do not appear to be doing well.  Prime Minister Johnson will come under pressure, but a compelling alternative does not jump out now that Chancellor Sunak's support has waned.  Note that Sein Fein looks poised to oust the Democratic Unionist Party to lead Northern Ireland's Assembly. The Norges Bank has also lifted rates three times already, and the deposit rate stands at 0.75%.  The underlying rate of inflation, which excludes energy and adjusts for tax changes, stood at a relatively mild 2.1% in March.  The krone has been no match for the dollar, but it is appreciated against most of its major trading partners this year.  The recent weakness is unlikely to be sufficient to spur the Norges Bank into faster action. After hiking last September, December, and March this year, it will likely wait for the June meeting to hike again. 

Tokyo's April CPI will be reported at the end of next week.  Tokyo's CPI is reported ahead of the national figures but provides a good economic tell.  The April report is important because the cut in mobile service prices last April drop out of the 12-month comparison.  This means that Tokyo, and by extension, Japan's consumer price measure, will jump.  The phone charges are thought to be worth around one percentage point, and this is what the market is anticipating. As a result, the headline pace rises to 2.3% from 1.3%, and the core rate, which excludes fresh food, may increase to 1.8% from 0.8%.  It means that the measure that excludes fresh food and energy will turn positive for the first time since March 2021. However, the BOJ will see through it, and the new fiscal measures are projected to reduce consumer inflation by around half of a percentage point in the May-September period. 

Four other central banks of note meet next week, two from South America and two from central Europe.  With next week's hikes, Brazil and Chile are maybe 1 or 2 hikes away from being done.  A 100 bp hike in the Brazilian Selic rate brings it to 12.75%.  The latest CPI reading puts inflation slightly above 12% year-over-year.  The swaps market looks for rates to peak near 13.5%.  Chile's CPI is closer to 9%, and its policy rate is 7%.  The last two hikes, January and March, were 150 bp each, and before that, the central bank hiked twice by 125 bp. It raised rates by a total of 100 bp in June and July last year.  The swaps market envisions 155 bp tightening over the next six months for the peak. 

Poland and Czech central banks have wood to chop, with March inflation around 11% and 12.7%.  Poland's central bank has hiked rates at each of the last seven meetings for a total of 440 bp.  It hiked by 100 bp in April, and another hike of that magnitude appears likely.   The swaps market looks for a peak near 6% next year.  The Czech repo rate is at 5.0%.  The central bank has also hiked rates at its last seven meetings for 475 bp in total.  It dialed back its hikes after 125 bp, and 100 bp moves last November and December to 75 bp and 50 bp in February and March.  A 50 bp hike is the most likely scenario.  The market also looks for the Czech rate to peak near 6% next year. 

Turning now to the price action in the foreign exchange market despite or because of naysayers is trading new multi-year highs against the euro and sterling.  The greenback may begin consolidating the gains that took it to 20-year highs against the yen.  Chinese efforts to slow the yuan's descent appear to have done the trick and broken the strong downside momentum.  The unusual Politburo statement ahead of the weekend and extended holiday is conducive of a consolidation phase.   After a sharp decline, and with signals of policy support forthcoming, Chinese stocks may draw some new attention. 

Dollar Index:  The six-day rally ended before the weekend with the help of China's allusion to more economic support for the world's second-largest economy.  The modest pullback was only the third decline since March 30.  It barely slipped through the previous day's low and was marginally inside the upper Bollinger Band (~103.35).  The momentum indicators are stretched but do not appear to rule out a new high.  It may take a break of the 101.80-102.35 band to signal a correction instead of a flattish consolidation.  April's nearly 5% net gain is the largest monthly rise since January 2015.  

Euro:  The euro bounced ahead of the weekend to snap a six-day fall that took it from around $1.0850 to almost $1.0470, its lowest level since early 2017.   The momentum indicators are over-extended but do not appear poised to turn higher yet.  The squeeze that carried the single currency to almost $1.06 before the weekend was met with new selling and it settled in the middle of the day's range.  There is more talk about a test on $1.00 (parity). Ahead of it, the 2017 low ($1.0340) may offer the next target. Given the sharpness of the euro's decline, a move above the $1.0650-$1.0700 area is needed to cause the bears any pain.  

Japanese Yen: The BOJ's signals of its intent to defend the 0.25% cap on the 10-year cap indefinitely broke the dollar out of the pennant or flag formation and sent it to JPY131.25.  BOJ Governor recognized that rapid moves are not helpful for businesses but saw the weaker yen as a net positive force for the economy overall.  The Finance Minister's rhetoric is gradually strengthening, but intervention ahead of what is expected to be a 50 bp Fed hike is highly unlikely.  Ahead of the weekend, and with Tokyo markets closed for a holiday, the dollar found support near JPY129.40.  Some lighter activity during the holiday period may be conducive for consolidation.  Maybe the lower end of the range may be in the JPY128.60-JPY129.00 area.  On the other hand, a move toward JPY135 would likely coincide with US 10-year yields pushing above 3%.  

British Pound:  Sterling dropped like a rock too.  Since reaching a high a little shy of $1.31 and reversing lower on April 21, sterling nearly seven cents to almost $1.24 on April 28. It has not been lower since July 2020.  The six-day slide ended before the weekend amid the broader dollar pullback.  Before the bounce, sterling had settled five consecutive sessions below the lower Bollinger Band.  The MACD looks poised to turn higher and appears to be a little ahead of the Slow Stochastic.  The next important chart point is around $1.2250.  Meanwhile, the $1.2670 area offers the nearby cap. A bout of short-covering could lift sterling further ahead of the BOE meeting.  The swaps market has a 25  bp hike fully discounted now and another at the June meeting.  The market appears nearly evenly divided between a  25 bp and 50 bp move at the  August meeting.

Canadian Dollar: The US dollar was extended its pullback into a third session ahead of the weekend, when the dramatic declinein US equities turned it around.  The greenback's small correction stalled near CAD1.2720, the (38.2%) retracement of the advance from the April 21 low (~CAD1.2460).  The MACD and Slow Stochastic are still rising, suggesting a re-test of the CAD1.2880-CAD1.2900 ceiling.  Canada has a solid macroeconomic story, but it has been overshadowed by the broad gains for the greenback, the unwinding of the commodity currency theme as questions raised over Chinese demand, and the risk-off mood.  The correlation between changes in the exchange rate and the S&P 500 over the last 30 sessions is about -0.60, which is about twice the inverse correlation with oil (~-.30).  A break of CAD1.27 could spur a move into the CAD1.2620-CAD1.2640 area.  

Australian Dollar:  The Aussie has fallen out of bed.  Coming into this month, it appreciated in seven of the past eight weeks. Starting with the week ending April 1, it has fallen for five consecutive weeks. The latest leg down was brutal.  After peaking near $0.7460 on April 21, the Australian dollar fell by about 5.25% to the low on April 28 `by $0.7055.  That was the lowest level since early February.  The pre-weekend bounce stalled around $0.7180.  It must get above $0.7200 to be meaningful.  It seems more likely to retest the year's low set in late January near $0.6970. The risk of a deeper decline toward $0.6850 may be growing. The MACD looks like it can turn higher soon, but the Slow Stochastic may take longer.  The RBA meets, and if it does not hike the cash target rate by at least 15 bp, the Aussie may be vulnerable to a new bout of selling.  The swaps market has discounted about 245 bp of tightening this year.  That seems too aggressive, and an adjustment could also leave the currency vulnerable. 

Mexican Peso: When everything is said and done, the Mexican peso proved itself relatively resilient in April to the greenback's surge.  The peso fell by about 2.6% in the month, less than all the major currencies but the Canadian dollar.  The dollar recouped half of what it lost from the early March high near MXN21.4675. It stalled after reaching almost MXN20.64.  The initial pullback found slightly below MXN20.29.  This seems like a rather shallow pullback, warning of the risk of a new attempt higher next week.  That said, the momentum indicators may be poised to turn lower in the coming days.  A break of MXN20.20 would undermine the dollar's technical tone. 

Chinese Yuan:  The dollar gapped higher against the yuan on April 25 and has not looked back.  The gap would be particularly significant in a less controlled currency because it appears on the weekly charts.  The dramatic losses in the euro and yen put downward pressure on the yuan, which the PBOC says is managed against a trade-weighted basket.  The PBOC's 1% cut in required reserves for foreign currency deposits was seen as a tepid protest, more a warning.  The dollar's surge extended to CNY6.65 before the Politburo's pledge of more economic support, which sent it to about CNY6.5850. With mainland markets closed for the first three sessions next week, CNH will be monitored more closely.  As typically happens when the yuan falls, the offshore yuan falls faster.  The spread between the two is the largest of the year (e.g., the dollar settled at CNY6.6080 and CNH6.6400).  Consolidation over the next few days may serve nearly everyone's interest. Arguing backward from the 20th Party Congress later this year, where China's Xi is expected to take a third term, there must be a desire to provide a good economic backdrop. It is partly a function of the Covid response and partly a function of the economic stewardship. 


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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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Walmart joins Costco in sharing key pricing news

The massive retailers have both shared information that some retailers keep very close to the vest.

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As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

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Walmart has really good news for shoppers (and Joe Biden)

The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.

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As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

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