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Mid-Market Update: Stocks steady, Yen rallies on data, Oil win streak snapped, Deficits drive yields higher, Gold softens, LATAM in focus

Mid-Market Update: Stocks steady, Yen rallies on data, Oil win streak snapped, Deficits drive yields higher, Gold softens, LATAM in focus

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Wall Street appears set for a period of calm as traders await how COVID-19 slowly spreads across the US.  New cases will rise, but it will take a couple more weeks to rate how much economic activity improved following regional reopenings.  It is hard to imagine stocks will be able to keep on rallying as spikes in new cases will derail the reopening efforts in key cities.  Economic activity will only see a modest pickup if the second quarter has the US become the curbside pickup economy. 

The ADP payroll report pretty much confirmed what jobless claims has been telling us over the past several weeks.  Job losses will be in the 20 million ballpark this Friday and the unemployment rate will surge to around the 18% level.  It is hard to get excited about US stocks right now as the economic pickup will be lackluster and the jobs recovery in travel, entertainment and retail, will be rather slow. 

Oil

Oil’s nice rally is over, and it seems that going forward WTI crude will be somewhat rangebound between the $20 and $30 levels.  The energy markets are not quite balanced and deeper curtailment efforts will be needed over the next few weeks.

The EIA crude oil inventory showed crude production fell below the 12-million barrel per day level for the first time since February of last year.  The weekly EIA inventory headline number came in at 4.59 million barrels, below the 8.7 million consensus estimate.  Oil bulls can’t get overly excited with this report as the demand outlook is still bleak and production cuts need to be more aggressive.  Imports from Saudi Arabia rose to a six-week high, a good sign for Brent crude, but not necessarily for US shale. 

The distillate inventory build was a whopping 9.5 million bpd as net exports almost halved from the prior week.  The one positive out of this report was the pickup in gasoline demand as parts of the country reopen. 

The next couple of weeks should see volatility ease somewhat for energy traders.  Any hiccups with the reopening of the economy in the US could see WTI crude fall towards the $20 a barrel level.  Oversupply concerns will also weigh on prices, but with tank tops nearly reached, the production cuts will work themselves out. 

Treasuries/FX

To the surprise of no one, US debt issuance will hit a record high to cover the skyrocketing deficit.  The quarterly refunding announcement sent the 10-year Treasury yield to the highest level since April 15th.  The second quarter was expected to see redemptions, but that obviously won’t happen as massive stimulus measures were announced to counter the impact of the coronavirus. 

The deficit seems set to hit $4 trillion as lawmakers remain determined to deliver additional economic stimulus.  Fiscal hawks are nowhere to be found and will only emerge once the economy exits a disastrous second quarter.  TIPS were unchanged as inflation is hardly a concern right now. 

The Japanese yen was the best performing currency after both the US private payroll data confirmed for many that the unemployment rate will surge closer to 20% and after the European Commission warned the North-South divide will only get worse.  The integrity of the bloc’s single currency could once again be at risk as the indebted members will see slower recoveries. 

Yesterday’s German Constitutional Court ruling reminded investors that Germany might prove difficult in allowing further massive QE programs.  Everything is just starting to look bearish regarding the euro.

Gold

Gold prices just can’t shake off reopening momentum.  Despite expectations that COVID-19 deaths could rise to 3,000 a day next month, investors are staying optimistic as new cases are not spiking.  The virus however will take longer to spread deep into rural corners of the country.  Gold prices may continue to consolidate until either cases spike in the rest of the country or the scattered economic rebound disappoints.  Gold should see strong support come from the $1650 level in the short-term and should still target $1800 over the next couple months.

LATAM

Brazil

The main event in LATAM will be the Brazilian central bank rate decision.  The Brazilian real has had a bad start to the month following worse than expected industrial production and an outlook cut by Fitch.  The political situation is not likely to get any boosts anytime soon as the President and Congress can’t agree upon a reform agenda. 

Brazil’s central bank (BCB) is expected to cut the Selic rate by 50 basis points to a record low 3.25%, but traders should not be surprised if they are more aggressive and bring it down to 3.00%.  Since the March meeting the coronavirus pandemic and political turmoil have crushed growth prospects.  Even President Bolsonaro had to admit that efforts to flatten coronavirus curve have failed.  Long-term fiscal sustainability is at risk for Brazil and the BCB will be aggressive today and signal more cuts are coming. 

Chile

Chile’s central bank (BCCh) interest rate decision will likely focus on non-traditional measures to provide liquidity and further fiscal support.  At the last meeting in March, Chile’s central bank went all-in delivering a half a percentage point rate cut to 0.50% and increased the size of bank bond purchase program by $4 billion.  Interest rates in Chile have reached their lower bound and seem to be anchored for the foreseeable future.

When emerging markets find better momentum, the Chilean and Colombian pesos are likely to outperform the rest of LATAM. 

Peru

Peru was quick to react to the coronavirus pandemic shock to the global economy.  The Peruvian reference rate saw two full percentage point rate cuts in mid-March and early April.  Peru’s central bank is expected keep rates steady at 0.25% and reiterate they will continue to provide ample liquidity.  Peru will likely see an expansion of stimulus in one of the upcoming rate decisions.  The Peruvian sol could be stuck in broadening pattern formation that will see prices remain stuck between the 3.35 and 3.42 range. 

Colombia

Colombia’s central bank will present the quarterly report which should be rather downbeat.  Colombia’s economic growth outlook will continue to get downgraded after the government extended their lockdown through May 25th. 

Financial markets are always forward looking and will start to begin gravitating towards Colombian assets.  Colombia’s economy will start to look constructive as oil prices have stabilized optimism is high economic activity will start to pickup in the near future. 

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Spread & Containment

War, peace and security: The pandemic’s impact on women and girls in Nepal and Sri Lanka

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to improve the lives of women and girls in postwar countries…

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Nepalese girls rest for observation after receiving the Moderna vaccine for COVID-19 in Kathmandu, Nepal. (AP Photo/Niranjan Shrestha)

Attention to the pandemic’s impacts on women has largely focused on the Global North, ignoring countries like Nepal and Sri Lanka, which continue to deal with prolonged effects of war. While the Nepalese Civil War concluded in 2006 and the Sri Lankan Civil War concluded in 2009, internal conflicts continue.

As scholars of gender and war, our work focuses on the United Nations Security Council Resolution 1325 on women, peace and security. And our recently published paper examines COVID-19’s impacts on women and girls in Nepal and Sri Lanka, looking at policy responses and their repercussions on the women, peace and security agenda.

COVID-19 has disproportionately and negatively impacted women in part because most are the primary family caregivers and the pandemic has increased women’s caring duties.

This pattern is even more pronounced in war-affected countries where the compounding factors of war and the pandemic leave women generally more vulnerable. These nations exist at the margins of the international system and suffer from what the World Bank terms “fragility, conflict and violence.”

Women, labour and gender-based violence

Gendered labour precarity is not new to Nepal or Sri Lanka and the pandemic has only eroded women’s already poor economic prospects.

Prior to COVID-19, Tharshani (pseudonym), a Sri Lankan mother of three and head of her household, was able to make ends meet. But when the pandemic hit, lockdowns prevented Tharshani from selling the chickens she raises for market. She was forced to take loans from her neighbours and her family had to skip meals.

Some 1.7 million women in Sri Lanka work in the informal sector, where no state employment protections exist and not working means no wages. COVID-19 is exacerbating women’s struggles with poverty and forcing them to take on debilitating debts.

Although Sri Lankan men also face increased labour precarity, due to gender discrimination and sexism in the job market, women are forced into the informal sector — the jobs hardest hit by the pandemic.

Two women sit in chairs, wearing face masks
Sri Lankan women chat after getting inoculated against the coronavirus in Colombo, Sri Lanka, in August 2021. (AP Photo/Eranga Jayawardena)

The pandemic has also led to women and girls facing increased gender-based violence.

In Nepal, between March 2020 and June 2021, there was an increase in cases of gender-based violence. Over 1,750 incidents were reported in the media, of which rape and sexual assault represented 82 per cent. Pandemic lockdowns also led to new vulnerabilities for women who sought out quarantine shelters — in Lamkichuha, Nepal, a woman was allegedly gang-raped at a quarantine facility.

Gender-based violence is more prevalent among women and girls of low caste in Nepal and the pandemic has made it worse. The Samata Foundation reported 90 cases of gender-based violence faced by women and girls of low caste within the first six months of the pandemic.

What’s next?

While COVID-19 recovery efforts are generally focused on preparing for future pandemics and economic recovery, the women, peace and security agenda can also address the needs of some of those most marginalized when it comes to COVID-19 recovery.

The women, peace and security agenda promotes women’s participation in peace and security matters with a focus on helping women facing violent conflict. By incorporating women’s perspectives, issues and concerns in the context of COVID-19 recovery, policies and activities can help address issues that disproportionately impact most women in war-affected countries.

These issues are: precarious gendered labor market, a surge in care work, the rising feminization of poverty and increased gender-based violence.

A girl in a face mask stares out a window
The women, peace and security agenda can help address the needs of some of those most marginalized. (AP Photo/Niranjan Shrestha)

Policies could include efforts to create living-wage jobs for women that come with state benefits, emergency funding for women heads of household (so they can avoid taking out predatory loans) and increasing the number of resources (like shelters and legal services) for women experiencing domestic gender-based violence.

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to achieve the agenda’s aims of improving the lives of women and girls in postwar countries like Nepal and Sri Lanka.

Luna KC is a Postdoctoral Researcher at the Research Network-Women Peace Security, McGill University. This project is funded by the Government of Canada Mobilizing Insights in Defence and Security (MINDS) program.

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

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Government

CDC Announces Overhaul After Botching Pandemic

CDC Announces Overhaul After Botching Pandemic

After more than two years of missteps and backpedaling over Covid-19 guidance that had a profound…

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CDC Announces Overhaul After Botching Pandemic

After more than two years of missteps and backpedaling over Covid-19 guidance that had a profound effect on Americans' lives, the Centers for Disease Control (CDC) announced on Wednesday that the agency would undergo a complete overhaul - and will revamp everything from its operations to its culture after failing to meet expectations during the pandemic, Bloomberg reports.

Director Rochelle Walensky began telling CDC’s staff Wednesday that the changes are aimed at replacing the agency’s insular, academic culture with one that’s quicker to respond to emergencies. That will mean more rapidly turning research into health recommendations, working better with other parts of government and improving how the CDC communicates with the public. -Bloomberg

"For 75 years, CDC and public health have been preparing for Covid-19, and in our big moment, our performance did not reliably meet expectations," said Director Rochelle Walensky. "I want us all to do better and it starts with CDC leading the way.  My goal is a new, public health action-oriented culture at CDC that emphasizes accountability, collaboration, communication and timeliness."

As Bloomberg further notes, The agency has been faulted for an inadequate testing and surveillance program, for not collecting important data on how the virus was spreading and how vaccines were performing, for being too under the influence of the White House during the Trump administration and for repeated challenges communicating to a politically divided and sometimes skeptical public."

A few examples:

Walensky made the announcement in a Wednesday morning video message to CDC staff, where she said that the US has 'significant work to do' in order to improve the country's public health defenses.

"Prior to this pandemic, our infrastructure within the agency and around the country was too frail to tackle what we confronted with Covid-19," she said. "To be frank, we are responsible for some pretty dramatic, pretty public mistakes — from testing, to data, to communications."

The CDC overhaul comes on the heels of the agency admitting that "unvaccinated people now have the same guidance as vaccinated people" - and that those exposed to COVID-19 are no longer required to quarantine.

Tyler Durden Wed, 08/17/2022 - 12:22

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Economics

Why Is No One at Nike Working This Week?

And will the move gain broader acceptance among American employers?

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And will the move gain broader acceptance among American employers?

You go into an office, pull at the door and find that it doesn't give and nobody's there. 

It may sound like the start of the common rushing-to-the-office-on-a-Saturday nightmare but, more and more, collective time off is being embraced by employees as part of a push for a better work culture.

While professional social media platform LinkedIn  (MSFT) - Get Microsoft Corporation Report and dating app Bumble  (BMBL) - Get Bumble Inc. Report had already experimented with collective time off for workers, the corporate ripples truly began with Nike  (NKE) - Get Nike Inc. Report.

In August 2021, the activewear giant announced that it was giving the 11,000-plus employees at its Oregon headquarters the week off to "power down" and "destress" from stress brought on by the covid-19 pandemic.

"In a year (or two) unlike any other, taking time for rest and recovery is key to performing well and staying sane," Matt Marrazzos, Nike's senior manager of global marketing science, wrote to employees at the time.

Nike Is On Vacation Right Now

The experiment was, not exactly unexpectedly, very well-received — a year later, the company instituted its second annual "Well-Being Week." Both the corporate headquarters in Beaverton, Ore., and three Air Manufacturing design labs with over 1,500 employees are closed for a collective paid vacation from Aug. 15 to 19.

"We knew it would be impactful, but I was blown away by the feedback from our teammates [...]," Nike's Chief Human Resources Officer Monique Matheson wrote in a LinkedIn post.

"Because everyone was away at the same time, teammates said they could unplug – really unplug, without worrying about what was happening back at the office or getting anxiety about the emails piling up."

Shutterstock/TheStreet

Of course, the time off only applies to corporate employees. To keep the stores running and online orders fulfilled but not exacerbate the differences between blue and white collar workers, Nike gave its retail and distribution employees a week's worth of paid days off that they can use as they see fit.

Nike has tied the change to its commitment to prioritize mental health. In the last year, it launched everything from a "marathon of mental health" to a podcast that discusses how exercise can be used to manage anxiety and depression.

Rippling Through the Corporate World?

But as corporations are often criticized for turning mental health into positive PR without actually doing much for employees, the collective week off was perhaps the most significant thing the company did for workers' mental health.

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The practice of set office closures has long been common practice in many European countries. In France, not only corporate offices but even restaurants and retail stores empty out over the month of August for what is culturally considered sacred vacation time. 

But as American work culture prioritizes individual choice and "keeping business going" above all else, the practice has been seen as radical by many corporate heads and particularly small businesses that may find it more difficult to have such a prolonged drop in business. 

But in many ways, the conversations mirror some companies' resistance to remote work despite the fact that one-fourth of white-collar jobs in the U.S. are expected to be fully remote by 2023

"This is the kind of perk that makes employees want to stay," industry analyst Shep Hyken wrote in a comment for RetailWire. "And knowing they can’t completely shut the entire company down, I like the way they are compensating the distribution and retail store employees."

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