Connect with us


Over to the ECB

Overview: Equity markets in Asia Pacific and Europe are weaker.  The main exception in Asia Pacific was India, where the market rose by about 0.75%. …



Overview: Equity markets in Asia Pacific and Europe are weaker.  The main exception in Asia Pacific was India, where the market rose by about 0.75%.  Europe's Stoxx 600 is lower for the third consecutive session and is now down on the week.  US futures are up around 0.3%-0.4%.  The 10-year Treasury yield is hovering a little above 3%.  European peripheral yields are softer ahead of the ECB meeting.  New Zealand’s 10-year yield jumped eight basis points in response to the central bank’s announcement that it would begin selling bonds that it bought during the pandemic.  The dollar is mixed, and in an unusual turn of events, the beleaguered yen is the strongest of the majors, recovering about 0.5%.  The euro is flat near $1.0715 ahead of the ECB meeting outcome.  Among emerging market currencies, leaving aside the Russian rouble, the Chinese yuan’s nearly 0.25% gain leads the advancer.  The Turkish lira’s leg lower continues.  Gold is trading quietly, a few dollars on either side of $1850.  July WTI is trading quietly in a narrow range (~$121.35-$122.70) near yesterday’s highs.  US natgas is off 4.5% after falling 6.3% yesterday.  The explosion at the Freeport LNG export facility in Texas, source of around 70% of US natgas exports will be closed for three weeks according to estimates. Europe’s benchmark had been off four sessions coming into today and jumped by more than 8%.  Iron ore snapped an eight-day advance and fell 2.2% in Singapore today.  July copper is almost 1.5% lower to give back the gains recorded in the past two days plus some. July wheat is off about 1% and continues to pare a 5% gain registered on Monday.


Asia Pacific

There are two developments from China to note. First, a 2.7 mln district in Shanghai is coming under new Covid restrictions.  The fact that the zero Covid policy has not be abandoned means that that there may still be rolling lockdowns, and this argues against a "V" recovery.  Second, and more optimistically, China reported stronger than expected trade figures.  Exports surged by nearly 17% year-over-year in May, more than twice the median forecast (Bloomberg survey) and follows an almost 4% gain in April.  Imports rose 4.1% year-over-year in May after a flat report in April.  The result was a $78.8 bln monthly trade surplus, up from $51.1 bln previously.  The average monthly trade surplus this year is $58.3 bln.  It averaged $38.6 bln a month in the Jan-May 2021 period.  

A new threat to supply chains especially to petrochemicals, steel, and autos is coming from South Korea.  According to the union, the majority of the 25k members of the Cargo Truckers Solidarity, affiliated with the Korean Confederation of Trade Unions, and many un-unionized truck drivers are supporting the strike.  The government has played down the impact and estimates that only 8k drivers are struck initially.  The recently elected, President Yoon Suk Yeol has issued emergency transport measures that allows government truck fleet to operate at the logistic hubs. The industrial action is over jobs and wages.  An extension of the Safe Trucking Freight Rates System is being sought.  The 3-year program that sought to prevent dangerous driving and minimum care rates for truck drivers is set to expire at the end of this year. The union want to extend the program to all the cargo truckers. The expiring agreement covered only around 60% of the drivers. Reports suggest activity at several ports, including Busan, the world's seventh largest port, have been disrupted.  It handles nearly two million containers a month.  Separately, the Korean won is off 3.3% so far here in Q2 after depreciated by 1.9% in Q2. Some attribute the weight on the won coming from foreign investors who have sold around $5.9 bln of Korean equities after divesting $6.5 bln worth in Q1.  However, this is more than offset by foreign purchases of Korean bonds.  They bought about $16.3 bln in Q1 and have bought another $9.1 bln so far in Q2.  

The dollar made a new marginal high against the yen earlier today near JPY134.55 before moving modestly lower.  The greenback was up seven of the past eight sessions. The high set in 2002 was around JPY135.15.  Above there, the previous high from 1998 was around JPY147.65.  Given the divergence of monetary policy, interest rate differentials, and the terms-of-trade shock, a persuasive argument can be made that the yen's decline is fundamentally driven.  Initial support is seen by JPY133.00 and then JPY132.50.   The Australian dollar tested the week's low near $0.7160 and it held.  There are options for about A$530 mln at $0.7165 that expire today and another at $0.7135 for A$475 mln that also roll off.  There may be some resistance around $0.7200, but a move above $0.7250 is needed to lift the technical tone.  The greenback initially pushed above CNY6.70 for the first time this week and found offers lurking.  Options for almost $2.4 bln struck there expire today.  It pushed slightly below CNY6.67 before stabilizing. The dollar's reference rate was set at CNY6.6811, a little lower than median projections (Bloomberg survey) of CNY6.6832.  


The market recognizes the hawkish pivot by the ECB.  Consider that at the end of last year, the swaps market priced in a 10 bp policy rate at the end 2022.  It rose to about 50 bp mid-February but retreated below 10 bp on the initial Russian invasion of Ukraine.  It recovered was near 60 bp in mid-April.  It surpassed 100 bp by mid-May and yesterday reached almost 1.34%.  Between the July and October meetings the market has a little more than 100 bp of tightening discounted.  That would imply at least one 50 bp move.  ECB President Lagarde has endorsed 25 bp hikes starting next month, but she is unlikely to push back hard against a 50 bp sometime in the futures.  If she were, one effect would be to weaken the euro.  The staff forecasts, as we have argued (here), the staff is likely to revise up inflation forecasts and shave growth forecasts.  These forecasts are part of the forward guidance that will underscore the likelihood of a hike at next month's meeting, even though there will be no new economic projections.  At the same time, it is hard not to argue that the risks to growth are still on the downside.  There is also a technical issue of the targeted long-term refinance operations (TLTRO), the three-year loans, which if specific lending targets are met, were secured at the incredible rate of minus 100 bp.  Although there is some talk of a new discretionary mechanism to combat fragmentation (strong divergence of interest rates), we have argued it is unlikely because, a facility currently exists and an attempt to have such a new facility faltered last year over conditionality, and the compromise struck gave the ECB added flexibility when reinvesting maturing proceeds.  

This is the ECB's fourth meeting of the year.  Consider the price action around the previous three meetings.  The euro rallied in the four days before the February 3 meeting and surged 1.2% on the day. It lost about 1% the following week, which began a five-week decline.  The euro rallied 1.6% the day before the March 10 ECB meeting and gave nearly all of it back on the day of the meeting and the following day.  The following week it rose by about 1.25%.  The euro fell on April 14 by slightly more than 0.5%, to give back the gain it scored the previous day.  It lost roughly another 0.5% in the following two sessions.  

The euro has traded roughly in a $1.0650-$1.0750 trading range this week.  It is hovering around the middle of the range ahead of the ECB meeting outcome.  There are options for 1.1 bln euros at $1.0755 that expire today.  After tomorrow's US CPI, 1.4 bln euros in options at $1.08 expire.  The euro's recovery from $1.0350 in the middle of last month stretched momentum indicators and we continue to look for the more impulsive move to the downside.  The MACD looks about to turn lower, and the Slow Stochastics have been gently trending lower this month.  Sterling posted a large outside up day on Tuesday.  There has been no follow through buying and sterling has remained within Tuesday's range (~$1.2430-$1.2600).  An option for GBP340 mln at the top of that range expires today.  A breakout seems unlikely today.  


The US reports weekly jobless claims and Q1 household net worth figures today ahead of tomorrow's May CPI.  Jobless claims are not going to change the view that the labor market remains robust and stronger than the Federal Reserve thinks is healthy.  Consider that through last month, nonfarm payrolls have risen by 2.44 mln this year.  In the same period last year, the US created 2.65 mln jobs.  Not only has the moderation been slight, but consider that in first five months of 2019, the US grew 890k jobs.  US household net worth rose by $5.3 trillion in Q4 21 and average $4.7 trillion a quarter last year.  It rose by an average of $3.6 trillion in 2020 and $3.1 trillion in 2019.  The markets do not seem to react much to this time series, which does not say anything about the critical distribution issue.  

US oil inventories rose by about 2 mln barrels last week even though supplies at Cushing fell to a three-month low.  The more pressing issue is gasoline.  Inventories fell for the 10th consecutive week amid rising consumption (reached 9 mln barrels a day) and slipped below 220 mln barrels. The US high driving season is just beginning, warning of the risk of higher prices.  Separately, yesterday's $33 bln 10-year note sale saw a 1.2 tail and a little softer coverage.  Of note, direct bidders took down 19.4% of the issue, the most in three years.  Today, the government sells $19 bln of the 30-year bond.  The last auction generated a 3% yield and is currently yielding almost 3.15%.  

Tomorrow Canada reports May jobs data.  Of the 27.5k increase expected, the median forecast in Bloomberg's survey sees full time positions accounting for the bulk of the new jobs.  Canada's economy appears to be continuing to outperform the US.  The swaps market is almost halfway toward pricing in a 75 bp hike next month rather than a 50 bp move.  The terminal rate expected in the swaps market dipped in late May below 3% and is now a little above 3.6%.  

The US dollar recovered against the Canadian dollar yesterday after initially slipping through CAD1.2520.  It settled near its highs (~CAD1.2565) and reached CAD1.2580 in early European activity.  Nearby support is pegged around CAD1.2540.  There are options for around $750 mln at CAD1.25 that roll off today.  While a quiet session seems likely today, tomorrow may be a different story with US CPI and Canadian jobs.  The greenback has been consolidating in recent days against the Mexican peso.  This week's range so far has been roughly MXN19.47-MXN19.68.  There appears to be more speculation that Banxico may hike by 75 bp when it meets on June 23.  Today's CPI figures could sway the market one way or the other.  Brazil also report May CPI figures today.  It may slow for the first time this year. The central bank is expected to hike by 50 bp next week.  Peru is seen lifting its rate target by 50 bp today to 5.50%. 


Read More

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Reduced myocardial blood flow is new clue in how COVID-19 is impacting the heart

Patients with prior COVID may be twice as likely to have unhealthy endothelial cells that line the inside of the heart and blood vessels, according to…



Patients with prior COVID may be twice as likely to have unhealthy endothelial cells that line the inside of the heart and blood vessels, according to newly published research from Houston Methodist. This finding offers a new clue in understanding covid-19’s impact on cardiovascular health.

Credit: Houston Methodist

Patients with prior COVID may be twice as likely to have unhealthy endothelial cells that line the inside of the heart and blood vessels, according to newly published research from Houston Methodist. This finding offers a new clue in understanding covid-19’s impact on cardiovascular health.

In a new study published today in JACC: Cardiovascular Imaging, Houston Methodist researchers examined the coronary microvasculature health of 393 patients with prior covid-19 infection who had lingering symptoms. This is the first published study linking reduced blood flow in the body and COVID-19.

Using a widely available imaging tool, called positron emission tomography (PET), researchers found a 20% decrease in the ability of coronary arteries to dilate, a condition known as microvascular dysfunction. They also found that patients with prior COVID-19 infection were more likely to have reduced myocardial flow reserve – and changes in the resting and stress blood flow – which is a marker for poor prognosis and is associated with a higher risk of adverse cardiovascular events.

“We were surprised with the consistency of reduced blood flow in post covid patients within the study,” said corresponding author Mouaz Al-Mallah, M.D., director of cardiovascular PET at Houston Methodist DeBakey Heart and Vascular Center, and president elect of the American Society of Nuclear Cardiology. “The findings bring new questions, but also help guide us toward further studying blood flow in COVID-19 patients with persistent symptoms.”

Dysfunction and inflammation of endothelial cells is a well-known sign of acute Covid-19 infection, but little is known about the long-term effects on the heart and vascular system. Earlier in the pandemic, research indicated that COVID-19 could commonly cause myocarditis but that now appears to be a rare effect of this viral infection.

A recent study from the Netherlands found that 1 in 8 people had lingering symptoms post-covid. As clinicians continue to see patients with symptoms like shortness of breath, palpations and fatigue after their recovery, the cause of long covid is mostly unknown.

Further studies are needed to document the magnitude of microvascular dysfunction and to identify strategies for appropriate early diagnosis and management. For instance, reduced myocardial flow reserve can be used to determine a patient’s risk when presenting with symptoms of coronary artery disease over and above the established risk factors, which can become quite relevant in dealing with long Covid.

Next steps will require clinical studies to discover what is likely to happen in the future to patients whose microvascular health has been affected by COVID-19, particularly those patients who continue to have lingering symptoms, or long COVID.

This work was supported, in part, by grants from the National Institutes of Health under contract numbers R01 HL133254, R01 HL148338 and R01 HL157790.


For more information: Coronary microvascular health in patients with prior COVID-19 infection. JACC: Cardiovascular Imaging. (online Aug. 16, 2022) Ahmed Ibrahim Ahmed, Jean Michel Saad, Yushui Han, Fares Alahdab, Maan Malahfji, Faisal Nabi, John J Mahmarian, John P. Cook, William A Zoghbi and Mouaz H Al-Mallah. DOI:


Read More

Continue Reading

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…



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.

Read More

Continue Reading


Target Sets Sights on Holiday Season, Has Plan for High Inventory

Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.



Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.

Target's  (TGT) - Get Target Corporation Report strategy is paying off as the company's stock falls on heavy volume following its earnings release. 

Normally, a profit miss as wide as Target's, 39 cents per share vs. expectations of 72 cents per share, would result in a bigger drop than Target's, but the retailer has been prepping the market for this miss all summer. 

The inventory the company built up during the height of the pandemic, as Americans shopped more from home, needs to go, and the only way get rid of the excess product is deep discounts. 

"Back in June, we announced that our team would be undertaking a bold effort to rightsize our inventory position in the categories for which demand patterns have radically changed," CEO Brian Cornell said during the company's earnings call. "While this decision had a meaningful short-term impact on our financial results, we strongly believe it was the best path forward."

Now, looking forward the company sees some overhang for the third quarter, but expects a big holiday season ahead. 

While some fear a recession and what it might do to the economy, Target is convinced that the holiday season will be strong.

Image source: John Smith/VIEWpress.

Target Aims for Holiday Season

While Target is focused on the back-to-school season currently underway, the company expects "spillover" from its inventory issues to be present during the third quarter to the tune of $200 million. 

But the company's own checks suggest that its shoppers are excited about the holiday season. 

"The one thing that seems to be very consistent is a guest and consumer who says they want to celebrate the holiday seasons so we certainly expect that they are going to be celebrating Halloween this year and actively trick or treating and hosting parties with friends and family," Cornell said.

"We know they're looking forward to Thanksgiving and they're going to look forward to celebrating the Christmas holidays and that comes down each and every week as we survey consumers and talk to our guests so that gives us great optimism for our ability to perform during these key holiday seasons"

Real Money

Elevate Your Portfolio

Get actionable market insights from a team of experts who actually invest, trade, and manage money for a living

  • Daily Market Commentary
  • Actionable Trading Ideas
  • Investment Advice

Not only does Target expect a strong quarter, but the company also expects favorable comps as fourth quarter headwinds from a year ago aren't present this time around. 

"Guests already have their sights set on upcoming holidays and seasonal moments in Q3 and beyond," Cornell said.

Target's Q2 Collapse

Target said adjusted earnings for the three months ending in July were pegged at 39 cents per share, down 89% from the same period last year and well shy of the Street consensus forecast of 72 cents per share.

Group revenues, Target said, rose 3.5% to $26 billion, essentially matching analysts' estimates of a $26.04 billion tally. Target said same-store sales rose 2.6%, again shy of the Refinitiv forecast of 3.2%, while operating margins fell to 1.2%, below the group's July guidance of a 2% level. 

Earlier this summer, Target cautioned that its bigger-than-expected 35% build-up in overall inventories over the first quarter would trigger price cuts, adding that deeper discounts would be needed to shift the excess goods onto a customer base that was already pulling back on discretionary spending.

Walmart  (WMT) - Get Walmart Inc. Report, Target's larger big box rival, said Tuesday that improving spending trends, as well as actions the group has taken to shift excess inventory, will ease some of the pressures it expects to face in terms of overall profits over the back half of the year.

Walmart said adjusted earnings for the three months ended in July came in at $1.77 per share, down one penny from the same period last year but well ahead of the Street consensus forecast of $1.62 per share.

Group revenues, the company said, were tabbed at $152.9 billion, an 8.4% increase from last year that topped analysts' estimates of $150.81 billion. U.S. same-store sales rose 6.5% from last year, the company said, firmly topping the Refinitiv forecast. 

Read More

Continue Reading