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Category - Fixed Income

    Iron Ore Spikes With Commodities Markets Set for Demand Revival

    This article by Annie Lee and Mark Burton for Bloomberg may be of interest to subscribers. Here is a section:

    Iron ore’s revival came after it lost about a quarter of its value in the past month, as China’s push to curb steel production hammered demand. But steel and other industrial commodities have rebounded this week, after China’s count of daily Covid cases fell back to zero and central bankers vowed to step up support for the real economy. Coking coal in China hit a record on Tuesday, while copper has also recovered amid signs that Chinese consumers are on a buying spree. 

    “Iron ore just cannot be the only one lagging while everything else in steel space is massively bid,” Xiaoyu Zhu, a metals trader at StoneX Financial Inc., said by email. “After the price spike in coal products in the last two days, it’s hard for iron ore to stay quiet.”
     

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    Powell's Jackson Hole Gamble Runs Risk of Backfiring

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    In the end, it will come down to what Powell considers the bigger longer-term risk for the U.S.: Become trapped in a disinflationary spiral like that experienced by Japan as the forces of technological advances and globalization continue to press down on prices, or enter an inflationary zone of escalating cost pressures akin to what the U.S. suffered a half century ago.

    Right now, he’s betting that the former is the bigger long-run danger, and holding off from tightening credit.

    “The new framework is not so much about what kind of monetary policy you would expect right now, but what you might expect over the next year or perhaps longer as this recovery continues,” Wendy Edelberg, director of The Hamilton Project at the Brookings Institution, says. “They have made a pretty convincing argument they are going to keep monetary policy accommodative for longer than they would have under a different policy rule.”

    But the path ahead will be far from easy as the Fed seeks to softly land the economy in the neighborhood of on-target inflation and maximum employment.

    “It’s going to very difficult,” says Blinder, who was at the Fed when it achieved what many economists consider its only perfect landing for the economy, in the mid 1990s. “If they can achieve that, they deserve more than a pat on the back.” 

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    What interns and new grads really get paid at top tech companies

    This article from Techcrunch may be of interest to subscribers. Here is a section:

    For example, Collins found that, according to 19 survey respondents so far, Facebook is offering an average annual salary of $109,526 with a massive signing bonus of $79,737 for employees in technical roles like iOS or full stack developer, or software or network engineer.

    By comparison, according to 31 survey respondents, Google is paying recent graduates in tech roles an average of $107,000 annualized salary with an average signing bonus of $27,327.

    And Microsoft was offering new grads a $107,455 annualized salary with a $26,591 signing bonus, according to 22 respondents.

    Looking at the self-reported salary and bonus data by job title, Collins found that software engineers and developers are out-earning their peers in user experience design and sales engineering by tens of thousands, annually.

    And even though government salaries are presumed to be much lower than those in the private sector, working in tech in a government office will score entry-level engineers and developers a slightly better salary, on average, than working for a seed- or Series A-stage startup, the survey suggests.

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    Delta Impact on Consumer Behavior Will Delay Tapering Announcement

    This note from Guggenheim may be of interest to subscribers. Here is a section:

    Expectations are mounting for a September announcement of tapering plans by the Federal Reserve (Fed), prompted by the strength of the economy and comments from more hawkish members of the FOMC, particularly Boston Fed President Eric Rosengren.

    We don’t see that happening. The Delta variant is throwing a wrench into the forward progress of the economy. Although Fed Chair Powell believes that “it’s not yet clear whether the Delta strain will have important effects on the economy,” our read of the latest data suggests that it is already having a negative impact on consumer behavior.

    After a large downside miss to July retail sales, spending on COVID sensitive activities such as restaurants, air travel, and hotels has weakened further in August. High frequency indicators of broader consumer activity such as daily credit card spending also show softening over the past few weeks.

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    Shipping bottlenecks set to prolong supply chain turmoil

    This article from the Financial Times may be of interest to subscribers. Here is a section:

    The disruptions started in the second half of last year after demand for goods sank when the pandemic struck and carriers cut sailings, but locked-down consumers then ordered products online at an unprecedented rate.

    Shipping companies’ efforts to catch up have been set back by the Suez Canal blockage in March and the Yantian terminal closure, as well as border restrictions and port worker absences.

    An indefinite partial shutdown at Ningbo-Zhoushan is the latest problem that could deepen the strain on global logistics. Shipping lines have already started to omit calling at the Chinese port near Shanghai.

    About 350 containerships capable of carrying almost 2.4m 20ft boxes are waiting off ports globally, according to VesselsValue. The congestion has been getting worse with idle capacity reaching 4.6 per cent of the global fleet, up from 3.5 per cent last month, data from Clarksons Platou Securities shows.

    Lars Mikael Jensen, head of global ocean network at Maersk, the world’s largest container shipping group, agreed that the situation had shown no signs of improvement since the Delta variant of Covid emerged.

    “It’s not getting any better on aggregate,” he said, adding that maritime transport networks are “still super stretched — it only takes a small thing then you’re back to square one or square one minus”.

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    Inflation Tempers Americans' Enthusiasm About Red-Hot Economy

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    By global standards, the U.S. has bounced back fast. But as data on the recovery continue to pour in, there’s plenty to support the suspicion that the glass is still half-empty.

    Consumer sentiment fell in early August to the lowest level in nearly a decade by one measure and U.S. retail sales fell in July by more than forecast.

    The following charts help explain why Americans still aren’t clear how impressed they should be.

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    China coronavirus infection closes shipping terminal at massive Ningbo-Zhoushan Port as container rates soar

    This article from the China Morning Post may be of interest to subscribers. Here is a section:

    Nair was referring to massive delays at Shenzhen's Yantian port in May and June. Weeks of containment efforts following outbreaks of Covid-19 among dockworkers in China's Pearl River Delta caused global shipping delays, supply-chain disruptions and surging freight costs. The problems have not been fully resolved.

    Lars Jensen, CEO of liner consultancy Vespucci Maritime, also said the Meishan terminal closure could have a similar impact on the Ningbo-Zhoushan Port that Yantian experienced when it was closed for more than three weeks.

    "Significant problems, both for export cargo as well as for the movement of empty containers into the region, would then ensue," he wrote in a LinkedIn post on Wednesday.

    With its zero-tolerance approach to the coronavirus, China is currently carrying out mass testing to contain the spread of the highly infectious Delta variant, which Ningbo authorities said the Meishan worker tested positive for.

    However, the deputy director of the Ningbo Centre for Disease Control and Prevention, Yi Bo, said the worker may have contracted the virus from his interactions with foreign crewmembers of cargo freighters that he had boarded at the port. Video surveillance showed he had close contact with crews.

    Meishan is one of the busiest terminals at the Ningbo-Zhoushan Port, servicing main trade destinations in North America and Europe. In 2020, it handled 5,440,400 TEUs of container throughput, or around 20 per cent of the total container throughput at the Ningbo-Zhoushan Port, according to official statistics.

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    Predicting Equity Returns with Inflation

    This article from Research Affiliates may be of interest to subscribers. Here is a section:

    In this article, we document that two derived US inflation variables—inflation cycles and inflation surprises—have been robust predictors of US equity returns. We demonstrate that this predictability translates into new sources of alpha that investors can seek to harvest. In particular, we highlight the signals’ ability to perform during the worst times in the stock market without missing upside opportunities.

    The tail-hedging properties derived from inflation signals are particularly desirable. Hedging positive inflation shocks can be costly when inflation is low.9 For example, strategic allocations to alternative assets, such as commodities, or absolute return strategies as a way to protect against inflation have not all fared well in recent years, with commodity indices down more than 30% versus their 2011 levels. As a result, many asset owners may not be able to stay the course if inflation fails to materialize in the medium term. We find that inflation signals can provide a new tool for investors who wish to hedge their portfolios against inflationary and deflationary risks.

    “The tail-hedging properties derived from inflation signals are particularly desirable.”

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    Scientists Reach 'Unequivocal' Consensus on Human-Caused Warming

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Humanity will have about a 50% chance of staying below the 1.5°C threshold called for by the Paris Agreement if CO₂ emissions from 2020 onwards remain below 500 billion tons. At the current rate of emissions, that carbon budget would be used up in about 13 years. If the rate doesn’t come down, the planet will warm more than 1.5°C.

    “Our opportunity to avoid even more catastrophic impacts has an expiration date,” said Helen Mountford, vice president of climate and economics at the World Resources Institute. “The report implies that this decade is truly our last chance to take the actions necessary to limit temperature rise to 1.5°C. If we collectively fail to rapidly curb greenhouse gas emissions in the 2020s, that goal will slip out of reach.”

    The new publication lands in the middle of the ramp-up to COP26, to be held in Glasgow in November. A global deal to pursue faster emission cuts would depend on poor countries securing $100 billion a year in climate finance from rich countries, something envisioned in previous climate agreements
    but not yet achieved. National governments would also need to agree to rules governing the trading of emissions permits, to ensure those moving faster towards cuts are rewarded for doing
    so.

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