David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Japan Public Workers May Get Biggest Salary Gains in 26 Years

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    Wage levels are also set to rise for non-salaried workers. A labor ministry advisory panel agreed in late July to target lifting the national average for the minimum wage by 4.3% to above 1,000 yen ($7.05) for the first time, in what would be the largest boost since the ministry began keeping records in 1978. That change, which is expected to kick in from October, would affect about 20% of the labor force, according to JPMorgan.

    Advances on incomes bode well for the Bank of Japan, where Governor Kazuo Ueda is watching income trends closely as a key factor that will determine the long-range likelihood of achieving 2% inflation on a sustained basis. Ueda has said repeatedly that for now there remains some distance to reaching that goal, implying that the bank will maintain its accommodative stance for a while. 

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    Borrowers Flock to Bonds as Fed's Anti-Inflation Vow Hits Loans

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    The high-yield bond market is becoming a favorite of companies that once raised cash using leveraged loans, luring borrowers with lower costs and a wealth of investor demand.

    US firms have sold $55 billion of secured notes in the junk-bond market so far in 2023, marking a 17% year-over-year increase, according to CreditSights data. It’s the biggest issuance jump in more than a decade — and an indication that companies are replacing floating-rate debt in the wake of the Federal Reserve’s most-aggressive monetary tightening cycle in decades.

    “It’s a good way to balance each of these markets off each other, and honestly, a better cost of capital,” said John Cokinos, global head of leveraged finance at RBC Capital Markets. “You can hedge naturally by just having fixed-rate debt.”

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    Wheat Gains After Ship Attack Temporarily Shut Russian Port

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    Wheat futures rose, paring a weekly loss, after a major Russian grain-shipping hub was temporarily closed. 

    Traffic from Novorossiysk port was halted for several hours on Friday after a Ukrainian drone attack on a naval vessel. The overnight assault was repelled without damage to port facilities, according to the Russian Defense Ministry. 

    Although the closure was short-lived, it adds to uncertainty about Black Sea trade flows as the war escalates in the midst of this year’s harvests. Russia is the world’s top wheat shipper, and its farmers are collecting a second bumper crop. 

    Chicago futures climbed as much as 3.5%, before paring the advance. Prices have been increasingly volatile after Russia attacked Ukrainian sea and river ports following its withdrawal from the agreement to allow Ukrainian crop shipments through the Black Sea last month.

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    Colombian President Says No One is Above the Law as Son Charged

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    Colombian President Gustavo Petro said that an investigation into whether his son took money from organized crime must be allowed to follow its course, since “no one can be above the law.” 

    A prosecutor said Thursday that Petro’s eldest son Nicolás put some of the tainted money to his father’s successful 2022 campaign and kept some of it for himself. 

    Gustavo Petro, center, waves to supporters alongside his son Nicolas Petro Burgos, right, on election night in Bogota, Colombia, on May 29, 2022.

    The scandal is likely to further weaken the leftist government’s ability to pass its radical health, pension and labor reforms, and may also hurt its performance in upcoming regional elections in October. 

    “The Petro administration lost a lot of leverage with this,” said Sergio Guzman, the director of Colombia Risk Analysis, a Bogota-based consultancy. “It was going to have a difficult time to move things through in congress, but this makes it all the more difficult.”

    Even so, people who think Petro is now finished are “jumping the gun”, Guzman said. 

    Investors often welcome developments that hinder Petro’s welfare reforms, fearing these will blow out the fiscal deficit. The peso was 1.9% stronger at 10.40 a.m. in Bogota, the best performance in emerging markets. 

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    QQQ Churns in Late Hours on Apple, Amazon Earnings

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    In late trading, a $207 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) whipsawed after Amazon.com Inc.’s bullish revenue forecast and Apple Inc.’s disappointing iPhone sales. Longer-dated Treasuries are now set for their worst week of 2023 amid signs of unexpected economic strength and concern over a widening budget deficit.

    A report Thursday underscored resilient demand for workers, while separate numbers showed labor productivity climbed, helping to offset rising labor costs. Those figures preceded the government’s employment data — forecast to show the US added 200,000 jobs in July. While that would be the weakest print since the end of 2020, it’s still a strong advance historically.

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    Your Rich Hedge-Fund Pals Are All Going to Dubai

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    First came the tacky influencers, broadcasting raucous yacht parties to their followers caught in pandemic lockdowns. Then came Russian wealth, from cash to crypto, looking for a home unbothered by pesky sanctions after the invasion of Ukraine.

    Now Dubai’s latest well-heeled digital-nomad demographic is the wealthy Western hedge-funder, judging by a recent flow of talent from the likes of Millennium Management and ExodusPoint Capital Management, as the emirate and its neighbor Abu Dhabi court the rich and powerful with tax-free status, lighter regulation and an Asia-friendly time zone.

    This may feel like “deja vu” for some — and perhaps out of whack with the hedge fund industry’s stagnant growth, poor performance and worsening environment for raising money last year — but there’s a good chance the Gulf is going to become a test case in the race for rich talent in a world dominated by geopolitics and war. It will also likely raise the hackles of tax authorities across the West at a time of stretched budgets.

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    Saudis Extend 1 Million-Barrel Oil Cut, Say Can Be Deepened

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    Saudi Arabia extended its unilateral oil production cut by another month, and said it could be prolonged further or even deepened. 

    The leader of the Organization of Petroleum Exporting Countries will continue the cutback of 1 million barrels a day — launched last month — into September, according to a statement on state Saudi Press Agency. That will hold output at about 9 million barrels a day, the lowest level in several years. Crude futures jumped. 

    The measure — which comes on top of supply curbs Riyadh was already making with others in the OPEC+ producers group — is intended “to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets.” Its ally Russia also said it will extend its export curbs, but taper them slightly.

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