EUR/USD 1.18404
-0.222%
Gold 3676.64
-0.357%
Oil 63.841
-0.511%
USD/JPY 146.404
-0.030%
GBP/USD 1.36508
0.045%
GBP/JPY 199.859
0.022%
Browse More
  • English
  • 简体中文
  • 繁體中文
  • Tiếng Việt
  • ไทย
  • Indonesia
Subscribe
Real-time News
Meme: What are the types of headaches?On September 17th, the cost of insuring euro-denominated credit against default remained low ahead of the Federal Reserves interest rate decision. AJ Bell analyst Russ Mould said in a report, "Today is the key day investors have been anticipating all year—the Fed is likely to cut interest rates for the first time in 2025." Mould noted that a 25 basis point rate cut could further boost market sentiment, but a 50 basis point cut (currently considered less likely) could spark market concerns about the US economic outlook. According to S&P Global Market Intelligence data, the European cross credit default swap index, which measures the risk of default on euro high-yield bonds, fell 1 basis point to 251 basis points, approaching the 3.5-year low of 248 basis points reached on Monday.On September 17, TA Securities warned that if the Federal Reserve holds interest rates steady and incoming data continues to weaken, the market could interpret this as a policy mistake. This scenario could prompt investors to shift toward healthcare and consumer staples stocks, leading to outflows from financial, industrial, and growth-reliant technology sectors. U.S. Treasury prices could rebound, while overall risk appetite could fade.On September 17, TA Securities predicted that if the Federal Reserve cuts interest rates by 25 basis points to a range of 4.00%-4.25% as expected, the market will react by "buying the forecast and selling the reality," as most investors have already priced in a 25 basis point rate cut. A 25 basis point rate cut would be interpreted as a cautious, supportive, "insurance" cut aimed at maintaining growth momentum without signaling distress. This environment typically favors consumer staples, healthcare, and technology stocks, which benefit from lower borrowing costs and have defensive or secular growth characteristics. Financial stocks, on the other hand, tend to underperform the broader market due to the impact of narrowing interest rate spreads on earnings.On September 17, Russias weekly crude oil exports fell sharply, driven by a decline in cargo volumes at Baltic ports due to Ukrainian drone attacks that affected facilities in key Russian regions. Vessel tracking data showed that Russias average daily seaborne crude oil exports were approximately 3.18 million barrels in the week ending September 14, down 934,000 barrels from the previous week, marking the largest weekly drop since July of last year. However, the less volatile four-week average of exports rose slightly: the week ending September 14 was revised to an average of 3.46 million barrels per day, higher than the revised average of 3.42 million barrels per day in the week ending September 7. This rebound was due to the previous weeks exceptionally large exports, when Russias exports of Urals crude oil through Black Sea and Baltic ports drove cargo volume growth. The four-week average data can more clearly reflect the underlying trend.

Economist: Energy and logistics crisis may put the United States back into a stagflation trap

Oct 26, 2021 10:57

The former chairman of Morgan Stanley Asia and the well-known economist Stephen Roach recently issued a warning that the current global energy crisis and the continued fermentation of international logistics bottlenecks may cause the United States to encounter "stagflation" in the 1970s. "The dilemma is reappearing, that is, the coexistence of high inflation rate, high unemployment rate and low economic growth rate, and the complete failure of monetary policy control may strike again.

Since September, the global "energy shortage" has been concentrated in many places. At the beginning of this week, international crude oil prices once again hit a new high since 2018. The price of NYMEX natural gas in the United States rose more than 4 times year-on-year to above US$6. To make matters worse, due to the continued existence of logistics bottlenecks, the CIF price of energy in the European and Asia-Pacific end consumer markets has risen faster, which in turn has caused many countries and regions to face difficulties in power supply that have been rare for many years. It further impacted the global industrial chain and caused the prices of industrial products to rise further.

In fact, the “one box is hard to find” in the container shipping industry and the “chip shortage” in the electronics industry chain have already troubled the global economy in the first half of the year. However, the pressure on energy supply has clearly worsened the situation. On the one hand, the world economy has not fully recovered from the impact of the epidemic. On the other hand, the continuous rise in social prices from raw materials and manufactured products is still inevitable. This means that as long as there is another supply chain accident similar to the blockage of Suez in the first half of the year, then the global advanced economies falling into the "stagflation" trap will be an irretrievable fate.

Once "stagflation" occurs, as the name implies, prices continue to rise while the actual economic growth rate almost stagnates. This is obviously a severe situation for the overall economy, and therefore it extremely tests the policy wisdom of central banks, especially the Federal Reserve. Roach pointed out that the ultra-loose monetary policy that the Fed has maintained for many years, especially the additional liquidity measures, is precisely the culprit that has pushed the economy into a long-term high inflation environment. As a result, the high inflation and low growth dilemma that the United States faced in the 1970s due to the "Middle East Oil Crisis" may recur. High inflation is by no means "temporary" as Fed officials expected, but may last longer than anyone's. It takes a long time to imagine!

The economic expert pointed out that due to the lack of electricity and shipping bottlenecks squeezed by overseas industrial chain activities, the United States is likely to usher in a general inflationary explosion during the Christmas and New Year peak consumption season at the end of the year. In the process, the cold weather, concerns about the global trade environment, and the troubles of the international geopolitical situation may make the situation worse.

Suggestion