Ian Reynolds
A big week for statistics with the focus on China, Germany and US.
Global interest rate cycles seem to be in sync, with possibly only the UK behind the curve.
The US is at, or near to the terminal rate. In Europe and the UK there is more chance of rates having to go higher still, as stubborn inflation persists.
China and Germany, the big big manufacturing countries, are a mess but is the end in sight and more importantly, is it priced into markets ?
This week China helped their capital markets with 2 stimulus actions
China Central Bank to Cut FX Reserves Ratio [WSJ]
This helped stabilise the offshore Yuan and stock and bond markets
Evergrande and Country Road were the focus, as ever, and with Evergrande's HK bankruptcy filing already priced in, markets were more hopeful as Country Road made coupon payments on some of it's bonds
China’s manufacturing activity shrinks in August [FT]
China’s Factory Activity Sparks Hope Slump Is Bottoming Out [Bloomberg]
US and China to begin dialogue on export controls [FT]
With everyone hanging on Powell's words at Jackson Hole, Madame Lagarde made some surprising comments
'New playbook needed': Lagarde warns of uncertain times [AFR]
Articulating this point most directly was Christine Lagarde, president of the European Central Bank, who spoke at length about the ramifications of tighter labour markets, the transition to a greener economy and the fragmentation of the economy into competing blocs.
“There is no pre-existing playbook for the situation we are facing today – and so our task is to draw up a new one,” she said.
The US economy seems to be stagnating with higher than acceptable inflation.
The same could be said for Europe where the German economy is in a mess with much higher inflation.
In Case You Missed It
EU money supply surprised to the downside
UK shop price inflation falls to lowest level in almost a year, data shows [FT]
Australia
The Aussie Dollar is in no-mans land as here, also, the economy is stagnating. Lacklustre growth and subdued property markets persist. Commodity prices have dropped sharply, Iron down 50% from 3 years ago, but terms of trade are at an all time high.
Terms of trade are defined as the ratio between the index of export prices and the index of import prices. If the export prices increase more than the import prices, a country has a positive terms of trade, as for the same amount of exports, it can purchase more imports.
This doesn't make sense so maybe AUD / USD mispriced. More next week
Commodity Prices measures the change in the selling price of exported commodities. The commodity sector accounts for over half of Australia's export income.
Protesters interrupt incoming RBA boss for wanting 140,000 people to lose their jobs [Apple News]
This Week's Important Economic Indicators [London time]
