💡Quote of the
“The Fed is probably on hold [with rate hikes] for the foreseeable future… If growth weren’t running so hot, you’d worry that the Fed’s paranoia about another [inflation] head fake put it at risk of overdoing it and blowing the opportunity for a soft landing. But the stunning strength of the U.S. economy has given policymakers a certain margin for error as they guard against the risk that flighty data might deceive them yet again.” - Jonathan Levin, Bloomberg Opinion columnist
⭐ Gold holds steady amidst tight U.S. job market, awaits clues from Federal Reserve. Gold maintained its position at around $1,918.68 per ounce on Thursday after briefly dipping, following reports of a tightening U.S. job market. The focus has now shifted to a series of upcoming Federal Reserve speeches, as investors seek insights into potential interest rate hikes.
Gold's resilience persisted despite a stronger U.S. dollar, and a drop in 10-year Treasury yields, which had reached a two-week high in the previous session, provided some reinforcement.
Market analysts are closely monitoring the Federal Reserve's communication, with traders currently indicating a 93% probability of the Fed maintaining its interest rates during the upcoming Sept. 19-20 meeting.
💵 U.S. dollar set for longest winning streak in years. This surge is driven by confidence in the robustness of the U.S. economy and expectations that the Federal Reserve will maintain elevated interest rates, making the U.S. a more attractive destination for investors seeking higher returns. (Bloomberg)
The Bloomberg Dollar Spot Index, a major gauge of the dollar's performance weighted against the euro and yen, has climbed steadily over three consecutive days, registering nearly a 1% increase. This puts it on course for its eighth consecutive weekly gain, marking the longest streak since data began in January 2005.
🏦 Sticky inflation. Annual inflation in the eurozone held steady at 5.3% in August, a significant distance from the European Central Bank's 2% target, highlighting ongoing economic challenges. (Euronews)
Germany, the largest economy in Europe, is grappling with economic stagnation, with the central bank predicting a lackluster performance in the current quarter. The country experienced stagnant gross domestic product (GDP) in the second quarter, following declines in the two preceding quarters.
Several factors, including soaring energy prices, increased borrowing costs, and economic slowdowns in China, a key trade partner, have contributed to Germany's economic struggles.
📉 Losing streak. European stock markets slipped for the seventh consecutive session on Thursday as investors grapple with economic concerns, including U.S. inflationary pressures and euro zone data. This marks the longest losing streak for the Stoxx 600 index since February 2018. (CNBC)
European stock markets extended their losing streak with the Stoxx 600 index closing down 0.14%, marking its seventh consecutive negative session. Mining stocks led the declines, falling by 2.2%, while utilities stocks managed to climb 1.4%.
🍏 Apple’s China woes. Apple Inc. is grappling with a significant market tumble, poised to erase almost $200 billion in value over just two days. This plunge comes in the wake of China's plans to expand its ban on iPhones, extending it to government-backed entities and state firms. As the largest component of key U.S. equity indexes, Apple's decline is contributing to a broader market downturn, amplified by mounting concerns surrounding China's economic situation. (Bloomberg)
This ripple effect is not limited to Apple alone. It has resonated throughout the markets, causing investors to offload assets across the board, including chips, mega-cap technology stocks, and U.S.-listed Chinese companies.
Edward Moya, Senior Market Analyst at OANDA, observes that "one bad Apple spoils a bunch of mega-cap tech stocks," emphasizing Apple's heavy reliance on China for its growth story. If Beijing's regulatory crackdown escalates, it could spell trouble for numerous other mega-cap tech companies that similarly depend on the Chinese market.
😮 Traders bet on volatility surge with 'fear gauge' wager. While the CBOE Volatility Index (VIX), or the 'fear gauge,' has remained relatively calm this year, a daring trader has made an audacious $30,000 wager that it will skyrocket by a staggering 1100% before Valentine's Day next year. This bold move implies a VIX reading of 180, a level never reached since its inception in 1993. (Bloomberg)
The VIX has barely breached 100, with its highest point recorded during the 2008 Great Financial Crisis at 89.53—less than half of what this trade is banking on.
Surprisingly, this audacious move isn't the only one of its kind. The same trader, or perhaps others, have amassed more than 20,000 contracts of open interest in VIX December options, all with the same striking price.
⛽ Prepare for higher fuel prices. Oil prices have climbed above $90 per barrel for the first time this year, causing concern among drivers who fear higher fuel costs. This surge comes as Russia and Saudi Arabia extend their oil supply cuts, creating worries about inflation rates in major economies. (The Guardian)
Russia and Saudi Arabia have committed to jointly reducing their oil output by 1.3 million barrels per day, despite a surge in global demand that is approaching record levels. This decision will keep their combined daily production at approximately 9 million barrels.
Although oil market traders had expected these production cuts to continue through September and October, the announcement of an extension until year-end has raised concerns about the recovery of major economies and potential hardships for consumers.
📸 Image of the week
🕵️♀️ Tech detectives uncover China's chip breakthrough. TechInsights, a Canadian research firm, recently uncovered a significant finding in the latest Huawei phone: a cutting-edge 7 nanometer Kirin 9000s processor, manufactured by China's Semiconductor Manufacturing International Corp (SMIC). This discovery underscores China's increasing success in developing its own advanced semiconductor manufacturing capabilities. It's a clear sign of the ongoing chip war, with the U.S. imposing stricter controls on semiconductor exports to China. We can anticipate more covert innovations and tech investigations as this battle continues to unfold. (Bloomberg Opinion)
Unveiling the inner workings of a device like Huawei's smartphone requires cutting-edge laboratory equipment. When dissecting a device like Huawei's, TechInsights employs electron microscopy, a technology akin to what scientists use to scrutinize the intricate details of bacteria. However, as technology advances, the task becomes increasingly challenging to delineate and decipher these ultra-fine components.
As TechInsights' product manager John Boyd puts it, "As technology scales, it gets much more difficult to define and resolve these very fine features that are used."
What else is happening
🇷🇺 🇹🇷 Putin-Erdogan talks fail to resurrect Ukraine grain deal. President Vladimir Putin has dashed hopes of reviving a UN-backed Ukraine grain deal that once stabilized global food prices. The deal, allowing Ukraine to ship its grain via the Black Sea, was a casualty of tensions in the region. Talks with Turkish President Recep Tayyip Erdogan, who had brokered the original initiative, yielded no breakthrough. (Bloomberg)
After a three-hour meeting in Sochi, Putin insisted on removing obstacles to Russia's own agricultural exports before considering the revival of the Ukraine grain deal. Instead of announcing a new framework, the leaders confirmed a plan to send 1 million tons of Russian grain through Turkey to African nations concerned about food price hikes.
🇺🇸 🇪🇺 U.S. and EU consider new tariffs on Chinese steel to resolve Trump-era trade dispute. Efforts are underway to introduce fresh tariffs targeting excessive steel production from China and other nations while resolving a lingering trade conflict from the Trump era. Talks are ongoing, focusing on tariffs for imports from China, particularly those benefiting from non-market practices. (Bloomberg)
The United States and the European Union are actively discussing an agreement to impose tariffs, primarily on Chinese imports that benefit from non-market practices. The goal is to address the Trump-era trade dispute that originated when President Donald Trump imposed tariffs on European metals imports, citing national security concerns.
Since 2018, the US has imposed a 25% tariff on such imports, while the EU has applied similar duties to various steel imports through its safeguard measures. Both sides reached an agreement in 2021 to pause punitive measures, setting an October 31 deadline to find a permanent solution.
🧬🔬 'Embryo-nal' breakthrough. In a groundbreaking feat, Israeli scientists have engineered a model of a human embryo using stem cells, bypassing the need for eggs, sperm, or a womb. This revolutionary achievement offers a glimpse into the initial stages of embryonic development. (Reuters)
Researchers at Israel's Weizmann Institute of Science have unveiled a human embryo model resembling day 14 of development, showcasing internal structures before the formation of organs. But the scientists stress they are far from creating embryos from scratch.
Team leader Jacob Hanna noted the potential applications of this breakthrough, including drug testing during pregnancy, insights into miscarriages and genetic diseases, and the potential to grow transplant tissues and organs. The method involved manipulating stem cells derived from adult human skin cells, reverting them to an early developmental state.
See you next week!