Here are this mornings headlines:
Starting with data released earlier in the week, US inflation came out significantly higher than expected, at 6.2%, the highest since 1990, with price increases spreading to beyond parts of the economy most disrupted by pandemic closures. The main culprits were the hot housing market, and the knock on from the energy crunch percolating through the economy, which is leading to major concerns that 6.2% might not be the highest print we see in the immediate future. “We’re going to see the inflation picture get worse before it gets better,” said Sarah House, senior economist at Wells Fargo & Co. The Federal Reserve has made it abundantly clear that there will not be interest rate hikes until they have fully finished winding down their stimulus program, which begs the question, if they need to hike rates, will they rush winding down their bond buying, and how will that impact the economy? We are no longer hearing the term transitory, unless it is to deny its existence, and as it stands, the Fed never needed inflation to be more transitory. The Fed is on course for a shift in policy, with inflation now so high, it is wiping out wage increases we have recently seen. With inflation at 6% and growth at 6%, it seems the requirement for stimulus has all but diminished, which means then next move we could see from the Fed, would be to speed up its wind down of bond buying.
In Europe, the inflation landscape does not look so severe. The European Central Bank has signposted that Euro-area inflation will slow sharply in 2023, as long as energy costs stabilise and the supply-chain disruptions fade. Not a big ask, with a war with Russia looming. The figure is anticipated to average 1.4% in 2023, below the ECB’s 2% target. The short term economics are still fairly unstable, with energy costs yet to peak, and subdued wage growth due to excess capacity in the labour market. The current evaluation, believe it or not, hint towards Eurozone inflation being relatively transitory, on the proviso surging prices ease next year, there will not be much requirement to begin a rate hike sooner than anticipated.
The political tension continues to rise in the Ukraine with reports of a considerable build-up of Russian Federation troops and material along the border. The fragile relationship between Russia and Western Europe has been exacerbated in recent months with the energy crisis and issues surrounding migration. Bloomberg are now reporting that this build-up has led United States officials briefing allies within the European Union on the possibility of a Russian invasion of the Crimea. Last month saw the political and humanitarian crisis escalate. For example, the Organization for Security and Cooperation in Europe – which has been conducting assessments on the conflict – stated on Wednesday that it recorded the highest number of cease-fire violations since July 2020. The Russian Federation are denying that this build-up amounts to an act of aggression, maintain that any the movement of its troops and military resources within its borders is a matter of internal concern. This situation is evocative of the crisis in May when NATO estimated that some 100,000 troops had been mobilised and deployed along the Crimean Border. Notwithstanding the subsequent easing of tensions between Putin and Biden following a telephone conversation, and a bilateral summit which took place in June, the two leader’s relationship has been tempestuous since then.
We are getting reports through that the Netherlands are preparing to go into a three week partial lockdown, in order to stop surging Covid cases. This will effectively put bars, restaurants and non-essential stores into the firing line, who will be ordered to close for three weeks at 7pm. This will result in a work from home instruction, and the closure of sporting events. This could well be a precursor for how the rest of Europe may handle spiking cases over the winter, which will inevitably impact the economic recoveries.
COP26 is being pitched as the last resort for the existential climate change crisis we now face. This generation seems to have inherited a failing global economy, and deteriorating climate, and somehow made it worse. To add insult to injury, the very emergency summit designed to avert a global climate disaster, has more delegates from the fossil fuels industry than any one government has sent. Over 500 fossil fuel interested people have attended, while Brazil has sent the most delegates themselves, 479. One has to ask, why were the biggest culprits not precluded from being able to lobby delegates at this specific summit? Ostensibly, there have been minor breakthroughs, such as China and the US agreeing to put their plethora of differences aside, to begin negotiations on how to prevent this disaster. Scientific consensus is that there is five years to make the significant enough changes to climate to prevent disaster, so China and the US agreeing to meet in June next year to begin, what we can only presume will be unproductive discussions, hardly screams of an imminent emergency.
Elon Musk has offloaded $5 billion in Tesla shares, following a divisive Twitter poll, where over 50% of his followers decided for him, as to whether or not he should sell 10% of his stake… although that is what he led us all to believe. The poll seems like a huge own goal, as it devalued Musk by $50 billion, prior to the sale, which filings released on Wednesday have pointed out that the instructions to sell were pre-arranged in mid-September.
Yesterday, the United Kingdom came together to mark Armistice Day. Every year, at 11am on 11th day of the 11th month, a two minute silence is held to mark the end of World War One, in 1918, and to remember all those who had sacrificed their lives. The Queen is due to be present at the Cenotaph during Remembrance Sunday, which she widely regards as one of her most sacred duties.
I hope you have a great weekend.