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Week in Review: 25-29 September 2023

News Summary


The U.S. is on the brink of a federal government shutdown after hard-right Republicans in Congress rejected a longshot effort to keep offices open as they fight for steep spending cuts and strict border security measures that Democrats and the White House say are too extreme. Come midnight Saturday with no deal in place, federal workers will face furloughs, more than 2 million active duty and reserve military troops will work without pay and programs and services that Americans rely on from coast to coast will begin to face shutdown disruptions. The Senate will be in for a rare Saturday session to advance its own bipartisan package that is supported by Democrats and Republicans and would fund the government for the short-term, through Nov. 17. But even if the Senate can rush to wrap up its work this weekend to pass the bill, which also includes money for Ukraine aid and U.S. disaster assistance, it won't prevent an almost certain shutdown amid the chaos in the House. On Friday, a massive hard-right revolt left Speaker Kevin McCarthy's latest plan to collapse. “Congress has only one option to avoid a shutdown — bipartisanship,” said Senate Majority Leader Chuck Schumer. Senate Republican leader Mitch McConnell echoed the sentiment, warning his own hard-right colleagues there is nothing to gain by shutting down the federal government. “It heaps unnecessary hardships on the American people, as well as the brave men and women who keep us safe,” McConnell said. The federal government is heading straight into a shutdown that poses grave uncertainty for federal workers in states all across America and the people who depend on them — from troops to border control agents to office workers, scientists and others.


 

Now, a look into container shipping lines. Peak season is running out steam as spot rates slide lower. Rates “continue to lose ground, bending under the pressure of insufficient demand and growing overcapacity,” said Alphaliner this week. According to Linerlytica, “Container market sentiment continues to deteriorate, with freight rates still slipping and little prospect for a rate rebound in October despite carriers’ efforts to contain capacity availability through blanked [canceled] sailings.”

 

This past week, some negative news have accumulated, namely new home sales (MoM) in the United States, which decreased to -8.70 % in August from 8 % in July of 2023.

The Chicago Fed National Activity Index fell to -0.16 in August 2023 , pointing to slower economic growth during the month. Production, personal consumption and housing indicators contributed negatively to the index. At the same time, the contribution of employment-related indicators was unchanged

The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas fell to -18.1 in September 2023, indicating deteriorating business conditions.


On Wednesday, after a few days of bond yields rising and stock markets sliding, Federal Reserve Bank of Minneapolis President Neel Kashkari said on CNBC it is not clear yet whether the central bank is finished raising rates amid ample evidence of ongoing economic strength. Kashkari said he is not yet ready to say rates have been lifted enough to get inflation back to the 2% target. He said that he expects the U.S. central bank to hold rates steady next year after a likely final rate rise this year.


On Friday, the personal consumption expenditure price index in the United States was released, revealing a rise of 3.5% year-on-year in August 2023, the most in four months, and matching market forecasts. Compared to the previous month, PCE prices were up 0.4% in August, slightly below market estimates of a 0.5% increase. Meanwhile, annual core PCE inflation fell to 3.9%, the lowest since September 2021. 


The Chicago Business Barometer, also known as the Chicago PMI, fell to 44.1 in September 2023 from 48.7 in August, and well below market forecasts of 47.6. The reading marked the 13th consecutive month of contraction in business activity in the Chicago region.


Regarding the financial markets, for the week, the main stock market indices are mixed, with the S&P500 losing 0.7%, the NASDAQ 100 up 0.1%, and the RUSSEL 2000 0.5% in the green. Gold slumped by 4% and silver lost 5.9%. The barrel of WTI is up 0.5% and is still around 90$/barrel. Bitcoin is up 2.7% and around ~27000$.

The relative strength of the US dollar rised 0.6%, and bond yields rised on the long end. US bond yields now sit at 4.58% for the 10-year and 4.7% for the 30-year. The US bond yield curve remains inverted and is now peaking at 5.55% in 6 months from now.

 

Sources:

https://www.freightwaves.com/news/trouble-ahead-container-shipping-rates-sinking-further-into-the-red

https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry

https://www.msn.com/en-us/money/markets/feds-neel-kashkari-isnt-sure-if-interest-rates-are-high-enough-to-stop-inflation/ar-AA1hl7SZ

https://www.reuters.com/markets/rates-bonds/feds-kashkari-unsure-if-fed-has-hiked-enough-bring-inflation-target-cnbc-2023-09-27/

https://news.yahoo.com/brink-government-shutdown-senate-tries-040907757.html

 

 

Comment Section

Leading economic indicators make us believe that the worldwide economy is stagnating and the risks of a recession or a financial crisis are rising. In the US, the bond market selloff has been pushing yields higher on the long end of the yield curve, putting pressure on the stock markets, which have declined. However, on Friday, there was a technical bounce on the stock markets, which held support levels. Nevertheless, the bear market rally seems to have come to an end, and the trend may have turned bearish. The opportunity to profit from short selling is coming.

 

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