Summary
China's State Council rolled out a trillion yuan package in economic stimulus. The latest $146 billion in assistance will target infrastructure, property, and private business. The initiatives are expected to cover a range of targets the government has identified as in need of support. Among the targets were state banks that were given an additional $44 billion to finance infrastructure projects.
Local governments were given permission to use more than $73 billion to reduce financing costs. As electricity firms face challenges sparked by droughts and heat waves, they were also given $29 billion.
The spending comes after Beijing had unexpectedly lowered two of its key interest rates, stepping up efforts to shore up growth, amid COVID-19 lockdowns and a deep property slump.
China has rolled out a new batch of stimulus measures to boost the nation’s ailing property market and support a weakening yuan, in its latest attempt to restore confidence. The policy announcements sent Asian shares modestly higher on Friday. According to a joint statement by the People’s Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR) released Thursday, minimum down payments for mortgages will be cut to 20% for first-time buyers and to 30% for second-time buyers.
The government is also going to stimulate household consumption, which accounts for about 37% of China’s GDP. Effective this year, it will double tax breaks on childcare and education costs, and provide tax relief for taking care of elderly parents
The US economy grew at an annualized rate of 2.1% in the second quarter of 2023, compared to the preliminary figure of 2.4% and the first quarter's expansion of 2.0%.
Personal Consumption Expenditures Price Index in the US, which is the Federal Reserve’s preferred inflation gauge, showed that prices increased 0.2% on a monthly basis and 3.3% annually.
The unemployment rate in the US rose to 3.8% in August 2023 from 3.5%
in July, the highest since February 2022. The labor force participation
rate increased slightly to 62.8 % from 62.6 % in the previous month. The Non Farm Payrolls show an increase in jobs relative to the prior month, which would contradict the unemployment rate increase. However, we need to wait for the revision of these numbers next month.
The ISM Manufacturing PMI climbed to 47.6 in August 2023 from the previous month's 46.4. The PMI has consistently remained below the 50 threshold since last November, signifying a prolonged period of contraction in the manufacturing sector, which is the most extended stretch of its kind since the Great Recession of 2007-2009.
The annual inflation rate in the Euro Area remained steady at 5.3% in August 2023, while the annual core inflation rate slowed to 5.3% from 5.5% in the previous month, in line with market expectations. The euro area seasonally-adjusted unemployment rate stayed at a record low of 6.4% in July 2023. The youth unemployment rate is 13.8%.
Regarding
the financial markets, for the week, the main stock market indices are
up, with the S&P500 up 2.5%, the NASDAQ 100 gaining 3.7%, and the
RUSSEL 2000 up 3.6%. Gold gained 1.3%, and silver lost 0.2%. The barrel of
WTI rised 7.5% and is now around
86$/barrel. Bitcoin was unchanged and is still around
~26000$.
The relative strength of the US dollar is unchanged,
and bond yields decreased slightly. US bond yields now sit at 4.18% for the 10-year and
4.30% for the 30-year. The US bond yield curve is inverted and is now peaking at 5.49% in 6 months from now.
Sources:
https://www.investopedia.com/china-s-new-economic-stimulus-plan-6503487
https://edition.cnn.com/2023/09/01/economy/china-mortgage-stimulus-intl-hnk/index.html
https://edition.cnn.com/2023/08/31/economy/pce-inflation-july/index.html
https://tradingeconomics.com
Comment
The summer season is reaching the end, as well as the earnings season, and we had the release of a lot of economic indicators. We can see the weakness in China, which is now actively stimulating the economy and supporting the consumer. In the US, the consumers have likely exhausted their savings and credit cards, and are now going back to the labor force. In Europe, the growth is anemic and the potential for an economic and employment downturn is rising.
The way we see this playing is central banks going back to some sort of quantitative easing or stimulation, which in the long term will result in currency debasement. The BRICS are not an immediate threat to the US dollar, but debasement is. All main contemporary fiat currencies are being debased at approximately the same rate. Thus, commodities will continue to rise in an year-on-year basis and may be a good idea to park part of the portfolio. Physical goods have real value, and cannot be printed.
Talking about investments, we would be cautious at least in the next 6 months in terms of equities. As always, any purchases must be strategic and opportunistic. Short-term bonds pay relatively well while we wait for more macro developments and better buying opportunities.
Recommended Videos
Video: Crypto Action Screams Downside, Jobs Report, Technical Trading Strategies, Stock & Crypto Trades
Channel: Gareth Soloway
Video: Robert Kiyosaki - Rich Dad, Poor Dad: How To Avoid the Next Global Financial Crisis
Video: Rick Rule: Shortages In Key Natural Resources To Define Next Decade
Channel: Wealthion
Comments
Post a Comment