A Load of Bullock

Bullock justifies higher for longer

Here’s a good one: climate change will lead to more volatile inflation outcomes; extreme weather could raise inflation; and the impact of climate change on the neutral rate is not clear-cut. So says the RBA’s incoming governor, Bullock—get those punches in early, I suppose. We know the agenda. I need not explain why tying monetary policy to climate change and the green agenda is absurd. Suggesting it ‘could’ raise inflation is a very subjective line to take and hardly one that economists could argue with any certainty. It’s a political line. The CB is supposed to be independent of politics. She may as well say, Higher for longer, poorer for longer, peasants’.

Blue Monday

Here’s another for Monday morning. "September is the worst month of the year for equities, period. The median return for $SPX since 1928 is -1.56% ". Thanks for that, Goldman... The FTSE 100, DAX, and S&P 500 are down roughly three and a half percent for August so far, while the Nasdaq and DJIA have fallen 4.5% and 2.8%, respectively.

But there is some recoupment of the losses at the tail end of the month. European shares rose early on Tuesday, led by a catch-up trade in London. The FTSE 100 jumped around 1.5% in early trading as it caught up to the rest of the world following the Monday August Bank Holiday. European indices were higher again, with the DAX in Frankfurt adding to yesterday’s 1% rally with a gain of around 0.4% and the CAC in Paris moving in similar fashion.

Rise and shine

Asian shares rose, led by China, as Beijing unveiled measures to boost stock prices such as a cut in stamp duty and a loosening of margin loan rules. I doubt this amounts to much more than a little icing sugar on the cake; these simply do not fix underlying economic troubles, or demographic ones for that matter. Wall Street closed Monday higher, with the S&P 500 up 0.63% to 4,433, and futures pointing to a higher open as the market wrestles with the 23.6% retracement area, with prices now at the 21-day EMA.

Elsewhere, Treasury yields are lower, dragging on the dollar, while gold is firmer above $1,920 now (bullish MACD crossover, clear of the 200-day line, and bears seemingly exhausted).

Coming up today: US house price data, the Conference Board’s consumer confidence survey, and the latest JOLTS job openings report.

Key data for today

Inflation data this week will be closely watched. Australia kicks things off tomorrow, with the last CPI having edged slightly lower to 5.4% from 5.6%. Preliminary German and Spanish CPI inflation readings will offer clues for the rest of the Euro area, which has seen inflation decline to 5.3% from 8.6% at the start of the year. Also due up are the ADP jobs numbers and the second reading for US Q2 GDP, with the advanced estimate indicating the world’s largest economy expanded by 2.4% in the three months to the end of June.

On Thursday, China’s manufacturing and services PMI reports top the bill as investors grapple with signs of weakness in Asia’s largest economy and housing market. Eurozone inflation may prove stickier than the ECB would like, with August’s latest PMI report showing headline rates of input cost and selling price inflation ticking higher due in part to upward wage pressures. US core PCE inflation, the Fed’s preferred gauge, is the main event for the US session, having softened slightly in the prior month.

The US is still standing tall

China’s Caixin manufacturing PMI provided some more color on Friday and maybe a bit more of an accurate picture of economic activity. Swiss inflation data is due at the start of the European session before the release of the final Eurozone PMIs. The main event is the US nonfarm payrolls, which, though showing signs of job creation slowing down, still paint a picture of robust health in the US labor market. The US economy added 187k jobs in July, which was below expectations, but employment fell to 3.5%, around a 50-year low, and wage growth exceeded forecasts at +0.4%.