The Poon Report - Misled!
News Summary
Jay Powell warns Fed against risk of being ‘misled’ in inflation fight
Taken from FT Friday, 10 November 2023
US central bank ‘will not hesitate’ to raise interest rates again if necessary, chair says
Federal Reserve chair Jay Powell has warned the US central bank against the risk of being “misled” by good data on prices, saying the mission to return inflation to its 2 per cent target had a “long way to go”.
Speaking at an IMF event on Thursday, the Fed chair said officials were “gratified” by the retreat in price pressures but stopped short of sounding the all-clear on an inflation problem that has proven more persistent than policymakers expected.
“We know that ongoing progress toward our 2 per cent goal is not assured: inflation has given us a few head fakes,” he said in prepared remarks. “If it becomes appropriate to tighten policy further, we will not hesitate to do so.”
In a sign that there is little urgency in the bank to immediately raise rates again, Powell emphasised the Fed would continue to “move carefully”, in order to “address both the risk of being misled by a few good months of data, and the risk of overtightening”.
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Portugal to hold snap election in March after resignation of PM
Taken from FT Friday, 10 November 2023
António Costa’s Socialist party had been leading in polls but standing likely to have been hurt by corruption scandal
Portugal’s president has called a snap general election for March following the shock resignation of Socialist prime minister António Costa triggered by a corruption investigation.
President Marcelo Rebelo de Sousa announced the March 10 date after Costa quit this week hours after public prosecutors executed a number of arrest warrants and raids in an investigation into possible corruption and malfeasance by public officials.
The Socialists won an outright majority in the most recent vote in early 2022 and had been leading in the polls, but their standing against the centre-right opposition Social Democrats is likely to have been hurt by the corruption scandal.
The election also means the possibility of more gains by the hard-right Chega party, the country’s third-largest, which has risen rapidly in just four years by tapping into public grievances over graft, immigration and low pensions.
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Ransomware attack on ICBC disrupts trades in US Treasury market
Taken from FT Friday, 10 November 2023
Chinese bank restoring services after hack affected some fixed income and equities transactions
A ransomware attack on China’s largest bank has disrupted the US Treasury market by forcing clients of the Industrial and Commercial Bank of China to reroute trades, market participants said on Thursday.
The Securities Industry and Financial Markets Association first told members on Wednesday that ICBC had been hit by ransomware software, which paralyses computer systems unless a payment is made, according to several people familiar with the discussions.
The attack prevented ICBC from settling Treasury trades on behalf of other market participants, according to traders and banks, with some equity trades also affected. Market participants including hedge funds rerouted trades because of the disruption and the attack had some effect on Treasury market liquidity, according to trading sources, but it was not impairing the market’s overall functioning.
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Interest rates already high enough to tackle inflation, says Bank economist Huw Pill
Taken from The Telegraph Friday, 10 November 2023
Comments comes as traders bring forward their predictions on rate cuts
The Bank of England’s chief economist has signalled that interest rates will not need to rise further as 5.25pc is already enough to “bear down on inflation”.
Huw Pill made the comments a day after Governor Andrew Bailey warned there are still “upside risks” to inflation, particularly given the impact of the Israel-Hamas war on oil prices.
In a sign of a growing split between policymakers on Threadneedle Street, Mr Pill said that no more rises appear to be required, which clashes with comments from Mr Bailey last week who he said he was “watching closely” to see if further hikes are needed.
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China's Singles Day price war takes on painful new dimensions
Taken from Nikkei Asia Friday, 10 November 2023
Sites offer deep discounts but will that be enough to hang on to shoppers?
Every year, China's Singles Day shopping blitz pits the country's e-commerce giants against each other in a battle for online shoppers. Now, slowing sales and intensifying competition from new entrants are pushing a price war in the industry to painful new extremes.
The growing importance of low prices was evident shortly after the sales event kicked off in late October, when the top livestreamer on Alibaba's Taobao sales platform was accused of "coercing brands" into giving his viewers the best deals.
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Originally a one-day shopping spree, Singles Day began to span three weeks a few years ago. Livestreaming sales have grown in importance, while tactics have evolved from basic price reductions to a complex array of campaigns, such as discounts based on minimum purchase thresholds or presales that require a deposit.
At the same time, the luster of Singles Day has gradually diminished as livestreaming and the emergence of other shopping festivals such as June 18 and Dec. 12 made discounts available throughout the year.
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US Treasury Secretary Janet Yellen, Chinese counterpart He Lifeng begin talks to help lay groundwork for Biden-Xi meeting
Taken from SCMP Friday, 10 November 2023
US Treasury Secretary Janet Yellen said on Thursday that she would talk to her Chinese counterpart Vice-Premier He Lifeng about “the use of economic tools for national security purposes” as they hold two days of meetings in San Francisco.
Their visit – the second since July, when Yellen visited China – came days before the start of the Asia-Pacific Economic Cooperation leaders’ summit, where US President Joe Biden and Chinese leader Xi Jinping are expected to meet on Wednesday.
Yellen said the US would continue to take “targeted actions to protect our and our allies’ national security”.
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Don’t count on Xi Jinping-Joe Biden meeting to yield breakthroughs, provided it happens: analysts
Taken from SCMP Friday, 10 November 2023
Assuming Xi Jinping and Joe Biden finally sit down together next week in San Francisco after a year of posturing, accusations, backchannel signalling and wayward surveillance balloons, the results will be underwhelming.
There is so little trust – a week before the expected meeting, the Chinese had still not formally confirmed Xi’s participation at the Asia-Pacific Economic Cooperation summit – and so many missed opportunities that the “deliverables” will be modest at best even as both sides downplay expectations.
“Neither the United States nor China are entering the potential meeting between President Biden and President Xi expecting to significantly improve or reset the relationship,” said Bonny Lin of the Centre for Strategic and International Studies, a Washington-based think tank.
“Rather, the meeting will be about managing and stabilising the bilateral relationship, improving communication and reducing misunderstandings before they occur.”
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Why it’s Michele Bullock versus the Boomers
Taken from AFR Friday, 10 November 2023
UBS data shows household income from superannuation is running hot, making the economy more resilient to interest rate rises and inflation stickier.
George Tharenou, the chief economist for UBS in Australia, is one of many local commentators who believe the Reserve Bank is probably done lifting rates.
But Tharenou’s base case is that governor Michele Bullock will keep rates at their current 12-year high for 12 months, as the central bank struggles to bring sticky inflation to heel.
Tharenou argues there are a number of factors that are denting the effectiveness of the RBA’s rate rises.
These include demand created by record immigration (which he says could push towards 600,000 this year, putting particular pressure on rents) and strong fiscal spending, which Tharenou says remains clearly stimulatory.
Nominal public demand is growing at a stunning 8 per cent year-on-year, contributing 2 percentage points to GDP growth and spilling into demand in the private sector, particularly in infrastructure and construction. The official rise in the minimum wage and the removal of caps on public service wages are also likely to keep inflationary pressures high.
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Private credit catches on in Asia as high rates squeeze other funding routes
Taken from FT Friday, 10 November 2023
Investors hunt for private equity-like returns through debt financing
Investors in private credit are looking for opportunities across Asia as rising interest rates hamper public markets and activity in mergers and acquisitions.
Private credit — lending money to a company against an agreed-upon amount of collateral — has been a niche strategy in Asia compared with other forms of financing, such as private equity deals, bank loans and initial public offerings. But investors and companies are finding it increasingly attractive as high interest rates make other fundraising routes more expensive.
Private debt financing can include lending through fund vehicles as well as direct lending by end investors. A total of 38 Asian private funds raised $10.2bn in 2022 for such lending, compared with $2.2bn from 34 funds in 2013, according to data provider Preqin. Globally, 271 funds raised $242bn last year.
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Kamala Harris Is Biden’s No. 2 Problem
Taken from WSJ Friday, 10 November 2023
Meanwhile, Republicans need to winnow the field to Donald Trump, Nikki Haley and Ron DeSantis.
Joe Biden’s main problem, the perception that he is too old for the job, is guaranteed to get worse each day. This makes his vice president more important than vice presidents ever have been. When people consider voting for Mr. Biden for the presidency they’ll know it is likely they’re really voting for Kamala Harris. This will only hurt Democratic fortunes, because she is uniquely unpopular. The practical path would be to make a change that reassures, to a veteran, highly regarded figure in whom people might feel confidence. This wouldn’t be easy and would give the president a black eye with some portion of his base, but black eyes heal in a year, and none of those angered will be voting for Mr. Trump.
I have been fascinated by Ms. Harris’s lack of success in her role considering the impressiveness of her previous résumé—district attorney, California attorney general, U.S. senator. I think she didn’t fully understand the nature of the vice presidency and thought she did. I think she let her political ego dictate her calculations. She was surrounded by friends and staff who had made a study of her but not the job and who assumed that by virtue of her first-ever status—first ever woman to hold the role, first ever black and Indian-American—she should be bold, remake the position, make her special significance and importance clear, be less an understudy than a co-star. But you can’t effectively change a thing unless you understand it first.
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Long before rescue talks, Country Garden struggled to build homes, pay bills
Taken from Yahoo Finance (Reuters) Friday, 10 November 2023
When China's largest developer Country Garden first skipped debt payments in August, its shares tumbled 14%, marking a reversal of fortunes: from industry poster child to another troubled property company struggling to pay its creditors.
The same month, Chinese authorities quietly started talks with Ping An asking the insurance group to take a controlling stake in the developer, according to a Reuters report that was denied by Ping An.
Interviews with contractors, workers and home buyers, as well as a review of lawsuits involving Country Garden, show that for months before its problems became public, the company was struggling to deliver homes and pay contractors on time.