Tag Archives: inflation

Greenback bounces after end-2019 selloff, yuan shrugs off coverage easing

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(Reuters) – The greenback snapped a six-day dropping streak so as to add 0.25% on Thursday, the primary buying and selling day of 2020, pushing the euro off five-month highs whereas the offshore yuan shrugged off reserve ratio cuts that might add $115 billion value of liquidity.

FILE PHOTO: U.S. 100 greenback notes are seen on this image illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Gained/

Buying and selling might stay skinny till Tuesday, when most European international locations open after Monday’s Epiphany vacation however market gamers will likely be relieved the greenback navigated the vacation interval with out experiencing the cash market squeezes many had feared.

The greenback index slumped 0.4% on New Yr Eve as massive banks took solely a small portion of the $150 billion supplied by the U.S. Federal Reserve’s in a single day repo operation and borrowing prices fell to the bottom stage since March 2018.

(Graphic: The Fed dives into the repo market png click on, right here)

Whereas wariness stays that there might be a repeat of final January’s “flash crash”, when large stop-loss promoting swept via holiday-thinned markets, analysts mentioned the Fed’s liquidity injections had lowered the danger.

“There’s nothing basic…on the finish of final 12 months the greenback offered off fairly sharply so we’re seeing an easing in among the greenback promoting stress,” mentioned Lee Hardman, senior FX strategist at MUFG.

“The liquidity squeeze didn’t materialise in order that’s contributing to stability in broader monetary markets…However the greenback story has been turning detrimental in current months, partly due to motion taken by the Fed to ease greenback liquidity,” Hardman mentioned, referring to the U.S. central financial institution’s steadiness sheet growth re-launched in October.

Having ended December nearly 2% decrease in opposition to a basket of currencies, the greenback inched as much as 96.65 whereas in opposition to the euro it was at $1.119, knocking the only forex from its highest stage since early August of $1.1249.

The dollar index ended 2019 nearly flat.

The Chinese language yuan closed at 6.9631 to the greenback, its strongest shut since Aug. 2, and in addition firmed offshore after small downward strikes triggered by Wednesday’s transfer to chop the amount of money that banks should maintain, releasing $115 billion value of funds to assist the economic system.

The transfer had been broadly anticipated following Premier Li Keqiang’s pledge final month to unleash extra stimulus.

(Graphic: China lending fee and RRR click on, right here)

Traders at the moment are ready for the U.S. ISM manufacturing survey due on Friday. Throughout a lot of Asia and Europe, closing buying managers indexes painted a barely brighter image, with French, German and euro zone readings a contact higher than advance PMIs.

However additionally they confirmed an 11th straight month of contracting euro zone exercise.

The euro slipped 0.2%, having strengthened 1.8% in opposition to the greenback final month. Nevertheless, euro zone bond yields prolonged their rise and inflation expectations rose to the very best since July.

“Increased bond yields are more likely to hold the euro’s micro-rally going, wildfires will hold a lid on Aussie greenback, and PMIs and oil are supporting Norwegian, Swedish and Canadian currencies,” Societe Generale informed purchasers.

The Swedish crown briefly firmed 0.3% in opposition to the euro after PMIs rose in December following three months of declines, though they nonetheless languished in contraction territory.

The Norwegian crown inched to 3-1/2 month highs after firmer PMIs, additionally benefiting from firmer crude costs.

The Australian greenback slipped 0.3%.

U.S. President Donald Trump mentioned on Tuesday that Section 1 of a commerce take care of China could be signed on Jan. 15 on the White Home. Markets are ready for additional particulars

Reporting by Sujata Rao; Modifying by Frances Kerry, Kirsten Donovan

Our Requirements:The Thomson Reuters Belief Rules.

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U.S. unemployment fee hits 3.5%; job development average

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WASHINGTON, (Reuters) – The U.S. unemployment fee dropped to close a 50-year low of three.5% in September, with job development growing reasonably, suggesting the slowing economic system may keep away from a recession for now regardless of commerce tensions which can be hammering manufacturing.

The Labor Division’s intently watched month-to-month employment report on Friday, nevertheless, contained reminders that the dangers to the longest financial enlargement on document remained tilted to the draw back. Wage development stagnated and manufacturing payrolls declined for the primary time in six months. The retail and utilities sectors additionally continued to shed jobs.

The report adopted a string of weak financial studies, together with a plunge in manufacturing exercise to greater than a 10-year low in September and a pointy slowdown in companies trade development to ranges final seen in 2016, that heightened fears the economic system was flirting with a recession.

“The unemployment fee normally rises forward of a recession, so a contemporary decline pushes out the timeline for any potential recession into late 2020 on the earliest,” mentioned Josh Wright, chief economist at iCIMS in New York.

The 2-tenths of a proportion level drop within the unemployment fee from 3.7% in August pushed it to its lowest stage since December 1969. The jobless fee, which had been caught at 3.7% for 3 straight months, declined at the same time as 117,000 folks entered the labor drive final month.

Nonfarm payrolls elevated by 136,000 jobs final month, the federal government’s survey of institutions confirmed. The economic system created 45,000 extra jobs in July and August than beforehand estimated. Economists polled by Reuters had forecast payrolls would improve by 145,000 jobs in September.

September’s job positive aspects have been under the month-to-month common of 161,000 this 12 months, however nonetheless above the roughly 100,000 wanted every month to maintain up with development within the working-age inhabitants. The smaller family survey from which the unemployment fee is derived confirmed a leap of 391,000 in employment in September.

With indicators that the Trump administration’s 15-month commerce warfare with China is spilling over to the broader economic system, continued labor market energy is a crucial buffer towards an financial downturn. The commerce warfare has eroded enterprise confidence, sinking funding and manufacturing.

There’s additionally political uncertainty in Washington after the Democratic-controlled U.S. Home of Representatives launched an impeachment inquiry towards President Donald Trump over accusations he pressed Ukrainian President Volodymyr Zelenskiy to analyze former U.S. Vice President Joe Biden, a number one candidate for the 2020 Democratic presidential nomination.

These components, along with benign wage inflation, are prone to immediate the Federal Reserve to chop rates of interest a minimum of yet one more time this 12 months, economists mentioned. The U.S. central financial institution minimize charges final month after decreasing borrowing prices in July for the primary time since 2008, to maintain the financial enlargement, now in its 11th 12 months, on observe.

Fed Chair Jerome Powell reiterated on Friday that the economic system was “in a superb place,” including that “our job is to maintain it there so long as attainable.”

The greenback .DXY was little modified towards a basket of currencies. Costs of U.S. Treasuries rose marginally. Shares on Wall Avenue have been buying and selling increased.

STRONG GOVERNMENT HIRING

“We proceed to count on the Fed to chop its goal rate of interest later this month,” mentioned Michael Feroli, an economist at JPMorgan in New York. “We imagine it will have taken a a lot stronger quantity to persuade Fed management that they’ve already taken out sufficient insurance coverage towards draw back dangers.”

Financial development estimates for the third quarter vary from as little as a 1.3% annualized fee to as excessive as a 1.9% tempo. The economic system grew at a 2.0% tempo within the second quarter, slowing from a 3.1% fee within the January-March interval.

Slower development was bolstered by a report from the Commerce Division on Friday that confirmed the U.S. commerce deficit widened 1.6% to $54.9 billion in August.

A broader measure of unemployment, which incorporates individuals who need to work however have given up looking and people working part-time as a result of they can not discover full-time employment, declined to six.9% final month, the bottom stage since December 2000, from 7.2% in August.

Regardless of the tight labor market, common hourly earnings have been unchanged final month after advancing 0.4% in August. That lowered the annual improve in wages to 2.9% from 3.2% in August. The common workweek was unchanged at 34.Four hours.

Some economists imagine wage development is stalling as a result of firms are hiring inexperienced staff within the face of labor shortages. Others blame the slowdown on ebbing demand for staff.

“With demand for labor softening and plenty of firms contending with increased enter prices because the commerce warfare lingers and broadens, we don’t count on to see any significant strengthening in wage development within the coming months,” mentioned Sarah Home, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Hiring is slowing throughout all sectors, excluding authorities, which is being boosted by state and native authorities recruitment. Non-public payrolls elevated by 114,000 jobs in September after rising by 122,000 in August.

The three-month common acquire in personal employment fell to 119,000, the smallest since July 2012, from 135,000 in August.

Manufacturing shed 2,000 jobs final month, the primary decline in manufacturing unit payrolls since March, after a acquire of two,000 jobs in August. Manufacturing has paradoxically borne the brunt of the Trump administration’s commerce warfare, which the White Home has argued is meant to spice up the sector.

Final month’s decline in manufacturing payrolls was led by the automotive sector, which misplaced 4,100 jobs. Additional losses are possible if a strike by Basic Motors (GM.N) staff continues.

FILE PHOTO: A “Now Hiring” signal sits within the window of Tatte Bakery and Cafe in Cambridge, Massachusetts, U.S., February 11, 2019. REUTERS/Brian Snyder/File Photograph/File Photograph/File Photograph

Building employment elevated by 7,000 jobs after rising by 4,000 in August. Retail payrolls fell by 11,400 jobs, marking an eighth straight month-to-month drop.

Authorities employment elevated by 22,000 jobs in September after surging by 46,000 in August. Hiring was boosted by state and native governments. Just one,000 staff have been employed final month for the 2020 Census. Authorities payrolls have elevated by 147,000 over the 12 months, pushed by native governments.

Reporting by Lucia Mutikani; Enhancing by Sandra Maler and Paul Simao

Our Requirements:The Thomson Reuters Belief Rules.

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Divided Fed set to chop rates of interest this week, however then what?

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SAN FRANCISCO (Reuters) – Deep disagreements inside the Federal Reserve over the financial outlook and the way the U.S. central financial institution ought to reply is not going to cease policymakers from chopping rates of interest at a two-day assembly that begins on Tuesday.

FILE PHOTO: Federal Reserve Board Chairman Jerome Powell testifies earlier than a Senate Banking, Housing and City Affairs Committee listening to on the “Semiannual Financial Coverage Report back to Congress” on Capitol Hill in Washington DC, U.S., July 11, 2019. REUTERS/Leah Millis/File Photograph

Whereas an oil worth spike after assaults on Saudi Arabian oil amenities over the weekend added to the checklist of dangers dealing with an financial system already slowed by ongoing commerce tensions and world weak spot, the deep divide evident across the Fed’s policymaking desk means additional charge cuts could possibly be removed from a accomplished deal.

At one finish of the Fed’s large boardroom sit St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari, who’re anticipated to argue for a steep discount in borrowing prices to counter low inflation and an inverted Treasury yield curve.

Pushback from the alternative finish is prone to come from Cleveland Fed President Loretta Mester, who opposed the Fed’s charge minimize in July, and Philadelphia Fed President Patrick Harker, who solely reluctantly supported it and says he needs to depart charges the place they’re “to see how issues play out.”

Fed Chair Jerome Powell, seated halfway down the desk, faces the fragile activity of taking over board these views and the disparate arguments of the opposite dozen policymakers to construct consensus.

(To chop or to not minimize? right here)

(Communications breakdown: right here)

A high problem: making sense of financial information that means the U.S. manufacturing trade could also be contracting and inflation stays weak, at the same time as households proceed to spend and employers total are including loads of jobs.

“The discord is extraordinarily seen,” mentioned Gregory Daco, chief U.S. economist at Oxford Economics. “Should you take a look at the financial system right now, you take a look at an financial system that’s bifurcated … The important thing query is whether or not that weak spot seeps by means of the financial system, and whether or not that’s aggravated.”

For the reason that Fed’s 8-2 resolution to chop charges in July, a transfer that Powell referred to as a ‘mid-cycle’ adjustment, the financial information has delivered combined indicators.

Sturdy retail gross sales and continued wage progress might add to Boston Fed President Eric Rosengren’s confidence that present financial circumstances don’t justify additional coverage easing. He dissented within the July coverage resolution.

The continuing U.S.-China commerce battle makes Dallas Fed President Robert Kaplan amongst others involved about slowing manufacturing unit output and a slide in enterprise funding. Kaplan supported July’s charge minimize.

‘MIXED OPINION’

The latest wild card to consider to the talk emerged unexpectedly in Saturday’s assaults on the Saudi oil amenities, which triggered the most important spike in oil costs in additional than 20 years. [nL5N2674W4][nL5N2672I3]

Fed officers might see the event both as a danger to an already fragile progress outlook, which might help the case for extra easing, or as a fine addition to inflation, which might again a case for standing nonetheless for now.

Merchants of futures contracts tied to the Fed’s coverage charge have been pricing in, as of Monday afternoon, a 65.8% probability that the central financial institution would minimize its benchmark in a single day lending charge by 1 / 4 of a proportion level to a variety of 1.75% to 2% on Wednesday.

And although the conviction for additional charge hikes has softened since final week, merchants total proceed to anticipate yet another discount in borrowing prices by the tip of the yr.

“If everybody was on the identical web page on the Fed I might perceive it,” mentioned Lee Ferridge, head of macro technique for North America at State Road World Markets.

“However clearly there’s disagreement on the Fed … If the Fed may be very cut up and Powell can’t give a powerful sign, doesn’t that indicate only a few strikes are possible, reasonably than these dramatic cuts?”

Fed policymakers will deliver to the assembly their very own views of the place charges ought to be by December. In June, the final time they printed their forecasts, about half of policymakers anticipated a complete of two charge cuts this yr; about half thought no charges can be applicable.

That divide within the so-called Fed “dot plot” has borne little relation to how coverage has truly formed up, but it surely might add to confusion over the speed outlook after the conclusion of this week’s assembly.

With extra dovish policymakers like Bullard, Kashkari and Chicago Fed President Charles Evans calling for extra easing, and extra hawkish policymakers like Mester, Harker and Kansas Metropolis Fed President Esther George extra skeptical, “anticipate the 2019 dots to mirror this combined opinion,” mentioned Jefferies economist Ward McCarthy.

Reporting by Ann Saphir; Enhancing by Dan Burns and Paul Simao

Our Requirements:The Thomson Reuters Belief Ideas.

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US wholesale costs rise simply 0.2% in July

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U.S. wholesale costs ticked up simply 0.2% in July, the newest signal that inflationary pressures are largely in examine.

The Labor Division mentioned Friday that the producer value index — which measures value adjustments earlier than they attain the patron — elevated 1.7% final month in contrast with a yr in the past, the identical as June. Excluding the unstable meals and power classes, wholesale costs fell 0.1% in July and rose 2.1% from a yr earlier.

Inflation is muted, even because the economic system has entered its 11th yr of growth and the unemployment fee has fallen to three.7%, close to a five-decade low. But wages are rising solely modestly and lots of companies are reluctant to lift costs within the face of on-line and international competitors.

Federal Reserve Chairman Jerome Powell cited low inflation final month as a key cause the Fed reduce short-term rates of interest.

The Fed targets an inflation fee of two% as a hedge in opposition to deflation, a destabilizing fall in costs and wages. But value good points have largely missed that concentrate on for the reason that Fed adopted it seven years in the past. With wage development weak, firms have not been compelled to carry costs to offset larger pay.

In July, wholesale inflation was pushed largely by larger power prices, together with a 5.2% improve in gasoline costs and an 8% rise in the price of residence heating oil.

Lodge room costs fell 4.3% final month and doctor care providers dropped 0.5%. Meals costs ticked up 0.2%, led by a 10.3% leap within the value of corn.

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Buyers search for client strain forward of subsequent tariffs

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(Reuters) – As President Donald Trump prepares to slap new tariffs on Chinese language imports, traders are bracing for indicators of strain on U.S. customers as prime retailers start reporting quarterly outcomes subsequent week and key client sentiment and retail gross sales information is launched.

Buyers and analysts are anxious concerning the influence of Trump’s deliberate 10% tariff on the remaining $300 billion in Chinese language imports, which is able to largely have an effect on client items, not like the earlier spherical that fell closely on industrial and enterprise merchandise. That may very well be a double-whammy for the U.S. economic system, which is about 70 % pushed by customers, and retailers.

Mona Mahajan, U.S. funding strategist at Allianz World Buyers in New York, is amongst analysts specializing in the fallout from the tariffs, noting that the deliberate new spherical will “disproportionately” influence client items.

“We’ll be watching the information notably round retail gross sales and client confidence,” Mahajan stated. “We’ll proceed to observe the softening in manufacturing and inflation as properly, however extra necessary for the U.S. financial image is the patron proper now.”

July retail gross sales information is due out on Thursday. Excluding autos, gross sales are anticipated to have grown 0.3% in contrast with 0.4% in June, in response to a Reuters ballot. On Friday, The College of Michigan’s preliminary August studying of client sentiment is predicted to point out a slip to 97.7 from 98.Four in July.

The S&P Retail index .SPXRT fell a complete of 5.3% within the first three buying and selling classes following Trump’s Aug. 1 tariff announcement. As of Thursday’s market shut, the index was down 1.6% for the month up to now.

UBS analyst Jay Sole stated fears that the tariffs might ultimately improve to 25% have been additionally an overhang for shares. Morgan Stanley has estimated that 25% tariffs would result in a worldwide recession.

Retailers can have the dilemma of deciding whether or not to go the tariffs on to customers within the type of increased costs or take in the upper prices, which would cut back revenue margins.

“When you’re in a aggressive surroundings you’re going to take some motion to maintain your prospects,” stated Charles East, an fairness analyst protecting client firms at SunTrust Non-public Wealth Administration, who stated that malls are notably susceptible.

“I actually don’t suppose they will push costs up as a result of their gross sales are already weak,” East stated. “The margins are beneath strain. Maybe they will speed up cost-cutting.”

With two thirds of U.S. footwear coming from China, for instance, UBS’s Sole will search for feedback in earnings calls and statements on how retailers and footwear firms plan to deal with the tariffs.

“It’s an enormous deal. Our assumption is that there might be an try to lift costs on the products,” Sole stated.

“We expect customers are going to withstand these value will increase,” he added, citing a UBS survey of seven,660 customers in July that confirmed 77% of respondents have been anxious the China commerce battle would trigger costs to rise.

Retailers reporting subsequent week embrace Macy’s Inc (M.N), Walmart Inc (WMT.N) and Tapestry Inc (TPR.N), whose manufacturers embrace Coach, Kate Spade and Stuart Weitzman. The next week Kohls Corp (KSS.N), Goal (TGT.N) and Nordstrom Inc (JWN.N) will all report.

The S&P Client Discretionary index .SPLRCD, which incorporates huge retailers, is predicted to report a 1.2% improve in second-quarter earnings, in response to IBES information from Refinitiv.

However estimates for the remainder of the 12 months have been falling. Wall Road now expects third-quarter earnings development of 1.8% in contrast with a 6.8% expectation on July 1 whereas the fourth-quarter estimate has fallen to six.5% from 9.8%.

FILE PHOTO: A lady outlets at a Walmart in Westbury, New York, U.S., November 15, 2018. REUTERS/Shannon Stapleton

Mitigating elements for client firms embrace a robust labor market, low inflation, declining rates of interest and low gasoline costs, in response to David Pleasure, chief market strategist at Ameriprise Monetary in Boston.

However Pleasure cautioned that latest power within the Convention Board’s Client Confidence index might not final.

“When confidence is at most of these ranges, it might have peaked and can decline if the economic system slows additional or the inventory market sells off sharply,” he stated.

Reporting by Sinéad Carew; Enhancing by Leslie Adler

Our Requirements:The Thomson Reuters Belief Ideas.

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US consumer spending slows to 0.3% gain in April

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Consumer spending slowed in April while inflation was up, but still far below the target set by the Federal Reserve.

The Commerce Department said Friday that spending increased 0.3% in April following a 1.1% surge in March that had been the largest increase in nearly a decade. Personal income growth, which had been lagging in recent months, jumped 0.5% in April.

Inflation, as measured by a gauge tied to consumer spending, increased 1.5% in April compared with a year ago, up slightly from a 1.4% 12-month change in April.

The Fed tries to manage interest rate policy to achieve annual price gains of 2%. However, through the first three months of this year, inflation fell farther from this goal.

President Donald Trump has argued that the slowdown in inflation shows that the Fed is keeping monetary policy too tight and should start cutting interest rates.

The Fed raised rates four times last year but then reversed course in January and has signaled that it plans to keep rates unchanged this year. However, Trump has argued that the Fed’s policies are hurting the economy and the central bank should be slashing rates instead of keeping them steady.

Fed Chairman Jerome Powell and other Fed officials have attributed the slowdown in inflation to temporary factors which should reverse in coming months and have argued that the Fed’s wait-and-see approach on further changes in interest rates is appropriate given how low unemployment is currently.

The 0.5% gain in incomes followed three months of tiny changes and was the best showing since a 0.9% jump in December.

With incomes rising faster than spending, the saving rate increased to 6.2% of after-tax income in April, up from 6.1% in April.

The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at a solid 3.1% rate in the January-March quarter. But half of that gain was based on temporary factors that are expected to fade in the current April-June quarter.

Economists believe that consumer spending, which accounts for 70% of economic activity, will rebound this quarter after slowing in the first three months of the year but they still think overall GDP will slow to a growth rate of around 1.5%.

For April, spending on durable goods such as autos fell 0.8% after a 3.6% jump in March, while spending on nondurable goods such as food and clothing rose 0.7%. Spending on services such as utilities and doctor visits rose 0.3%.

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Strong stock and bond markets at odds over global growth

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NEW YORK (Reuters) – It looks like something has to give in global markets.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2019. REUTERS/Brendan McDermid

Stocks and bonds around the world have rallied atypically together since the start of the year, rewarding investors both bullish and bearish on the direction of global growth.

The main catalyst for the gains was the Federal Reserve’s surprise decision in early January to pause its tightening policy, after four interest rate increases in 2018 raised fears it was being too aggressive as the economy cooled and inflation remained minimal. Those fears helped send global markets into a tailspin in December.

Yet with the U.S. benchmark S&P 500 near a record level and corporate junk bonds notching new highs, the question stock and bond investors are asking is whether the Fed’s next move will be a rate cut that further propels risk assets or a rate hike that cuts into the stock market’s momentum.

A move by the Fed on interest rates or a communication misstep by the central bank would likely end either the rally in the stock market or in investment-grade bonds by the end of the year, restoring the traditional give-and-take between risk and safety, investors say.

“The Fed is between a rock and a hard place,” said Kathleen Gaffney, a portfolio manager at Eaton Vance Management in Boston. “They can’t go lower because there are signs that inflation is rising and they can’t go higher because of global political uncertainty. It leaves the market on pause.”

The U.S. central bank has said it will soon stop letting bonds bought during its “quantitative easing” period following the financial crisis roll off its balance sheet, which also helped push yields on safe havens like Treasuries lower and acted as a tailwind for riskier assets.

Gaffney said the Fed will likely have to raise rates again because of rising wages and other forms of inflation by the end of the year, adding that such a move will “pierce” the high valuations in both the stocks and bond markets.

TWIN RALLY

The rolling four-month percentage change in the price of the S&P 500 and the 10-Year Treasury note have both been positive for three straight months, according to a Reuters analysis. That is the longest such streak since a five-month run that ended in August 2017, it showed.

In that same 2017 period, the S&P 500 gained and 10-year Treasury yields fell as the market digested conflicting economic reports during the first year of the Trump administration, before the Federal Reserve in September began quantitative tightening that resulted in bond yields rising as the S&P 500 continued to rally.

Since January equity markets around the world have made up much of the ground they lost during a wrenching fourth quarter of 2018 that sent the U.S. stock market to the brink of a bear market.

The S&P 500 and Europe’s STOXX 600 are up almost 16% year to date, while stock indexes in China are up nearly 30%.

The ICE Merrill Lynch U.S. high yield index is up 8.6% year to date while the Merrill Lynch World sovereign bond index is up almost 1.5%.

World stocks vs bonds – tmsnrt.rs/2IrqXeF

A rally in benchmark 10-year Treasury notes, usually seen as a safe haven, undercuts the picture of a “risk on” market. Their yields have slid from 2.69% at the start of the year to as low as 2.34% in late March.

“At this point in the cycle, equity investors are trying to take any incremental news positively while fixed income investors are not,” said Jen Robertson, a portfolio manager at Wells Fargo Asset Management in London. “It’s quite delicate at the moment and any negative news out of first quarter earnings could impact this sharp bounce.”

Further uncertainty due to the economic impact of the UK leaving the European Union, which has now been pushed back to Oct. 31, or a deterioration in U.S.-China trade talks could be a “shock to the system” and derail both stocks and bonds, she said.

The spread between U.S. three-month bills and 10-year notes turned negative for the first time since 2007 in March, a bearish sign as a yield curve inversion has signaled an upcoming economic recession in the past.

The move initially boosted stock prices as investors predicted it would hem the Fed in from future interest rate hikes. But equities could fall soon if recession fears continue to grow, said Hiroaki Hayashi, managing director of Fukoku Capital Management in Tokyo.

“If you look at the past experiences, share prices have often rallied six to nine months after the yield curve initially inverted before entering a major correction. I believe we are exactly at such a phase now.”

Despite outsized gains this year, financial markets have not indicated investors have faith that the global economy can grow without historically low interest rates a decade after the end of the Great Recession, said Anwiti Bahuguna, head of multi-asset strategy at Columbia Threadneedle Investments.

“The bull market we’ve had for the past 10 years is essentially because of really low interest rates,” Bahuguna said.

“I don’t think that equilibrium will last much longer,” she added, saying rising inflation and low unemployment could soon test global markets’ ability to cope with tighter monetary policy.

Additional reporting by Hideyuki Sano in Tokyo and Terence Gabriel in New York.; Editing by Alden Bentley and Tom Brown

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Slowing manufacturing hiring may point to fraying U.S. expansion

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NEW YORK (Reuters) – The longest streak of U.S. factory hiring in a quarter century came to an unexpected end last month, and a clouded outlook for important manufacturing sectors like autos may impede a quick rebound, undermining a key plank of U.S. President Donald Trump’s economic agenda.

FILE PHOTO: A line worker installs the front seats on the flex line at Nissan Motor Co’s automobile manufacturing plant in Smyrna, Tennessee, U.S., August 23, 2018. REUTERS/William DeShazer/File Photo

That sector lost 6,000 jobs in March, the Labor Department said on Friday, ending a 19-month streak of gains that started in August 2017 and had it extended one more month would have become the longest uninterrupted expansion of factory employment since the mid-1980s.

As it stands, the just-ended run was the longest since a comparable streak from August 1993 through February 1995 and saw the generation of 410,000 U.S. factory jobs. By comparison, that earlier run during Democrat Bill Clinton’s presidency produced 526,000 new manufacturing positions. A 20-month streak back in the early 1980s generated 1.34 million production jobs.

Today, companies that produce cars, construction equipment and other manufactured goods account for 12 percent of an economy that in July marks 10 years of expansion, the longest on record. Back in the 1990s, manufacturing’s share of the economy was around 16 percent and it was closer to 20 percent in the early 1980s.

Trump campaigned on rebuilding the sector and his ability to create high-paying American manufacturing jobs, partly by pushing other countries for more favorable terms of trade.

For a graphic on U.S. manufacturing employment, see – tmsnrt.rs/2CYWCQt

Overall, though, the March jobs report was upbeat.

It showed U.S. employment growth in March accelerating from a 17-month low, signaling that February’s sharp pullback was more likely an anomaly rather than a sign of an impending economic slowdown. Nonfarm payrolls rose by 196,000 jobs for the month, while economists polled by Reuters forecast gains of 180,000 jobs.

Last month’s unexpected slowdown in factory hiring – economists polled by Reuters had forecast a gain of 10,000 jobs – may signal that slower consumer and business spending as well as softening auto sales may curtail manufacturing job growth going forward. Another possibility is that factories are finding trouble finding and retaining willing workers.

Weakness in the auto sector bears watching. Manufacturers in that area have announced thousands of job cuts to deal with slowing sales that have led to an inventory bloat. So far this year auto manufacturers and suppliers have unveiled plans to cut 15,887 jobs, according to data on Thursday from Challenger, Gray & Christmas Inc, an outplacement consultancy.

Yet some companies that are hiring in that sector report labor shortages in their regions.

Shawn Hendrix, president of Nissen Chemitec America Inc, which supplies parts for Honda and Subaru cars, said he is not seeing an industry slowdown. He is having trouble finding people to fill jobs at his London, Ohio, factory.

“We are hiring – in our area in central Ohio almost all manufacturers I know are hiring,” Hendrix said. But it’s hard to find workers willing to commit to long-term jobs: some quit after two days of orientation. “If we don’t develop a pipeline with our educators it’s going to be very difficult to sustain manufacturing,” he said.

It is possible that the figure for March is a blip. The Institute for Supply Management said on Monday that its index of national factory activity rose to a reading of 55.3 in March from 54.2 in February, which had marked the lowest level since November 2016.

Reporting by Trevor Hunnicutt; Editing by Dan Burns and Andrea Ricci

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Street Food – Feeding unrest in Cairo: The politics of bread



Egypt has long been called Umm al-Dunya, or the “mother of the world”. Ancient Greeks described it as “the gift of the Nile” whose flooding each year provided two rich harvests. Egyptian wheat…

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