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Charting the Global Economy: Inflation Builds; Jobs Miss in U.S. – Financial Post

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(Bloomberg) — U.S. employment growth fell short of expectations in September, while price pressures continued to mount in the U.K. and across Latin America. In India, dwindling coal supplies have raised the risk of power shortages.

New Zealand and Poland were among an increasing number of countries whose central banks are boosting interest rates to counter faster inflation.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

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U.S.

Job growth in September was the slowest this year, signaling a tempering of the labor market recovery. The unemployment rate fell to 4.8%, partly reflecting a decline in labor force participation among women.

Since the last major standoffs a decade or so ago over raising the debt ceiling, there’s been a sea change in the way investors, economists and officials think about public borrowing. They’ve become less interested in the debt’s size, and more focused on what it costs.

Early in the year, the hope was that the bottlenecks that gummed up the global supply chain in 2020 would be mostly cleared by now. They’ve actually only gotten worse — much worse — and evidence is mounting that the holiday season is at risk.

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Europe

Severe material shortages and long delivery times are weighing on demand for German manufactured goods, signaling that the country’s recovery may lose momentum in the final months of the year.

A market-based measure of expected inflation in the U.K. over the next decade topped 4%, bolstering wagers for tighter monetary policy. The move was spurred by a spike in energy costs with U.K. natural gas prices surging to a record, threatening to fuel higher consumer prices. 

Asia

India is pushing state-run Coal India Ltd., the world’s top miner of the fuel, to boost production to help power plants navigate a supply squeeze. India, which relies on the fuel for about 70% of electricity generation, has already seen signs of power shortages, and needs to lift deliveries to avert the risk of blackouts. It’s also seeking to minimize short-term impacts on energy-hungry industrial users including producers of aluminum, cement, bricks and paper.

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Emerging Markets

Sub-Saharan Africa needs significant additional funding to counter damage wrought by the coronavirus pandemic, bolster its economic recovery prospects and mitigate threats posed by climate change, according to the World Bank. 

Painful price increases across Latin America in September mean lots more work for the region’s major inflation-targeting central banks. Consumer prices soared well past policy maker’s tolerance levels in Brazil, Mexico, Chile, Colombia and Peru last month.

World

A number of central banks tightened monetary policy this week. New Zealand’s central bank raised interest rates for the first time in seven years and signaled further increases will likely be needed to tame inflation. Poland unexpectedly raised borrowing costs for the first time since 2012, while Romania also lifted rates.

European imports of U.S. liquefied natural gas are likely to increase this month, despite rising energy prices and a tight supply of fossil fuels in Asia as colder weather approaches. 

©2021 Bloomberg L.P.

Bloomberg.com

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Economy

Stock Markets Today: EU economy, China GDP, Bitcoin, Squid Game – Bloomberg

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Good morning. Euro area economy vulnerable to shocks, China growth slows, Bitcoin rallies and Squid Game’s value. Here’s what’s moving markets.

Highly Vulnerable

European Central Bank President Christine Lagarde warned that the globalized nature of the euro area’s economy makes it highly vulnerable to systemic shocks from supply chain disruptions. Lagarde also said the current spike in inflation is unlikely to last, while vowing to continue aiding the euro-area economy as the fallout from the pandemic lingers. Supply bottlenecks, cost pressures, and a reopening letdown are already set to plague region’s third-quarter earnings season. 

Slowing Growth

China’s economy weakened in the third quarter, weighed by multiple headwinds from a property slump to an energy crisis. Gross domestic product expanded 4.9% from a year earlier, down from a previously reported 7.9% in the preceding quarter. People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the Chinese economy and financial system from the struggles of China Evergrande Group.

Bitcoin Rallies

Bitcoin rallied early Monday after falling over the weekend, ahead of an anticipated U.S. exchange-traded fund approval. It fell both Saturday and Sunday to nearly $59,000 before climbing over $62,000 on Monday. Bitcoin is in focus as the first futures ETF tied to the token may debut Monday, according to a filing. Analysts expect profit-taking and volatility surrounding the decision.

Squid Game

Netflix estimates that its latest megahit, “Squid Game,” will create almost $900 million in value for the company, according to figures seen by Bloomberg, underscoring the windfall that one megahit can generate in the streaming era. The show stands out both for its popularity, and its relatively low cost, at just $21.4 million, less than Dave Chappelle’s new special “The Closer”. The viewership details are likely to cheer investors, who have regained enthusiasm for Netflix after several bumpy months, partly because “Squid Game” has been so popular.

Coming Up…

European futures are steady while contracts on U.S. stock benchmarks are pointing lower after last week’s strong performance. Oil advanced after an eighth weekly gain with the market facing a global energy crunch ahead of winter. Meanwhile, Koninklijke Philips will be among the European companies announcing results on Monday while State Street will report in the U.S. Also, Apple will finally unveil its redesigned MacBook Pro, the first revamp in five years.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours. 

And finally, here’s what Cormac Mullen is interested in this morning

Hedge funds have given up betting against short-term Treasuries, at least one gauge of positioning shows. Net leveraged-fund futures and options positions in two-year notes turned positive for the first time since April 2018, according to the latest Commodity Futures Trading Commission data. Two-year Treasury yields have surged some 25 basis points since early June as traders brought forward wagers on Federal Reserve rate hikes. The flip to net-long could suggest fast-money funds see a pause coming in the short-term yield spike, though some of the positioning is likely part of broader bets on the direction of the U.S. yield curve. In the interest-rate market, a full hike is now priced in for September next year, with traders about 50/50 in calling for one in June. That’s an aggressive move in a short space of time now given so much uncertainty over the path for inflation and growth until then.

#lazy-img-380107657:beforepadding-top:56.25%;Leveraged funds turn net long two-year Treasuries futures

Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.

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    Economy

    Oil prices climb to highest in years as COVID recovery, power generators stoke demand

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     Oil prices hit their highest in years on Monday as demand continues its recovery from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.

    Brent crude oil futures rose 87 cents, or 1%, to $85.73 a barrel by 0111 GMT, the highest price since October 2018.

    US West Texas Intermediate (WTI) crude futures climbed $1.12, or 1.4%, to $83.40 a barrel, highest since October 2014.

    Both contracts rose by at least 3% last week.

    “Easing restrictions around the world are likely to help the recovery in fuel consumption,” analysts from ANZ bank said in a note on Monday.

    “The jet fuel market was buoyed by news that the U.S. will open its borders to vaccinated foreign travellers next month. Similar moves in Australia and across Asia followed.”

    They added that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.

    Still, supply could also increase from the United States, where energy firms last week added oil and natural gas rigs for a sixth week in a row as soaring crude prices prompted drillers to return to the wellpad.

    The U.S. oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to Oct. 15, its highest since April 2020, energy services firm Baker Hughes Co said last week.

    China’s economy, meanwhile, likely grew at the slowest pace in a year in the third quarter, hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.

    The world’s second-largest oil consumer issued a new batch of oil import quotas for independent refiners for 2021 that show total annual allowances were lower than last year, a first reduction of import permits since these firms were allowed into the market in 2015.

     

    (Reporting by Jessica Jaganathan; Editing by Kenneth Maxwell)

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    Economy

    Stop handing out free money (and other ideas for getting the economy back on track) | TheHill – The Hill

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    Supply chain shortages and inflation are hurting consumers and Democratic election prospects in 2022 and 2024. The Biden administration, no doubt aware of this possibility, is taking action to address the ill-effects of scarcity and higher prices. Recently, the administration mandated that the Port of Los Angeles remain open 24 hours a day so merchandise idling in shipping containers can be delivered faster to fill empty supermarket shelves and consumer shopping carts.

    But this response may be coming too late, because shortages and inflation have created uncertainty in the minds of consumers that cannot be easily reduced.

    While the administration has handled the COVID-19 pandemic well, it has been much less successful in dealing with the negative effects of the ensuing adjustments, including shortages, inflation, supply chain disruptions, high demand and uncertainty.  

    The widespread shortages were caused by sudden and rapid increases in consumer demand and by manufacturers and suppliers that were too slow or unable to respond swiftly.

    Once supply chain disruptions are straightened out as manufacturers increase their production and distributers move their products faster, shortages are bound to ease, though some could linger.  

    The U.S. economy is also experiencing a modest annual inflation rate of 5.4 percent, caused by the trillions of dollars that the Treasury gave Americans in 2020 to spend to avert a pandemic-induced depression. Flush with this cash and what they had saved while sheltering in their homes during the pandemic, consumers quickly increased demand for most products and services. They became less price sensitive and pushed inflation higher. Still, though worrisome, an annual inflation rate of 5.4 percent is hardly runaway or stagflationary.  

    But the excess cash is tapering off. Without it, consumers will be forced to reduce their demand and thereby push most prices downward. As a result, future inflation won’t be as drastic or widespread, especially since the Federal Reserve Board is planning to reduce the money supply, which will dampen inflation.

    But the uncertainty produced by the pandemic is likely to prevent people from getting back to normal and might foster some continued shortages and inflation.  

    Americans have been feeling confused and unsure about their future. Before the pandemic, they took stable prices and product availability for granted, knew the content and location of their jobs, woke up in the mornings to feed their kids and send them to school and were fairly content with their lives. Not anymore. Their world had changed, and the new one seems unfamiliar and scary to many. As a result, 4.3 millions have left the labor force since the onset of the pandemic.

    What can the White House and Congress do to alleviate shortages, inflation and uncertainty? Here are four ideas.  

    1. Take measures to ease shortages. Mandating that the Port of Los Angeles work nonstop will increase some supplies, but it’s not enough. It should be followed by similar action in other ports. Likewise, factories should be instructed to increase production. Such measures are easy to take in the case of consumer staples but more difficult in the case of computer chips, as chips are part of a global industry, and increasing their production requires building large factories and investing billions of dollars.

    2. Stop handing out free money to consumers. With less money to spend, demand and inflation will ease. Though Americans are no longer receiving government manna, many still have cash to spend, which will continue to exert some upward inflationary pressures. 

    3. Think again about the size, timing and spending schedule of infrastructure and Build Back Better initiatives. Pumping trillions of dollars into the economy could create a new round of inflation inflammation.

    4. Reduce uncertainty. Unfortunately, policymakers lack the knowledge, skills and tools to address this effectively. What is desperately needed is trusted and steady leadership to assure Americans that their lives as consumers, employees, parents and human beings will be more certain again. Unless they can be made to feel more content with their lives, the economy may continue to sputter and keep a fuller economic recovery at bay. 

    Can these challenges be successfully addressed in the coming year or two? Maybe. The U.S. discovered and produced a life-saving vaccine against COVID-19 in record time and enacted policies that averted depression. Likewise, I expect shortages and inflation to subside and a sense of normalcy to rise. This, plus efforts to make consumers feel more confident, would put the country on a more prosperous path. 

    Avraham Shama is the former dean of the College of Business at the University of Texas – Pan American. He is a professor emeritus at the Anderson School of Management at the University of New Mexico. His book, “The Impact of Stagflation on Consumer Psychology,” was published by Praeger publishing. 

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