Where Are We Headed?
This weekly is on the early side and I am wary of what Friday brings, especially as the debt ceiling saga gives rise to further bond market volatility.
This week saw inflation figures released in the US, with the headline rate now running at 5% year-on-year. This is despite the US economy, like so many others, still not being back to full potential on the services side. Unexpectedly, 10-year US treasury bond yields fell. They are currently around 1.47%, which some believe is out-of-line with current inflation and activity levels.
In emerging markets, central banks have been raising interest rates, or contemplating it, as they try to dampen inflation. Russia hiked rates by 0.50% to 5.50% - its third this year as inflation is in excess of 6% and rising. Brazil, China and India are all also seeing rising inflation.
The US Federal Reserve and other central banks say this inflation is mostly transitory and will adjust. We won’t really know if that’s right though until early next year when economies become more balanced between demand and supply.
As the G7 summit in St Ives drew to a close, world leaders renewed an old commitment to contribute $100bn to help poor countries cut emissions, and announced fresh plans to help developing nations move away from their reliance on coal. The $100bn figure is significant as in 2009, developed countries agreed to meeting this target by 2020. However, many feel this amount isn’t enough anyway.
The defunding of new coal generation by the G7 will be replaced by a fund of up to $2.8bn to stop using the fuel, but many environmentalists want stronger guarantees after the failure to
hit previous targets aimed at helping poorer nations deal with climate change.
Retailers in the UK said total sales (supermarkets and high-street chains) in May were 10% higher* than two years ago (BRC). Clothing, Shoes and Furniture were especially strong. While in the US, figures show that household wealth reached $136.9TN** at end of March this year.
The crackdown on cryptocurrency continued in China with Qinghai and Xinjiang provinces ordering crypto mining projects to close. China accounts for half of total BTC production.
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