Economics

U.S. stock investors are warily watching the rise in Treasury yields as a stumbling block for Wall Street's record-setting rally, with particular trouble seen if ​the benchmark 10-year yield jumps abruptly toward 5%.

Higher bond yields pose a number of obstacles for stock performance. These obstacles include stiffer investment competition and pressure on equity valuations, ‌as well as higher borrowing costs, which can eventually stymie economic growth.

Japan's benchmark 10-year bond yield struck the key 3% barrier for the first time since 1996 on Tuesday, amid a deepening global debt selloff as traders fret about oil-driven inflation, monetary tightening and worsening fiscal conditions.

With ‌the Middle East crisis stoking price pressures globally, yields have been spiking from Tokyo and Sydney to New York and London as investors anticipate the need for central banks to raise interest rates.

The bond market is also under pressure from a deluge of issuance as hyperscalers aggressively raise money to fund the AI boom, in an environment where the U.S. debt load has passed $40 trillion and Japan's ministries are likely to request a record amount in an initial budget for next fiscal year. Yields rise when bond prices fall.

cross-posted from: https://lemmy.world/post/50413218

YSK this because the high amount of public debt, which has been getting a lot of attention in the US, is actually by design.

In our double-entry bookkeeping system, money is created via bank lending and government spending, adding to the economy, and is destroyed via loan repayments and taxes, subtracting from the economy.

Central banks create a wealth pump mechanism into assets through money printing, which erodes consumer purchasing power, driven by deficit spending, which creates money for the private sector.

Profits are privatized; losses are socialized.

• https://link.springer.com/article/10.1007/s11625-023-01304-5
• https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Estimates for previous two months were revised down sharply but unemployment rate held steady at 4.1%

US employers unexpectedly lost 23,000 jobs in July and gains for the previous two months were revised down sharply by a combined 103,000 jobs, painting a weaker picture of the labor market than past data indicated.

The unemployment rate, however, held steady at 4.1%. Economists had projected an unchanged unemployment rate and 83,000 new jobs for the month.

The latest data from the Bureau of Labor Statistics illustrates the continued summer slump in job growth amid ongoing conflict in the Middle East. Pressure has been mounting within the US Federal Reserve to raise interest rates to combat persistently high inflation, but July’s job report and its latest revisions may cool those expectations at the central bank’s next meeting.

Investors scramble to make sense of a shock Chinese challenge to the dominance of western chipmakers

Even for the rollercoaster world of AI, last week was particularly volatile as investors scrambled to keep up with developments that threatened the dominance of the largest western chipmakers.

It began with a double whammy. On Monday, the Chinese memory chipmaker CXMT floated on the Shanghai stock market, soaring by 466% in value to 3.3tn yuan (£365bn).

That same day, it was reported that China had developed its own tools to carry out deep-ultraviolet lithography, a technique essential to the computer chip supply chain over which the Dutch company ASML had held a monopoly.

Oil prices got back to jumping on Wednesday, while sinking technology stocks dragged Wall Street lower amid uncertainty about what the Federal Reserve will do to get high inflation under control.

The S&P 500 fell 1.5% after swinging sharply between gains and losses in the last hour of trading. The Dow Jones Industrial Average dropped 1,153 points, or 2.2%, and the Nasdaq composite slumped 1.7% to fall 9.8% below its record set last month.

The action was more decisive in the oil market, where the price of Brent crude leaped 7.3% to settle at $88.09 per barrel after fighting resumed in the war with Iran and raised worries about the global flow of oil.

Samsung and SK Hynix fall by more than 10% amid renewed fears over AI spending and Chinese competition

The sell-off in AI stocks has intensified, driving South Korea’s stock market down to its lowest level in three months.

Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans.

The South Korean semiconductor companies SK Hynix and Samsung Electronics fell by more than 10%, dragging the country’s Kospi share index down by 11.5% to its lowest point since mid-April.

Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information that China has begun mass production of homegrown deep ultraviolet (DUV) chip-making tools.

Brent crude benchmark rose to more than $80 a barrel, its steepest increase since ceasefire began

Oil markets have recorded their sharpest price rise in nearly two months after a series of attacks on fossil fuel tankers near the strait of Hormuz led Donald Trump to declare that the ceasefire deal with Iran was over.

At the same time, UK short-dated bonds suffered their worst day since the end of March as the prospect grew of a Bank of England rate rise to cope with the renewed inflationary pressures.

The yield or interest rate on two-year gilts rose 15 basis points to 4.35% with a rate rise in November fully priced in and a 50% chance of another in December. The market gave a 75% chance to one rate increase by the end of the year earlier this week.

• The economy added 57,000 jobs in June, with nearly all job growth coming from health care and social assistance.
• The unemployment rate edged down to 4.2 percent, but the employment-to-population ratio fell to its lowest level since June 2021.
• Prime-age employment declined sharply, especially among men, signaling potential weakness in the labor market despite low unemployment.
• Wage growth slowed to 3.5 percent year over year, lagging recent inflation and reflecting softer labor demand.
• Hotels, restaurants, insurance, and motion picture industries lost jobs, while women accounted for more than all net payroll job growth.
• There is still no evidence of an AI-driven jobs apocalypse, as productivity growth remains modest and concentrated job gains point to a cooling — not collapsing — labor market.

tværpostet fra: https://feddit.dk/post/23061809

Exploiting the unique institutional setting of Hong Kong’s real estate market, we uncover a curious ripple effect of haunted houses on the prices of nearby houses. Prices drop on average 19% for units that become haunted, 9% for units on the same floor, 6% for units in the same block, and 1% for units in the same estate. Our study makes two contributions. First, we provide an estimate of a large negative spillover on prices caused by a quality shock. Second, we find that the demand shock rather than the fire sale supply shock explains most of the spillover.

The report marked the slowest month of hiring since February, when hiring contracted.

The U.S. economy added just 57,000 jobs in June, a worrying sign for labor market stability as wage growth tracked below inflation for a third consecutive month.

In June, average hourly earnings increased by 3.5%, which remains far below the most recent inflation reading of 4.2%.

The unemployment rate ticked down to 4.2% from 4.3%. June’s total was the lightest month of hiring since February, when the labor market contracted.

Eye-opening discussion with billionaire investor Jeremy Grantham about economics, AI, climate change, and fertility.

https://www.youtube.com/watch?v=32u5T6lO8qk

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