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Livesquawk - US Briefing - Wednesday 15.09
US Briefing - Wednesday 15.09
Headlines
  • Biden To Meet With Top Executives On Covid-19 Vaccine Mandate
  • US Pres Biden Denies China Pres Xi Turned Down Meeting Offer
  • ECB’s Lagarde: EU Economy Recovering Faster Than Expected
  • ECB’s De Cos: Current Inflation Increase In EZ Largely Temporary
  • UK Aug. CPI Beats Forecasts: +3.2% Y/Y (est 2.7%); Core +3.1%
  • Money Markets Are Now Pricing In Two BoE Rate Hikes For 2022
  • Fire At Key UK Power Converter Knocks Out The Link To France
  • EU Gas Prices +20%; UK, France Power Cable Halt Till Oct.13
  • UK PM Johnson: To Announce Changes To His Cabinet Today
  • EZ Industrial Production +1.5% M/M Far Exceeds 0.6% Estimate
  • IFO Institute Sees German Inflation Slowing To 2-2.5% In 2022
  • French Aug. Final CPI In-Line; Italian Aug. CPI Revised Lower
  • China Aug. Retail Sales +2.5% Y/Y; Large Miss On 7% Estimate
  • PBoC Sets 500B Yuan Annual Quota For Southbound Quota Link
  • SCMP: Container Ports In Shanghai & Ningbo Begin To Reopen
  • N.Korea Fires 2 Missiles Into Sea; US Sees No Immediate Threat
  • API Crude -5.4M (est -3.5M); Gasoline: 2.76M, Distillate: -2.89M
  • Microsoft Rises; Dividend Hiked 11%; US Casino Stocks Tumble
  • Zooplus Drops After Citing KKR Has Terminated Takeover Talks
  • Evegrande Won’t Pay Interest Due Next Week; S&P Cuts To CC
Commentary
UK August Inflation Returns With Vengeance On Base Effects

London –  Annual inflation posted its largest monthly rise on record, boosted by the government's ‘Eat Out to Help Out’ scheme and continued supply chain disruptions.   Headline inflation rose to 3.2% in August, well above the forecast of 2.9% and last month’s 2.0%. The annual core reading of 3.1% also beat the 2.9% estimates and outpaced last month’s 1.8%. On the month, CPI jumped 0.7% from a flat July print.   The Office for National Statistics’ Jonathan Athow said, “August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago. However, much of this is likely to be temporary as last year restaurant and café prices fell substantially due to the ‘Eat out to Help out’ scheme, while this year prices rose.” 

 

 In terms of base effects, alongside the discount scheme, the ONS said the temporary reduction in the VAT rate in hospitality from 20% to 5% (due to expire in December) also contributed to the rise. “Food and non-alcoholic drink prices rose by more than last year, which also helped push up the rate,” said Athow.  “Rises in computer games prices, which are often erratic, also added upward pressure.” 

(LiveSquawk – Continue Reading)

Fire At Key UK Power Converter Knocks Out Link To France

A large fire at a key electricity converter station in the U.K. has shut down a major cable that brings power from France, worsening Britain’s energy crunch. Gas and power prices jumped. The outage couldn’t come at a worse time with supplies already short and prices at record highs. Britain is a net importer of power, with France its biggest supplier via two cables that run across the English Channel. Firefighters have been battling the blaze since the middle of the night and smoke continues to billow from the site. 

 

The fire will still take several hours to put out, according to Kent Fire and Rescue Service. Flows on the 2,000 megawatt IFA-1 cable halted just after midnight, according to National Grid Plc data. The second IFA-2 cable -- with capacity of 1,000 megawatts -- is currently unaffected, a spokesperson said. “This is a major event,” said Phil Hewitt, executive director at Enappsys Ltd.  National Grid sounded an early warning in July that the buffer of power capacity would be smaller this year. In one scenario they modelled -- with one interconnector knocked out and high demand -- margins would be the tightest in years.

(Bloomberg - Continue Reading)

This Is No Knockout Win For Team Transitory

You never really learn how something works until it goes wrong. This is true of many electronic devices, in my experience, and we are all now learning that it’s also true of inflation. Price rises have been under control in the Western world for decades. Now, we have a problem. If the numbers are to be trusted, inflation has taken off in a way that hasn’t been seen in a generation. But we also know that Covid-19 administered an economic shock of a kind that nobody had seen before, and it was natural that it would have an effect on prices. The forces that pushed down prices are still with us, and many have a vested interest in their continuing to do so. And so, we are all learning to explore and sometimes manipulate inflation statistics in a way we haven’t previously done.

 

There is one key question underlying all the effort. Is this inflation transitory, or is it built to last? I’m not going to answer that question here, mainly because I don’t think it’s yet possible to give a definitive one. But I do want to explore the latest inflation stats for August, all of which can be excavated from a Bloomberg terminal, to get us closer.  Here we go: Why Does It Matter If Inflation Is Transitory? It's not just because the Fed uses the word. The key point is that the bond market itself is devoted to the proposition that this inflation is a blip caused by the pandemic that will be over in a matter of months

(Bloomberg – Continue Reading)

China’s Move To Curb Oil Prices Has Market Wary Of More

China’s first auction of oil from its strategic reserves looks relatively paltry, but the possibility of further releases is still likely to exert a powerful influence on global crude prices. The initial sale will be for about 7.38 million barrels of crude on Sept. 24, the National Food and Strategic Reserves Administration said late Tuesday in Beijing. That’s less than what China typically imports in one day. The sale is part of an effort by Beijing to cool surging prices for raw materials and keep a lid on inflation, and there’s a chance the auctions could be ramped up to achieve these ends. The new strategy is another major “wild card” for the market and is one of the reasons why global crude prices aren’t likely to climb sustainably above $80 a barrel, said Vandana Hari, founder of Singapore-based market analysis firm Vanda Insights.

 

“Beijing has a powerful tool to cool down overheated crude prices, at least over a short period, and it’s determined to use it,” she said. “As the triggers for a release are unlikely to be officially disclosed, this is now a new bearish element that could be sprung upon the market at short notice.” The volume is less than Energy Aspect Ltd.’s estimate of 10 to 15 million barrels and well below the 35 to 70 million that some market participants had been anticipating, Yuntao Liu, an analyst at the industry consultant, said in a note. Successful bidders can lift the oil up to Dec. 10, meaning it will probably be the only auction this year, he said.

(Bloomberg – Continue Reading)

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