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Bundesbank says German recession is looking increasingly likely

  
  Analysis
  • A recession is increasingly likely
  • Inflation will continue to accelerate and could peak above 10% this autumn
  • Upside risk for inflation is high
  • High degree of uncertainty over gas supplies and sharp price increases likely to weigh heavily on households, companies

That’s a fair assessment and one that isn’t quite clouded by political bias for the most part. It almost seems inevitable now especially when you look at how energy prices have gone parabolic in Europe. The set of PMI data releases tomorrow could be what it takes to tip the euro over the edge as it holds on the brink of parity at the moment.

Iran says “nothing is agreed until everything is agreed” on nuclear deal

  
Analysis, Politics

This has been dragging on for the longest of time and latest talks are that a deal is “imminent” again with reports suggesting that Iran has dropped demands related to delisting several companies tied to the IRGC – a key sticking point in discussions previously. But from the messaging above, it remains to be seen if we are actually seeing any real progress. Or if this is just another rodeo ride.

“China cuts rates again to shore up stumbling economy”

  
  Analysis

The headline to the post is a typical one I’m seeing from notes around the place. “Stumbling” is a mild word to describe the Chinese economy, its getting hit hard by the property sector imploding under debt loads, defaults, mortgage payment strikes and buyers pulling away in fear of further price falls (and holes too!). Consumer demand is drying up. Rolling COVID-related restrictions and lockdowns are not helping. Even the weather is not helping right now:

The People’s Bank of China cus its one year prime rate less than expected, and its five year more than expected:

  • China rate cuts: LPR 1 year 3.65% (from 3.7%) & 5 year 4.30% (from 4.45%)

World Bank economist warns of rising risk of 1970s & 80s style debt crisis

  
Analysis, Economy

n interest piece while we wait for financial markets to fully kick off for the week.

Japan’s Nikkei have excerpts from an interview with chief economist and director of the World Bank’s Prospects Group Ayhan Kose.

In a nutshell:

  • One of the risks we look at is this higher-than-expected rise in interest rates — so, the much faster tightening of financial conditions.
  • The other risk we look at is the risk of commodity prices being higher
  • and the third important risk we analyze is the risk of further COVID disruptions, the types of disruptions we saw in the case of China. These disruptions are quite important because they translate into the supply-side interruptions, weaker growth, as well as higher inflation.

Here is the link for more detail.

World Bank

Key events and releases for the week starting August 22

  
  Analysis
  • various flash PMI estimates for Europe and UK
  • US/services and manufacturing PMI indices, 9:45 AM ET. Manufacturing PMI 52.0 vs. 52.2 last month. Services PMI 50.0 vs. 47.3 last month
  • US new home sales, 10 AM ET. Estimate 574K vs. 590K last
  • Richmond Fed manufacturing index for August. 10 AM ET. Estimate -6 vs. 0 last month

Wednesday, August 24

  • US durable goods orders. 8:30 AM ET. Estimate 0.9% vs. 2.0% last month
  • US pending home sales. 10 AM ET. Estimate -2.1% vs. -8.6% last month

Thursday, August 25

  • New Zealand retail sales Q/Q. 6:45 PM ET (Wednesday). Estimate 1.7% vs. -0.8% last quarter
  • German Ifo business climate. 4 AM ET. Estimate 86.7 vs. 88.6 last month
  • US preliminary GDP for 2Q. 8:30 AM ET. -0.8% vs. -0.9%.
  • US unemployment claims. 8:30 AM ET. Estimate 250K unchanged from last week
  • Jackson Hole symposium. All day
(more…)
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