Aurelia Butler

If you doubt that we’ve left the era of laissez-faire free trade, read a white paper put out late last year by the Chinese government. The title, China’s Export Controls, isn’t scintillating. But the conclusions are, at least to those who care about trade.“The world is undergoing profound changes of a scale unseen in a century, with an increase in destabilising factors and uncertainties,” reads one passage. “The status and role of fair, reasonable and non-discriminatory export control measures is growing in importance as an effective means to address international and regional security risks and challenges and safeguard world peace and development.”On the one hand, this tells us nothing we didn’t already know from the last several years of US-China trade battles, particularly around high growth technologies. But the Chinese argument deserves close attention, because very often when US politicians, regulators and policymakers make the same point, they are shot down as protectionist, nationalistic or worse. This is true even within the US administration itself, where there seem to be two opposing camps.The first, Team Status Quo, is heavy on state department and commerce types. They want to believe that we can somehow travel back to the 1990s, a time of wilful blindness about a “one world, two systems” model in which China and liberal democracies would co-operate to their mutual benefit despite maintaining fundamentally different political and economic systems.The second, Team New Rules, includes Katherine Tai, the US trade representative, as well as other administration officials interested in labour, climate and long-term security issues. They have a more realistic approach, grasping that even if the US wanted to go back to a neoliberal trade approach that prioritised market access for big companies over better wages, the ability to make crucial products or the protection of the planet, China is going in another direction.Beijing’s so-called dual circulation plan is a decisive step away from World Trade Organization rules and multilateral agreements orchestrated by technocrats from the US and Europe. It prioritises self-reliance, indigenous innovation and the use of all strategic resources to shape a world where the US no longer calls most of the shots. That means settling more trade deals in renminbi, the better to reduce the financial leverage that the dollar gives the US. It also involves weaponising supply chains — various legislative loopholes in the US still allow states and companies to source supplies such as personal protective equipment from China.This is the state of play. The only question is how the US should respond. Team Status Quo should give up on the rather arrogant idea that the US can return to the Clinton era, or that the electorate wants to. And the US should craft a trade policy fit for today. The starting point should be goals. Rather than simply cutting new trade deals with no concrete understanding of how they connect to today’s geopolitical reality, the US should ask itself, “what kind of economy do we want to build?”.The new settlement should be economically fair and geopolitically secure, with an even playing field for businesses of all sizes, better wages and environmental standards, resilient supply chains and a thriving industrial commons. This is particularly important for innovation in industries such as semiconductors, where companies learn by making.Once the overriding goals are in place, the administration can articulate coherent policies and craft strategic trade deals. This is exactly what China does. In fact it goes further, incorporating trade as one part of a much larger economic vision that is measured in decades, not quarters — or in the case of America’s previous president, tweets. That kind of top-down planning is complicated, risky and inappropriate for the US. But more strategic thinking for a new world is not. “Trade is a tool,” says Lori Wallach, a trade lawyer who directs the Rethink Trade programme at the American Economic Liberties Project, a think-tank focused on breaking concentrations of economic power. “This administration has articulated goals like creating good jobs for workers with and without college degrees and strengthening economic resilience,” she adds, “and our trade policy and deals must deliver not damage that.”One timely example is the fight over the House Competes Act and the Senate Innovation and Competition Act. Both bills support more domestic chip production and rebuilding of critical supply chains. But the House bill has a deeper analysis of and approach to goods and capital offshoring, better environmental protections and stronger trade adjustment assistance. This is crucial for Democrats to avoid the mistakes of the Clinton era, when they pushed unfettered trade without adequate support for those who lost jobs, some of whom went on to support Donald Trump. For the Democrats, this was the most politically devastating policy choice of the past two decades. I could go on. There are numerous inconsistencies between White House goals and initiatives such as Buy America, which actually means Buy America plus 60 other countries with widely varied economies and political systems, or how we are thinking about pan-Asian trade and security. The point is that the US doesn’t have a new, unifying theory for trade policy in our post-neoliberal era. It needs one, [email protected] More

The US government bond market is signalling that the Federal Reserve will be able to tame inflation in coming years without snuffing out growth in the world’s biggest economy. Treasury yields jumped last week after a much stronger than expected US jobs report, as investors bet that strength in the labour market would give the Fed further impetus to tighten monetary policy as it sought to rein in the most intense consumer price growth in almost 40 years. Despite the upbeat figures on the labour market, which pointed to rising wage pressure, expectations for future inflation barely budged. A Treasury market measure known as break-evens indicated that inflation would recede to less than 3 per cent in five years. That would mark a significant fall from the 7 per cent rate recorded in December. Longer term break-even rates suggest that markets are expecting the Fed to succeed in pushing inflation back towards its 2 per cent target. The rising yields, coupled with steady inflation expectations, have pushed returns bond investors can expect to earn after inflation is taken into account sharply higher since the end of last year. Analysts say this increase in so-called real yields indicates traders are expecting the US economy to continue expanding in the years to come even as policymakers withdraw stimulus measures to slow intense price growth. The yield on 30-year Treasury Inflation-Protected Securities (Tips) — a proxy for the real yield on the 30-year Treasury bond — broke above zero on Friday for the first time since June 2021. It closed last year at minus 0.47 per cent, according to Bloomberg data. “The Fed’s control over the economy has just increased,” said Robert Tipp, head of global bonds at PGIM Fixed Income.In 2021, the US economy rebounded from the historic pandemic-induced recession by growing at the fastest annual pace since 1984. Vaccines, a return to work and robust federal stimulus have all bolstered the rebound. But until recently, that had not been reflected in the Treasury market. “Real rates were just absurdly low compared to economic fundamentals. So it only makes sense that they should be rising,” said Gregory Whiteley, portfolio manager at DoubleLine Capital. Friday’s jobs report was just the latest in a series of indicators to illustrate this recovery. The closely watched US payrolls report showed the economy added 467,000 jobs last month despite the recent rise in Covid-19 cases. It also included a substantial surprise upwards revision in jobs figures for November and December, and showed that wages had grown by more than expected.The market responded by sending yields on US Treasuries jumping, with the 10-year yield hitting its highest level since January 2020. The strong jobs report could have driven inflation forecasts higher: more jobs and higher wages give workers more money to spend, driving up demand for goods that are scarce because of problems in the supply chain. Instead, traders have coalesced around the view that the Fed has more room to lift interest rates and cool the economy. As a result they ended the week by upping their estimates of how many times the Fed would tighten policy this year to more than five quarter-point rate rises, from between four and five a day before.“Either the entire inflation market hasn’t gotten the memo or they have got the memo and the memo says inflation is going to come back to normal by the end of the year,” Chris McReynolds, head of US inflation trading at Barclays, said on Thursday.Yields on longer dated break-evens are “very well contained. There’s no thought of sustained levels of inflation”, he added.Real rates are still depressed by historical standards: the yields on five- and 10-year Tips notes remain below zero. Without further movement in real rates — or without a shift in inflation expectations — the yields on traditional Treasury bonds could stay low even as the Fed lifts interest rates.Though the pace at which consumer prices are rising is expected to have hit a fresh 40-year high in January, there is some evidence that momentum may finally be starting to flag. Economists polled by Bloomberg have forecast that core consumer inflation, which removes the effects of the volatile energy and food sectors, will rise in January at a slower pace than in December. Barclays economists cited moderation in the price pressures on clothing and on used cars for the expected shift. “I’m a believer that the Fed missed the whole inflation thing, that they spent too long insisting it was transitory. But that was the 2021 scenario,” said Andy Brenner, head of international fixed income at NatAlliance Securities. “I do believe that inflation is going to subside.” More

Investing.com – February started with a tug-of-war in markets, or with a game of follow-the-leader crossed with musical chairs. Outsized moves from tech giants Alphabet (NASDAQ:GOOGL) (+7.3%), Facebook/Meta Platforms (NASDAQ:FB) (-26.4%), and Amazon (NASDAQ:AMZN) (+13.5%) dragged the market along with it, best illustrated by the NASDAQ Composite’s yo-yo finish to the week. A surprisingly strong U.S. jobs report also suggested continued strength in the economy, while oil climbing to 7-year highs and cryptocurrencies back on the upward march are a reminder of the inflation hedge trade. The end result was a 1.5% rise for the S&P 500 on the week, with the Nasdaq up 2.4% and the Dow Jones Industrial Average up 1%.Which sets us up for a week with a CPI report and a slew of earnings reports. Many will be watching the Russia-Ukraine conflict as well, with its obvious geopolitical import as well as direct effects on the commodity sector.Here’s what you need to know to start your week:January saw the U.S. add 467K jobs, surprising economists and analysts who expected that the Omicron variant disruption might have a deeper impact. It’s a reminder of how much of the U.S. has decided COVID-19 is not a cause of huge concern, and also that the U.S. economy is fairly hot. Thus inflation.The CPI and Core CPI Report come out Thursday pre-market. Economists expect CPI to come in at a .5% increase month over month and 7.3% year over year, with core CPI (excluding food and energy prices) also expected at .5% month over month and 5.9% year over year. With rumblings that the Fed might not only hike four times this year but also jump straight to a 50 basis points hike in March, this report will have real weight.See also: Our Fed Rate MonitorOne way to read Meta Platforms’ muted guidance and earnings report was as a new sign that pandemic-related tailwinds are gone for tech companies. Amazon’s rebound after its reports was as much about the worst already being priced into the shares, as the company took a big hit in Q3.We’ll continue to get read-throughs on both “Covid plays” and “reopen plays” this week, with the following companies reporting:Peloton’s report will get extra attention with news breaking of Amazon’s purported interest in the fitness equipment and subscription company, which is at least a sign that Peloton could be up for sale. Uber will also have an investor day on Thursday morning following its report, which will be closely watched.See also: 3 Stocks to Watch In The Coming Week: Pfizer, Disney, PelotonThe other big story to watch across this earnings season is the impact of inflation on different companies. We have companies from the materials sector, consumer goods and food, and healthcare reporting, all of which should add to the picture of how widespread inflation is and whether there are signs of easing ahead, whether supply-chain related or otherwise.This batch of companies includes:See also: Our full earnings season calendarDiplomatic efforts and military maneuvering is set to continue between Russia and Ukraine as well as Western countries. Reuters reports that French President Emmanuel Macron is set to visit Russia to speak with President Vladimir Putin Monday and Tuesday, while the Washington Post reports that U.S. President Joe Biden is scheduled to meet with German Chancellor Olaf Scholz on Monday. This comes after reports of a briefing given by the Biden administration to U.S. congress officials that Russia has built up 70% of the necessary force to invade Ukraine entirely, though the briefing did not affirm that would be Russia’s final decision.The stakes for Ukraine and then Russia and the broader geopolitical landscape are significant, and from the market perspective, the price of Oil – which crossed the $90/barrier for the first time since 2014 as it continues its recent ascent – and natural gas will be in focus and susceptible to any resolution or escalation.See also: Energy & Precious Metals – Weekly Review and OutlookCryptocurrencies were an asset class that appreciated the turn of the calendar page. After losing nearly 20% in January, Bitcoin has risen nearly 8% in February, and Ethereum has risen nearly 12%.As ever, the question is what will be the incremental driver of price performance in the sector. The rebound has timed pretty closely with the Nasdaq’s (at least temporary) bottom from the January correction, suggesting that crypto performance – and maybe tech stocks too? – is just an output of risk appetite. With another part of the rationale for bitcoin, at least, being its use as an inflation hedge, the CPI report may have be the next catalyst, for higher or for lower.See also: Our cryptocurrencies section More

“The volatile situation will affect us at least beyond the first half of this year,” Murat Aksel, the head of procurement on the Volkswagen board said in an interview with Automobilwoche.Carmakers around the world have been hit by a shortage of semiconductors caused by COVID-19 supply-chain disruptions as well as soaring semiconductor demand at consumer electronic companies.Aksel said there were clearly structural issues at play, with demand set to continue to rise in the car making industry.As such, instead of looking at claiming damages from suppliers behind on chip deliveries, the focus was on working closely with them to ensure better availability, he said.It should become easier to make reliable predictions in 2023, when more semiconductor production capacity comes online, he said. More

BEIJING (Reuters) – The number of passenger trips during China’s Lunar New Year holiday this year is expected to have grown 31.7% from last year, China’s state television CCTV said on Sunday, citing the transportation ministry.The estimated number of trips totalled 130 million, CCTV quoted the Ministry of Transport as saying.(This story corrects name of ministry in second paragraph) More