Economy

(Reuters) – A look at the day ahead in Asian markets. The prospect of looming U.S. rate cuts was back on the front burner after an inflation report, which had kept markets on edge ahead of its release, showed a tame reading.Wednesday’s consumer price index showed a moderate rise in July with the annual increase in U.S. inflation slowing below 3% for the first time in nearly 3-1/2 years.Following the July CPI data, the question investors seemed to be debating was not whether the Fed would cut rates at its Sept. 17 to 18 meeting, but by how much. Traders appeared to be leaning toward a more modest 25 basis point cut, but 50 bps was not ruled out. Nearly 40% odds were put on the bigger cut in September, according to CME FedWatch. The Fed’s annual Jackson Hole gathering, set for Aug. 22 to 24, will give Chair Jerome Powell a chance to fine tune his rates message ahead of the meeting.Much more U.S. economic data also will arrive in coming weeks, starting on Thursday with the monthly retail sales report and the weekly jobless claims data. The reports are likely to receive even greater scrutiny given the weak employment data at the start of August that sparked some concerns about a potential recession. That employment data also was a catalyst for a bout of severe volatility and equity downside to start August, but markets seemed to be moving further and further from those wild swings.The S&P 500 ended up 0.4% on Wednesday after the tame CPI report, with the benchmark index now down less than 4% from its all-time high reached in July. The Cboe Volatility index continued to recede, ending at just over 16 on Wednesday after shooting above 65 on Aug. 5.In another sign of revived animal spirits on Wednesday, candy giant Mars was set to buy Cheez-It maker Kellanova for nearly $36 billion, in the year’s biggest deal to date. Rate cuts were gripping other regions as well. New Zealand’s central bank slashed its benchmark rate for the first time since March 2020 and flagged more cuts over coming months. Elsewhere, GDP data was expected on Thursday for Japan, as investors in the country were still digesting news that Prime Minister Fumio Kishida will step down in September.Meanwhile, China is set to release a spate of data, including retail sales. A number of gloomy reports have dulled expectations for China’s economic performance in July.Here are key developments that could provide more direction to markets on Thursday:- China industrial output, retail sales (July)- Japan GDP (Q2)- U.S. retail sales (July) More

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The inflation data overall for July are “supportive of a sustained disinflation trend,”  Macquarie said, and when combined with the recent softening in the labor market strengthens the case for near-term Fed rate cuts. “We continue to anticipate a rate reduction of 25 bps in September with cuts also likely in November and December,” the economists added. The bets on a series of rate cuts ahead followed a duo of CPI and PPI reports that underscored progress on slowing the pace inflation. Data on Wednesday showed the consumer price index slowed to a 2.9% pace from a 3.0% pace in June, compared with economists estimates for 3%.Stripping out more volatile items like food and fuel, the “core” number climbed by 3.2% in the twelve months to July, below projections of 3.3%. The CPI and PPI readings are estimates to result in a  0.14% month on month rise in the core PCE, the Fed’s preferred inflation gauge, for the month.Still, while a rate cut is widely expected in September, the size of the cut or futures cuts will hinge on “the data flow, with inflation and employment readings taking on particular importance.” More

(Reuters) – The Hollywood actors’ union SAG-AFTRA announced on Wednesday a deal with online talent marketplace Narrativ that enables actors to sell advertisers rights to replicate their voices with artificial intelligence. As performers fear AI will make theft of their likenesses common, the new agreement seeks to ensure actors derive income from the technology and have control over how and when their voice replicas are used.“Not all members will be interested in taking advantage of the opportunities that licensing their digital voice replicas might offer, and that’s understandable,” SAG-AFTRA official Duncan Crabtree-Ireland said in a statement. “But for those who do, you now have a safe option.” Narrativ connects advertisers and ad agencies with actors to create audio ads using AI. Under the deal, an actor can set the price for an advertiser to digitally replicate their voice, provided it at least equals the SAG-AFTRA minimum pay for audio commercials. Brands must obtain consent from performers for each ad that uses the digital voice replica. The union hailed the pact with Narrativ as setting a standard for the ethical use of AI-generated voice replicas in advertising. Actress Scarlett Johansson drew attention to the perils earlier this year when she accused OpenAI of copying her voice for its conversational AI system. The technology was also a key issue in last year’s Hollywood strike, the first simultaneous strike in 63 years by actors and writers. Video game voice actors and motion-capture performers called a strike last month over failed labor contract negotiations focused on AI-related protections for workers.Legislation called the NO FAKES Act has been introduced in Congress and would give every person a right to their own voice and likeness, making AI copying without permission illegal. SAG-AFTRA, the Motion Picture Association, The Recording Academy and Disney support the bill.Proliferation of so-called deepfakes, which are highly realistic videos generated by AI trained on actual voices and images, and their role in manipulating public opinion have also raised alarm worldwide. More

“[W]e still see the December monetary policy meeting as the most likely date for the next interest rate increase,” Nomura said. A December hike, which would mark the third July, could come even if inflation doesn’t pick up pace as the BoJ’s July summary of opinions signaled a shift among the central bank’s policymakers. The policymakers still view the monetary policy conditions even after the 0.25% hike in July, and despite expectations for core inflation to trend sideways at a rate of more or less 2% year over year, Nomura said.  “[T]his suggests to us a change in its policy response function such that it is likely to raise interest rates even if inflation trends sideways without rising,” it added. While the recent market volatility forced BoJ Deputy governor Shinichi Uchida in a speech on Aug. 7, to underline that rate hikes aren’t on a pre-determined path and would depend on economic and inflation data, the deputy BoJ chief remarks doesn’t “rule out the possibility that the BOJ could raise interest rates if stability returns to financial markets,” Nomura added. Others, however, aren’t so sure that policymakers are eager to increase rates and would need to wait for further evidence of price pressures likely driven by wage hikes.  Looking at the summary of opinions from the July monetary policy meeting, there was “only one view” that could be categorized as hawkish, Barclays said in a Wednesday note. “Otherwise, there were some opinions biased against rate hikes, and even among the comments supporting them, cautious remarks stood out,” it added. The BoJ would likely need to wait until at least the December meeting to confirm “that the next wave of service price markups is reflected on the nationwide CPI data,” Barclays said, though now expects the next BoJ rate hike in January rather than April on expectations that wage pressure will move the inflation needle.The new year will deliver a clearer a outlook on the annually negotiated wage hikes, or “shunto,” which will likely be reflected on macro wage data, Barclays added.   More

OTTAWA (Reuters) -North American industry groups and shippers are bracing for an unprecedented simultaneous stoppage at both of Canada’s main railway companies that could inflict billions of dollars’ worth of economic damage.Canada is the world’s second-largest country by area and relies heavily on trains to transport grain, beans, automobiles, potash, coal and other goods.”It’s a catastrophe. Literally nothing would move,” said Greg Northey, vice president of public affairs at Pulse Canada.Talks between Canadian National Railway (TSX:CNR) and Canadian Pacific (NYSE:CP) Kansas City on one hand and the Teamsters union on the other have deadlocked, with each side accusing the other of bad faith.The rail companies say they will start locking out workers on Aug. 22 if they cannot reach a labor deal, while the union says it is ready to call a strike for that date.Industry groups want the Liberal government of Prime Minister Justin Trudeau to prevent a stoppage, noting Canada’s railways transport around C$380 billion ($277 billion) worth of goods annually.”Factoring in the millions of Canadian jobs that would be impacted, the magnitude of the disruption is daunting,” the Business Council of Canada lobby organization said in an open letter to Trudeau and Labour Minister Steven MacKinnon.U.S. FREIGHT TRAFFIC IMPACTEDA stoppage would also hit the United States, given the degree of integration between the two economies. Canada sends around 75% of all goods exports south of the border. The networks of the two Canadian rail operators, CN and CPKC, connect with several key U.S. rail and shipping hubs such as Chicago, New Orleans, Minneapolis and Memphis. CPKC’s network also extends further south connecting with ports on both the east and west coast of Mexico.CN said on Tuesday it was putting in place an embargo on any new reservations for movement of hazardous materials, security-sensitive cargoes or refrigerated containers originating in Canada, starting on Thursday. It also announced it was embargoing all intermodal traffic originating from over half a dozen U.S. hubs with which its network connects, starting on Friday. Separately, U.S. rail operator Norfolk Southern (NYSE:NSC) on Tuesday advised customers that it was embargoing all hazardous and security-sensitive cargoes to or from CN and CPKC’s networks effective immediately. It said additional embargoes may come in case of any work stoppages at the Canadian rail operators.Some U.S. companies find it more efficient to use Montreal or Vancouver for imports and exports.U.S. logistics firm C.H. Robinson, which manages more than 650,000 loads across the border a year, said it was lining up extra trucking capacity on both sides of the border. “When all trains serving the entire country could literally be stopped on their tracks, that’s another whole level of disruption,” said Scott Shannon, a senior executive at C.H. Robinson.PRESSURE MOUNTSIndustry groups say MacKinnon has the power to refer the dispute to the country’s labor relations board and thereby head off a stoppage.MacKinnon has so far said he wants the two sides to strike a deal at the negotiating table.Pressure on Ottawa looks set to mount in the coming days as industry groups hammer home the potential costs of a stoppage.Earlier this week, Morgan Stanley in a note to clients said that each week of shipment disruptions could dent the earnings before taxes of mining giant Glencore (OTC:GLNCY) by an estimated $100 million, or more, as a rail shutdown would disrupt coal shipments from its majority-owned unit, Elk Valley Resources. The Chemistry Industry Association of Canada said chlorine shipments would soon become unavailable, hitting the quality of drinking water within two weeks.”There are very large municipalities that – if the strike goes on – are going to be under boil water advisories,” CEO Bob Masterson said by phone, noting that the industry moved more than 500 rail cars a day.”There is no plan B … to transport this kind of volume you will need 2,000 trucks, roughly. There aren’t 2,000 trucks, and there aren’t 2,000 drivers,” he said.($1 = 1.3721 Canadian dollars) More

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