🇦🇺 Australia's inflation cools, allowing a pause in rate hikes

Australia's monthly inflation gauge fell more than expected, bolstering arguments that the Reserve Bank (RBA) may extend a pause in policy tightening at next week's meeting.

A consumer price gauge rose 4.9% in July from a year earlier, while economists had expected 5.2%, data from the Australian Bureau of Statistics showed Wednesday. This marked the third consecutive slowdown, and the RBA predicts inflation will return to within the 2-3% target range by the end of 2025.

The cooling in prices will be welcomed by Governor Philip Lowe, who has put the central bank in data-dependent mode after raising interest rates 12 times since May 2022.

Expectations that the results would allow the RBA to keep its cool on Tuesday led the Australian dollar to widen losses, and three-year bond yields to fall, while stocks rose.

“With inflation easing globally, including in Australia, there isn't a strong argument in favor of hiking rates in September,” said Callam Pickering, economist at global job site Indeed Inc.

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The Grain Deal 2.0 emerges?

Details of an alternative to the grain deal prepared by Russia, Türkiye and Qatar have been revealed.

Russia is now considering supplying Türkiye with 1 million tons of grain to be processed and sent to countries in need, the Russian Foreign Ministry has said.

The deliveries are to be made at a preferential price "with financial support" from Qatar. After processing in Turkish companies, the grain to be sent to poor countries, mostly in Africa. The measure was proposed by Vladimir Putin as an alternative to the grain deal.

The Russian and Turkish foreign ministers will hold talks on this topic in Moscow from August 31 to September 1.

In mid-August, Bild reported that Russia, Türkiye and Qatar were preparing a new agreement to replace the grain deal in which Moscow suspended its participation on July 18.

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Poor Americans can’t afford food

A growing share of low-income Americans don't pay rent and can't afford food, which reinforces signs of a growing financial crisis in the economy.

Among households using enhanced Supplemental Nutrition Assistance Program (SNAP) pandemic benefits, 42% skipped meals in August and 55% ate less because they couldn't afford food. That's more than double last year's rate, according to a report released Wednesday by Propel Inc.

The data also show that households were worse off in August than they were a month earlier.

Since July, a growing share of low-income households have experienced a utility shut-off, failed to pay the previous month's utility bill, or been unable to pay rent.

More than two-thirds of respondents receiving increased SNAP benefits said they had some form of debt.

The report complements other recent data showing a decline in consumer finances and sentiment, particularly among lower-income households, as labor market demand cools, savings declines and pandemic social supports expire.

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🇨🇳 PetroChina posts record profit despite China's slowdown

China's biggest oil company posted a record first-half profit as rising production offset lower oil prices and a slowdown in the country's economy.

PetroChina Co.'s net profit in the six months ending June rose 4.5% to 85.3 billion yuan ($11.7 billion) from a year earlier, it said in an exchange filing. The company posted a profit of 82.39 billion yuan in the first half of 2022, which also was a record high.

The result was driven by strong growth in sales of refined petroleum products, as well as gains in the natural gas segment, which offset declines in the refining and chemicals segments, the company said.

PetroChina is also a "key beneficiary" of lower Russian oil prices and Beijing's easing of restrictions on gas prices, Citigroup Inc. analyst Toby Shek said in a note before the results announcement.

Crude oil production rose 5% and gas production rose 6.7%. Refining and chemical profits fell 24%. PetroChina aims to increase oil production this year to the equivalent of 1.73 billion barrels.

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😁 Goldman Sachs bought UK and US companies with Chinese funds

Goldman Sachs has acquired a number of US and British companies in critical industries with a fund created with financing from the Chinese government. That included companies engaged in cybersecurity, as well as providing services to the British government, the Financial Times reported, citing sources.

According to sources familiar with the fund's operations, seven deals have been struck involving $2.5 billion in direct investment from a partnership fund established with the participation of China's sovereign wealth fund, China Investment Corporation.

This has allowed China to create indirect assets in companies operating in critical industries.

It is noted that the deals included a startup that tracks global supply chains, a cloud computing consultancy, a drug testing company and a maker of systems used to run artificial intelligence systems, drones and batteries for electric cars.

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🇲🇱 Russia vetoed draft UNSC resolution on Mali sanctions

Russia has vetoed a UN Security Council (UNSC) draft resolution co-authored by France and the UAE to extend the sanctions regime against Mali.

The sanctions included an asset freeze and a travel ban on those who, according to the sanctions committee's experts, are obstructing the implementation of the 2015 peace agreement.

Russia prepared an alternative draft resolution calling for a final extension of the sanctions until August 31, 2024, and proposing the immediate dissolution of the panel of experts. But the Russian draft was not adopted because it did not garner the number of votes necessary.

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🇫🇷 French inflation accelerates, ECB ponders rate

French inflation accelerated in August, adding further evidence of ongoing pressures in the region as European Central Bank officials prepare to decide whether to raise interest rates further.

Consumer prices in the euro zone's second-largest economy rose 5.7% from a year earlier, statistics agency Insee said Thursday, well above the median forecast of 5.4% in a survey of economists.

The exceeded forecast was driven by higher energy prices.

Together with data released on Wednesday showing inflation remaining above 6% in Germany and accelerating to 2.4% in Spain, policymakers now have a picture of steadily rising consumer prices in three of the region's four largest economies.

ECB Governing Council members believe the inflation data is crucial for the upcoming Sept. 14 decision on whether to raise rates again for the 10th consecutive meeting or pause the historic tightening campaign.

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🇨🇭UBS breaks banking records, yet thousands to lose their jobs

UBS Group AG posted the biggest quarterly profit among banks in its emergency takeover of Credit Suisse in the Q2 and confirmed it will fully integrate the local business of its former rival by next year.

The $29 billion profit is the result of the accounting difference between the $3.8 billion price UBS paid for Credit Suisse and the value of the acquired lender's balance sheet. Underlying earnings for the first combined UBS-Credit Suisse quarter were $1.1 billion.

UBS CEO Sergio Ermotti is now working to realize one of the largest mergers in global financial practice. The deal was hastily arranged in March when Credit Suisse was on the verge of bankruptcy after customers lost confidence in the 167-year-old bank.

Ermotti confirmed that the merger would result in 3,000 job cuts in Switzerland alone. The task of integration is likely to entail thousands more layoffs around the world and will come with legal risks and potential cost increases.

Nevertheless, UBS currently has more than $5 trillion in assets and is valued by investors at the highest level of any major European bank.

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🇺🇸 Walmart cuts wages and hours as workload increases

Walmart is offering some of its 16,000 pharmacists across the US a voluntary pay cut by reducing their work hours to cut costs.

For example, a pharmacist could go from an 80-hour, two-week pay period to one lasting 64 or 72 hours.

Yet Walmart says it is cutting back on hours for some pharmacists, citing lower demand for medications during the summer and requests from pharmacists for better work-life balance.

The previously unreported cuts, which are aimed at higher-paid pharmacists, signal new challenges for the company.

In addition, Walmart agreed to pay $3.1 billion as its share of the opioid litigation, increasing its legal costs this year.

At the same time, the growing popularity of diabetes drugs, which have become popular weight-loss products, has further added to the workload. Pharmacists complain about it because they have to fulfill the same volume of prenoscriptions with fewer people and work hours, according to posts on social media and independent message boards frequented by Walmart employees.

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Dell, HP and others to make laptops in India

At least 32 international electronics companies have applied for India's program to boost the production of laptops, tablets, and servers in the country, a senior minister said on Wednesday, weeks after the government announced restrictions on laptop imports.

The government is seeking to boost domestic manufacturing capacity under the 'Make in India' initiative, with several international companies either setting up their units or entering into joint ventures with Indian firms.

Among the companies that have applied are Hewlett Packard Enterprise Co, Dell Technologies, Asus, Acer, and Lenovo, Vaishnavi said, according to the news agency ANI.

The PLI scheme for IT equipment is expected to bring in 24.3 billion rupees ($294.24 million) in additional investment and is likely to create 75,000 direct jobs.

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🇻🇪 Venezuela oil bond rallies 160% because of CITGO

Venezuela's state oil producer stopped paying creditors nearly six years ago. Its exports are restricted by the United States. Washington refuses to recognize the government that controls the company. Still, investors who bought one of the company's bonds appear to be in for a big payout.

Petroleos de Venezuela SA bonds due in 2020 have risen about 160% over the past year.

The reason is that in selling the debt, the Venezuelan government pledged a 50.1% stake in the parent company of its US refiner Citgo Petroleum Corp. as collateral.

Now, after a lengthy legal battle, a US judge has set a date to begin the process of auctioning off Citgo's holding company. And bondholders top the list of creditors to be paid.

The market expects that the bond will get settled next year. It is secured by shares of PDV Holding subsidiary, which owns the group's only asset - Citgo - a group of three oil refineries and a network of gas stations.

EMFI Securities, which believes the bonds are undervalued even after their recent run-up, estimates that the auction could raise more than $13 billion, given Citgo's strong earnings performance.

The Venezuelan opposition, recognized by the US and controlling Citgo, is trying to challenge the validity of the bonds in New York State's highest court. This process, which has not yet been finalized, is now holding back the bond price.

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😄 EU needs recession, expert says

Western countries will probably not be able to avoid inflation without a recession as their labor markets remain too tight, says JP Morgan Asset Management strategist Karen Ward.

The former Bank of England economist who is an adviser to UK Chancellor of the Exchequer, stated that such an outcome is likely because policymakers will need to keep borrowing costs high.

“Markets bought into this idea that we could have resilient growth across the west and yet all those inflation pressures would disappear on their own and the central banks could move from tightening to easing,” she told Francine Lacqua. “Sadly, I think it is going to require that weakness.”

Markets have not yet fully come to terms with the prospect of higher rates, and their surprise last week after unfavorable business surveys pointed to weakness in the economy underscored that.

“The likelihood of a recession I think is still high,” Ward observed. “That’s what’s going to get rid of inflation.”

🤓 From "destroying Russia's economy" to "recession to avoid inflation" in just one year, kudos to the EU

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🇨🇳 China intensifies campaign to prop up economy

China has stepped up efforts to stimulate the economy and support its currency amid lingering investor concerns about growth prospects.

The central bank will reduce for the first time this year the amount of foreign currency deposits that banks are required to hold as reserves, the People's Bank of China said on Friday.

The decision came hours after authorities announced a stimulus for the battered real estate sector and unveiled plans to expand tax breaks for child and parental care and education.

The down payment and mortgage rate have also been lowered. The minimum initial down payment will be 20% for first-time buyers and 30% for repeat buyers.

China is also proposing to remove restrictions on buying homes in non-core areas of major cities such as Beijing, Shanghai and Shenzhen. Such restrictions, including on the number of properties people can buy, have been in place in many cities since 2010.

The PBOC has ramped up support for the currency via tools such as setting a stronger-than-expected daily reference rate, prompting state banks to sell dollars and tightening offshore yuan liquidity to squeeze shorts.

The measures are the latest move to boost confidence in the world's second-largest economy, which is sagging under the weight of the ongoing housing crisis, weakening global demand and rising unemployment.

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🇮🇹 Italian factories cut staff amid ongoing recession

Italian plants have begun laying off staff as the country's manufacturing recession shows no signs of easing.

The euro-zone’s third-biggest economy shrank more than previously measured during the Q2, according to separate data released on Friday.

The PMI reading improved from the previous month, but the new reading is clearly below the 50 level, indicating contraction, and also falls short of the median estimate of economists.

“The manufacturing recession which started mid-last year continues to stretch out,” Tariq Kamal Chaudhry, an economist at Hamburg Commercial Bank, said in an accompanying analysis.

The worsening economic outlook could be a problem for Prime Minister Giorgia Meloni's government, which is to present a budget later this month and had been counting on economic growth to meet deficit targets.

After a strong start to 2023, Italy’s contraction in the three months through June came as a surprise, with the new estimate showing a 0.4% contraction, rather than the 0.3% previously estimated.

Analysts now forecast growth of just 0.1% in each of the remaining quarters.

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Novo Nordisk overtakes LVMH as EU's most valuable company

Danish drug maker Novo Nordisk briefly replaced LVMH from the top spot on the list of Europe's most expensive companies in intraday trading on Friday.

LVMH, the world's largest luxury retailer, has been hurt by growing concerns about the outlook for the Chinese economy.

Meanwhile, Novo is riding a wave of demand for its highly effective diabetes and weight-loss drugs Ozempic and Wegovy, driving its earnings and shares to record highs.

Novo's share price has roughly tripled over the past three years, while the share price of LVMH, which owns fashion brands Louis Vuitton and Dior, has doubled.

Within a decade, annual sales of weight loss drugs are expected to reach $100 billion. According to Barclays, the current sales volume is about $6 billion.

💊 Drugs are the new gold?

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🇩🇪 Half of Germans fear economy collapse

According to Der Spiegel data, 50% of Germans believe that in 10-15 years Germany will cease to be one of the world's leading economies.

More than half of German businessmen are sure that Germany has passed its peak of development.

According to 76% of businessmen, the high cost of electricity in Germany will lead to deindustrialization.

German GDP stagnated from April to June compared to the first quarter, as reported by the Federal Statistical Office at the end of July. Prior to that, it had contracted for two consecutive quarters.

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🇪🇺 EU’s Borrell: 10 new countries may join

Head of European diplomacy Josep Borrell said that the European Union should start preparing for a significant enlargement. He explained that the organization may include ten new states.

This is the first time that a Brussels official of such a level has explicitly proposed to define a specific timeframe for new countries to join the EU.

"The idea of enlargement hovered over our discussion. Ukraine should become a new member of the EU, the Western Balkans too," Borrell said. Yet the official did not name which countries are guaranteed to join.

He also stated that it was necessary to consider the timetable for the admission of new members.

Currently, the official candidates for accession are North Macedonia, Albania, Serbia, Türkiye, Montenegro, Ukraine, Moldova, Bosnia and Herzegovina.

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🇨🇦 Canada posts surprise GDP decline in Q2

Canada's economy unexpectedly contracted at a 0.2% annualized rate in the Q2, according to data released Friday, likely allowing the central bank to hold rates in the face of a possible recession.

The second quarter figures were well below the Bank of Canada's (BoC) forecast for GDP growth of 1.5% year-on-year and the 1.2% growth expected by analysts.

"The Canadian economy may already have fallen into a modest recession," said Stephen Brown, deputy chief North American economist for Capital Economics. The figures "leave little doubt that the Bank of Canada will keep interest rates unchanged next week," he said.

The quarterly slowdown was largely due to declines in housing investment and smaller inventory accumulation as well as slower international exports and household spending, Statistics Canada said.

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🇧🇷 Brazil is importing Russian grain again

Russia exported $108.5 million (380,000 tons) worth of grain to Brazil in January-July, making it the fourth largest supplier to the country.

The last time Russia made large supplies to Brazil in January-July in 2010, but their total volume then amounted to only $5.6 million.

Brazil also bought grain in smaller volumes from Russia in 2013, 2014 and 2019.

For the first seven months of 2023, the largest grain supplier to Brazil as usual was neighboring Argentina (2 million tons of grain, $736.3 million), with Paraguay (886,000 tons, $290 million) ranking second in the top 5. Uruguay, in third place (544,000 tons, $211 million), increased its shipments 1.9 times compared to 2022. The top five is rounded out by the United States, which increased its shipments 1.7 times to 80,000 tons ($20.85 million).

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