Recession expectations become entrenched

Published: Tue 12 July 2022
Updated: Tue 22 November 2022
By steve

In Markets.

Tuesday 12, July 2022

Wrap

China is imploding, because President Xi has made terrible decisions about how to handle Covid-19, and cannot lose face by following the example of the rest of the world. This will crater demand from China, which had driven down more or less every last commodity price. The growing expectation that the world is heading for a severe recession hasn’t helped. President Biden is about to head off to the Middle easat to kow-tow to MBS and other despots to ask them to increase oil production. OPEC itself produced a report predicting that demand is continuing to grow, and that the capacity to increase production is every limited.

Sanctions against Russia continue to be applied, but it’s unclear to what extent this will reduce output. India and China continue to import Russian oil, as Europe continues to import Russian gas. My take on this is that the West is pretending to take a hard line against Russia.

The dollar went up a lot (2.6%) against the Chilean peso. Don’t know why: maybe the publication of its new, rather left-wing constitution. Commodity currencies, such as Brazilian Real and Norweigen Krone were also hit.

Equity markets were weak, but not catastrophically so. Poland was down 2.6%, the SPX 0.86%.

Nearly everywhere, sovereign yields were down. This was a risk-off day. Bitcoin stands at $195K.

Then there were eight

I am too busy to keep up with the Conservative leadership campaign. I saw some reference to Tom Tugenhat as having a ‘policy heavy’ campaign. From what I can tell, it amounted to reducing fuel duty by 10p a litre, scrapping the increase in NI, and, err, scrapping a few regulations which supposedly were imposed on us against our will by the EU (Solvency II, presumably). Oh, and spending a lot more on the army, of which he used to be a part. Oh, and there is something about being in favour of free speech. Oh and “scrapping the green agenda”. Oh, and “run the NHS better”. Oh, and opposing vaccine passports.

He was nasty to Roger Scruton, which in my book is a big black mark, but it seems that he did apologize (sort of).

I suppose it’s too much to expect any of the eight to give a view about a land-value tax, or UBI, or housing policy, or real free trade (i.e. scrapping import tariffs), or competition policy, or leasehold reform, or digital freedom, or supply side reforms, or agricultural subsidies …

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