Germany closed the QatarEnergy deal, securing a two-million-ton supply of liquefied natural gas (LNG) per year; US Fed intends to slow down rate hikes; Saffa support factors for trade are eroding as the surplus steadily reduces; UK economy officially in a recession as of this mid-November gone; Japanese core consumer prices overtaking wage growth; Aussie Reserve Bank plans to introduce smaller rate hikes in the coming calendar year.
USD: US FED TO SLOW RATE HIKES
US Fed Officials have come to the consensus that slowing down rate hike impositions would be beneficial to the economy. This past year the US economy has been riddled with aggressive rate hikes, which has contracted US business activity for five months in a row to date. However, the US housing market continues to prove resilient as the sales of single-family homes boomed by 7.5% in October, which in the short-term cancels out rising mortgage rates and real estate prices. The number of Americans filing for jobless claims has spiked to a three-month peak as of last week, though the data supporting this insight is negatively affected by the seasonality of the Christmas holiday season, where a lot of folks usually work less hours around this time of year.
EUR: GERMANY CLOSED THE QATAR LNG DEAL
On Tuesday, QatarEnergy's CEO announced that Qatar's state-owned oil and gas company will send two million tons of liquefied natural gas (LNG) to Germany per year. With QatarEnergy, around 2.7 billion cubic meters of natural gas will be delivered to Germany every year. A little over half of this natural gas comes from Russia. The resultant Eurozone consumer confidence increase of 3.6 points in November is a strong indication of better European business morale, as it appears to be that the worst of the Russian LNG crisis is behind them. Supply chain headwinds will moreover weaken, as German manufacturers now have more LNG to invigorate their power-intensive production operations. In December, the ECB will increase interest rates by 50 or 70 basis points to bring inflation under control.
ZAR: SUPPORT FACTORS ERODED BY INCREASING TRADE DEFICIT
According to Statistics South Africa, the year-to-date cumulative trade surplus was R175.42 billion in September, down from R346.88 billion last year, due to rising import volumes and waning price effects, while export volumes have been relatively weak. On a year-to-date basis, platinum, palladium, and iron ore dollar prices fell by 14.1%, 13.7% and 30.4%, respectively, at the end of October. The surge in coal prices reflects the additional European demand for coal following Russia's invasion of Ukraine, which resulted in gas supply shortages. Contemporaneously, international oil prices increased 46.5%, while the Rand exchange rate was 10.7% weaker against the Dollar.
GBP: BRIT ECONOMY OFFICIALLY IN RECESSION
According to official data, Britain's economy contracted by 0.2% in the three months to the end of September, and last week the Office for Budget Responsibility estimated it would remain in a recession until late next year. In its forecast for the Group of Seven rich nations, the Organization for Economic Cooperation and Development (OECD) predicted Britain's output would fall the most next year. In his autumn financial statement, Chancellor of the Exchequer (Finance Minister) Jeremy Hunt announced further tax increases and spending cuts. After raising interest rates 75bps earlier this month, the Monetary Policy Committee is expected to raise them 50bps by 15 December.
JPY: WAGE GROWTH MUTED BY RISING CORE CONSUMER PRICES
In November, core consumer prices in Tokyo, a key indicator of nationwide trends, grew at the fastest annual rate in 40 years. For the sixth consecutive month, the central bank exceeded its 2% inflation target. The increase has cast doubt on the Bank of Japan's (BOJ's) view that recent cost-push inflation will be transitory. Interest rates have been kept ultra-low by the Bank of Japan (BOJ) in anticipation that inflation will slow down next year as fuel price gains fade. It is for this reason that the BOJ remains an outlier in a world of monetary tightening. According to BOJ Governor Haruhiko Kuroda, wages must rise enough to offset an increase in goods prices for inflation to sustainably hit 2%.
AUS: SMALLER RATE HIKE PLANS BY THE RBA
Interest rates have been raised by 275 basis points by the Reserve Bank of Australia (RBA) this year to a nine-year high of 2.85%. As a result of these rate hikes, home prices have dropped, which prompted the RBA to reduce its pace of rate hikes. Another concern is that aggressive tightening would cut household spending sharply, as Australia is an economy that has a lot of its consumer wealth locked up in real estate assets.
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