Unemployment is on a rise

According to one Citigroup economist, a high employment rate of 5.2% and rapidly rising wages has led to a build-up of inflationary pressure in the overall economy. This will greatly impact the current job situation. September is expected to bring more high-level job openings and wage increases. Many experts have suggested that the continued rise in wages signal demand is a major factor. Experts also suggest that skill mismatch has also been a major reason for the rising inflation levels and wage rise, not witnessed earlier in the decade.

Other major concerns

It is being considered that supply chain issues and other issues have led to a spurt in inflation, which needs to be abated. Per unit labor costs are still comparatively lower for companies as per the productivity ratios. The current wage rise is seen as consistent with the long-term inflation objective. Rising wages can also be considered positive in some sense. Fed officials have also been expecting high inflations and rising home prices. The chief economist of Moody’s Analytics commented, they have been analyzing inflation constantly, but inflation has not been yet at the red signal, not even yellow.

This is a major concern that advanced economies have to look into and come up with an appropriate solution for. The labor market needs to be developed and the Federal Reserve also needs to implement measures to deal with the broadening inflationary pressures. 

The United Nations Economic and Social Commission for Asia and the Pacific’s report titled “Foreign Direct Investment Trends And Outlook In Asia And The Pacific 2020/2021” showed that India had accounted for 77 percent of the inflows in 2019. 

Although FDI flows in South and South-West Asia witnessed a fall from USD 67 billion to USD 66 billion in 2019, a 2 % fall, India gained a sizable contribution from the FDI, receiving USD 51 billion in 2019, which is a 20% hike from 2018. 

Information and Communications Technology (ICT) and the construction of the sub-sector attracted the most contributions; national brands in the E-commerce sector have also secured major investments. 

The FDI outflow from South and South-west Asia has aided steady growth for the past four years; an increase from USD 14.8 billion in 2018 to USD 15.1 billion in 2019, suggests the report. However, India and Turkey have a massive share in the FDI outflow. India alone has contributed 80% to total FDI outflow and has invested 12.1 billion in 2019 toward FDI, which is a whopping 10% increase from 2019. 

The report also indicates a drop in FDI inflows and outflows in South and South-west Asia. This declining trend can be noted through the fall in greenfield FDI by 43% for the first three quarters of 2020 when contrasted with the first three quarters of 2019. 

 Factors like large market size, the central attraction of global venture capital firms and IT giants, business process management, and electronic companies will give India a competitive advantage against its South Asian neighbors.

Elaborating on the impact, the Union Minister said that as agriculture contributed to several companies cutting across industries, the ongoing disruption in the agriculture sector was bound to have an adverse impact on the country’s economic outlook in the future. This is specifically concerning as the Indian economy is among the worst-hit economies in the world due to Covid-19. It suffered its biggest jolt by recording a negative growth of 23.9% in the April-June quarter of the FY 2020-21 due to strict lockdown imposed by the government. However, the economy made a swift recovery in the second quarter by lowering the negative growth rate to 7.5%. The significance of the agriculture sector for the Indian economy is huge. A chunk of India’s population (around 60%) is still dependent upon farming. The agriculture sector contributes around 15% of the country’s GDP, and importantly, the farm output is used as input by many allied sectors.

Farmers are now protesting for weeks against the three new farm bills passed by the Indian Parliament recently. Touted as landmark agriculture reforms, these bills aim to bring comprehensive reforms in the country’s agriculture sector. However, farmers not happy with these new laws and protesting that these will have an adverse impact on their income. The farming community is also complaining that these laws are in favor of corporates while their interest has not been taken into account while framing these laws.

The finance ministry in Switzerland put out a statement regarding the details of the trip. It revealed that the Switzerland President will meet the rulers of Abu Dhabi, Saudi Arabia, and Dubai during his visit to the region between October 26 and October 29. However, it is important to point out that in addition to the Swiss President, some of the heavy hitters from the Swiss banking industry will also be in attendance. The Chief Executive Officers of Credit Suisse and Citigroup are going to attend the meeting. On the other hand, fund managers like BlackStone and BlackRock will also be part of the deliberations.

The banking executives and the fund manager will only attend the leg of the tour in Riyadh. It is one of the biggest financial conferences in the Gulf region and it is no surprise that some of the biggest names from the industry are going to visit. Saudi Arabia has pledged to make massive investments in its country in order to build up its infrastructure and it is no surprise that financiers are keen to get a piece of the action. The event was held last year as well but it was generally boycotted by prominent banks due to the killing of journalist Jamal Khashoggi.

The senators who have filed the bill are Sharif Street and Daylin Leach. The legislation, if passed, would enable anyone aged 21 and above to cultivate, purchase, and possess cannabis.

The bill includes provisions for social justice, encouraging equity in this industry. Moreover, it also includes eradication of previous marijuana convictions in addition to offering individuals with low income a chance to avail interest-free loans for participating in this market.

Per the reports, the bill would enable adults to grow up to 10 plants of cannabis for personal usage. Apart from that, there would be permissions for marijuana deliveries along with lounges for social use at dispensaries.

In his statement, Leach termed the cannabis policy of Pennsylvania irrational, cruel and expensive. He also said that getting this bill to pass would be a difficult battle similar to the one with medical marijuana. He was quoted as saying,

“We did that, and we’ll do this too.”

It is vital to note that the Governor passed a bill that legalized the medical usage of cannabis in Pennsylvania back in 2016. Although marijuana is considered to be helpful in a number of medical conditions, it can’t be recommended to use long-term for Glaucoma.

Street also expressed his opinions by saying that the end to cannabis prohibition is overdue and it’s time for them to be a part of the emerging economy of cannabis “with the legalization of the Adult Use of Cannabis in PA.” When adults use it responsibly, it shouldn’t be construed as a crime, he added.   

The bill intends to restrict the big marijuana companies’ influence and empower smaller businesses to venture into the market. According to the reports, the present dispensaries of medical cannabis would be able to sell recreation-based products if they keep the supply chains separate. Also, micro growers would be allowed to cultivate a maximum of 150 plants; the permits would cost 250 dollars annually. One owner is allowed to operate not more than 3 shops.

The press release shared by the lawmakers also revealed that the retail sales of cannabis would have 17.5 percent tax. As per the lawmakers’ predictions, it would generate about 500 million dollars during its first implementation year. The report also noted that the revenue would mostly be directed to schools that would decide the spending of their shares.

In order to acquire wide public support, Leach has also unveiled a website. He also said that it would be a moral, political, and economic win for both sides, keeping the black market down.

All in all, the bill seems to have everything to create excitement among all the marijuana advocates – from personal cultivation to home deliveries and social utilization lounges. Whether it sees the light of the day, remains to be seen.

The Asian stocks had recovered in the last couple of months as the negotiations were going on smoothly and also the stimulus provided by the Chinese government has put the Chinese economy on recovery. But now with Trump’s comment of increasing tariffs, the investors are jittery, and the prices of oil and other products fell weakening the Chinese currency. The Hang Seng fell by 3.3%, the Taiex, Taiwan index fell by 1.8% and the S&P 200 in Australia reduced by 0.8%.

Though the Japanese and the South Korean market was closed today, the Nikkei futures fell by 1.9%. Europe is also not likely to be spared of this impact with Germany’s DAZ expected to open at 1.7% lower than the previous day and CAC of Paris down by 1.6%.

The offshore yuan was at 6.8215, and the onshore yuan ended at 6.7805 for a dollar. The euro fell by 0.1% and was at $1.1193, and the dollar index was at 97.579 up by 0.06%.

To add to the threat by Trump, there are conflicting reports of China canceling the talks, but the Chinese Vice President has plans to visit Washington this week leading to confusion in the market. There are many analysts who opine that it is a tactic by Trump to make China agree to the terms laid out by the US. A leading analyst said, “I think this has got the potential to be a real game changer. There is still a question of whether this is one of the famous Trump negotiation tactics or are we really going to see some drastic increase in tariffs. If it’s the latter, we’ll see massive downside pressure across all markets.”

The Commodity markets which were on a high after trade sanction on Iran and reduction in oil production by OPES saw a reduction in oil prices to a 5 week low in reaction to the comments made by Trump in his tweet. The US crude fell by 3% and was at $60.51 for a barrel and Brent was down by 2.2% and ended at $69.28 for a barrel.

ECB picking the pieces of Euro area

The fiscal policy of ECB is being used for demand management as the bank has to pick the pieces even after 11 years of global recession despite having an economic government in place for the Euro area. This economic government has been led for the last eight years by former German finance minister Wolfgang Schauble and making policies that suit his country. Germany’s way of handling the economic matters in the Euro area has been seen as one of the reasons why ECB has to pick the pieces of the region’s economy.

Germany’s mantra has reduced government spending and wrong labor reforms of increased hiring and firing which has been marketed as reforms. France is also following the same structure of austerity growth model and is facing a slowdown due to it. It also imposed a gasoline tax which created a lot of unrest in the country. That made the France government to recall the taxes and also increase public spending which it had stopped due to its austerity measures which resulted in a 10 billion euro loss and a bad negative impact on the investment and business environment in the country.  

Italy is another major country in the European Union, and the EU commission differed from the fiscal package proposed its government and was forced to cut public spending and also reduced budget deficit all due to the threats of sanctions made by the EU commission. That resulted in the country reeling into a much deeper recession than it was before.

Adding to this, Germany is not allowing its budget surplus to be used and is also taking away the purchasing power of the EU trade partners by siphoning 160 billion euro leaving the ECB to do all the work. The economic policies adopted by Germany is impacting France, Spain and Italy which makes up half of EU and are unable to do much against the powerful Germans and their only hope is the monetary policies provided by ECB. But, all that could change if the new chief of ECB who is set to be elected in November takes some tough measures.

In its guidance, the Chinese Central Bank also told the lenders that the pace and size of loans granted should not fall below the level from the same period a year earlier.

Usually, loan growth of China in January remains strong as Chinese banks tend to front-load loans early in the year to win market share.

At the same time, the Chinese Central Bank is providing adequate liquidity to the market and has been urging banks for months to keep lending to cash-strapped companies, notably smaller, private firms.

As per analysts, the key will be to revive weak credit growth to steadying China’s cooling economy, but policymakers are closely watching to ensure loans are used for the real business activity, not speculation.

“The (loan) injection was too much, and (we) need to tap on the brakes,” said one of the sources close to the central bank.

Excessive growth in loans never conforms to sufficient credit demand in the real economy, and excess expansion in granting loans could lead funds to flow into undesirable areas, said an analyst.

Another source of the news said, “(We) got the notice by phone. Credit lending was indeed robust, given there are certain regulatory requirements.”

However, the People’s Bank of China is yet to give any comments on the particular news.

However, a central bank official had said earlier this month that China would maintain ‘appropriate’ growth in total social financing, adding that current liquidity level in China’s banking system is reasonably ample.

In December, commercial banks in China extended far more new loans than expectation and finally leading the tally of 2018 to $2.4 trillion.

Anyways, there are factors like weaker sales and profits that are making Chinese firms reluctant to borrow from banks. As per an estimate, new corporate loans in the fourth quarter were half the levels seen in the first nine months of the year.

Off late China has been taking many steps to keep its economy on the track including macro-economic policy tweaks. But, it is still unclear on the degree of impact of the steps taken by China.

There was a drastic growth in the shares around the region including the European and U.S. futures. A strong session for chip makers in U.S was taking place during which the technology companies initiated the process to move ahead. The emotions stayed weak when Wilbur Ross the Secretary of Commerce informed that the two biggest countries of the world are still remains very far on trade; however Lawrence Kudlow, the White House Economic Adviser further stated that US President Donald Trump is more confident regarding the trade talks and he spoke in a positive way about the January jobs reports. The pound scaled up on the reports and the Northern Ireland’s Democratic Unionist Party has privately backed the Brexit deal.

Simultaneously, just after the Thursday’s climb the Treasuries touched at a low level, although there was a rise in oil for third consecutive day due to the increasing crisis in Venezuela. The crisis in Venezuela is further creating problems and warns it to make more difficult for the OPEC’s operations which is concerned with balancing world oil supplies and is overshadowed by an unexpected jump in U.S crude inventories.

The Global equities are winding up which is down week in five while the investors are questioning about the pace of the post during the Christmas rally and winning season revolves around. Traders are looking out for intimations at the trade talks and the improvement before the negotiations that is going to take place in the following week. The negotiation is scheduled in Washington where they are going to assess the economic impact of the longest shutdown in the U.S history that is further hindering the growth of data and its flow. The Senate have approved a measure and have voted down on it, on Thursday hopefully that the measure might put an end to the deadlock.

Axel Merk, the Chief investment office in San Francisco during the Merk Investment LCC said that he is somewhat positive and he reported to Bloomberg TV that – I don’t believe that there is an immediate recession which is mainly one of the important elements especially to real bear market, although it’s wise to change.

Although in other places, Profits have increased of the Australian bonds despite of the issues on the economic growth. Venezuelan rally were developed on the Venezuelan bonds on speculation President Nicolas Maduro’s competitors will gain speed up in an attempt to remove him.