Mel's Blog

The World is in Turmoil ! What are you going to do about it?

August 7th, 2017 10:54 AM by Mel Samick

The United Nations has unanimously voted to hit North Korea with new sanctions. The U.N. has been deliberating for the past month, striving to generate a response to North Korea’s perilous shenanigans and, at last, a resolution has been reached. According to Nikki Haley, the U.S. ambassador to the United Nations, $1 billion will be slashed off North Korea's annual export revenue (approximately a third of total export revenue); by way of background, North Korea's primary exports include coal, iron, iron ore, lead, lead ore and seafood. Two pivotal members of the U.N., China and Russia, who previously resisted new economic sanctions, finally endorsed the measure.

South Sudan, Yemen, Somalia, and Nigeria are in shambles amidst devastating famine. The U.N. refugee agency is issuing a message loud and clear: the risk of mass deaths in the Horn of Africa is growing - quickly. Accumulatively, 20 million individuals, 10 million of which are children, face the risk of starvation. Carolyn Miles, CEO of Save the Children, explained, “It’s one of the worst crises that we’ve seen since World War II.” This past month, the U.S. pledged nearly $640 million to aid the conflict. Furthermore, on Thursday, the U.S. agreed to contribute an additional $169 million in an international effort striving to prevent famine in Ethiopia and Kenya. It is comforting to see countries of contrasting backgrounds come together for one another in times of need.

The U.S. has trumped past job report expectations. In July alone, the U.S. economy added 209,000 jobs. Furthermore, the unemployment rate dipped all the way down to 4.3 percent.

The dollar held firm after an encouraging U.S. jobs report. This Friday, the dollar index saw its largest single-day rise of 2017, climbing an impressive 0.75 percent, as it pulled away from 92.548, which at that point was a 15-month low. Strong employment data published Friday was a primary driving force towards the change in direction. Viraj Patel, an FX strategist at ING in London pointed out the question on everybody’s mind, which is whether missing U.S. inflation over the past quarter has been transitory or transitional. This week's U.S. inflation-related indicators will prove pivotal in regards to whether the dollar's rebound can be sustained in the longer term.

There has been no indication of inflation with lackluster participation in the labor market. Despite a strong July employment report, a September Fed rate hike is widely considered unlikely. Wage inflation is coming in at a mere 2.5 percent, which is exceedingly low for a labor market as “hot” as the current one. Further observation of the labor market allowed analysts to conclude that the labor market is not as “hot” as it appears. To elaborate, inflation is being withheld by low levels of labor force participation. In the latest employment report, the participation rate was 62.9 percent, indicating there are more people on the sidelines now than there have been in the past 40 years. Thus, even with extensive job growth, there exists little sign of resurgence in labor force participation.

Oil prices have fallen lower as investors await news from OPEC meeting. According to Bloomberg data, oil output compliance fell to 86 percent in July, the lowest level since January. Emily Ashford, director of energy research at Standard Chartered, explained oil futures are being weighed down by “concerns over compliance with the OPEC cuts.” In fact, oil futures edged down 1.3 percent to under $49/bbl today. OPEC’s two-day gathering, which is taking place in Abu Dhabi, has a pre-determined focus on addressing why their existent deal has not produced meaningful ramifications to dwindle down global output. Additionally, OPEC will decide if Libya and Nigeria will join the agreement to cap output. Initially, these two countries were exempted from the deal because their output was blighted by extensive militant attacks. However, both nations are now achieving near peak levels and there exists a growing consensus they should now abide by production caps.

Mel

Information Provided by NYCB Capital Markets


Posted in:General
Posted by Mel Samick on August 7th, 2017 10:54 AM

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