Daily update
Daily update
- Bank of Japan Governor Uchida indicated that there would be a pause in interest rate hikes in the wake of the strong financial market reactions. Central banks are not supposed to create disorderly markets, so this is not necessarily surprising (the last rate hike will not be reversed). The political pressure on the BoJ to raise rates was not properly backed by economic fundamentals—there is a lesson there for all central banks.
- Japanese equity markets have now almost entirely erased the plunge on Monday. Economic fundamentals have not changed that much this week. Draw your own conclusions about markets’ relationship to economic reality.
- China’s July export data was weaker than expected—there are still discrepancies in the details (China exports 16% more to the US than the US imports from China). German export data for June also disappointed. Consumers preference for fun over goods is an ongoing trend, and Germany and China export goods rather than fun. Weaker exports from China raise questions over the 5% GDP growth target.
- US June consumer credit data is due. While the Federal Reserve is late in cutting rates, the real cost of borrowing money has not really moved this year (borrowers’ real interest rates are discounted by income growth).
