<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-820x461.jpeg" alt="" class="wp-image-522307" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107284465-1691669496096-gettyimages-1603825613-dsc05537_eh8zi6qn.jpeg 1920w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Grocery items are offered for sale at a supermarket on August 09, 2023 in Chicago, Illinois.  Scott Olson | Getty Images</figcaption></figure>



Contrary to what many believe, investment research firm BCA Research sees that the economy is on the cusp of a recession, and the predicted upcoming U.S. Federal Reserve rate cuts will not be sufficient to steer markets out of it.



“Every single one of us now believes there’s a recession, and that’s exactly the opposite of what the market believes,” Garry Evans, BCA Research’s chief strategist of global asset allocation told CNBC’s “Squawk Box Asia.”



Evans pointed to signs of the economy slowing down, including what he called the “deteriorating” U.S. labor market. The U.S. Labor Department reported that the unemployment rate inched to 4.3% in July to its highest since October 2021, and a gauge for U.S. manufacturing activity fell to an eight-month low in the same month.



“There’s things that are breaking down quite rapidly now,” said the strategist.



The Fed funds futures market suggests that investors are expecting at least three rate cuts by the end of the year, according to the CME FedWatch Tool.



But according to Evans, that will not move the needle much on his projections.



“A few rate cuts are not going to prevent a recession. Average recession is 10 months… It takes something like a year before fed cuts actually start to give a boost to the economy,” he said.



“The market believes that the fed fund rate at the end of next year will be 3%. It’s currently at 5.3%. That will not happen unless there is a recession,” he added.



A recession typically occurs when there are two consecutive quarters of decline in a country’s real GDP.



Traders are also keeping their eye on the annual economic policy symposium in Jackson Hole this week, which could offer greater clarity on the interest rate outlook, with Fed Chair Jerome Powell set to speak at the gathering on Friday.



The U.S. economy has remained robust even amid ongoing inflation and elevated interest rates.



In the last century, there have been more than a dozen recessions, some lasting as long as a year and a half.



Although the U.S. isn’t officially in a recession, a survey conducted by Affirm reveals that about 3 out of 5 Americans think it is.

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A recession is coming in the U.S., and ‘a few rate cuts’ won’t prevent it, says strategist

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1600" height="900" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096.jpeg" alt="" class="wp-image-521928" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096.jpeg 1600w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/106079953-1565841404120gettyimages-1161631096-1536x864.jpeg 1536w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The U.S. 10-year Treasury rose on Thursday as dovish minutes from the latest Federal Reserve meeting and a large revision lower in preliminary payrolls data bolstered expectations of an interest rate cut next month.



The yield on the 10-year Treasury was up more than 2 basis points at 3.799%, while the yield on the 2-year Treasury was roughly 1 basis point higher at 3.929%.



Yields and prices move in opposite directions. One basis point equals 0.01%.



Market participants are firmly pricing in an interest rate cut at the U.S. central bank’s next meeting. Traders are currently pricing in a roughly 66% chance of a 25-basis-point rate cut in September, with just over one-third pricing in a 50-basis-point rate cut, according to the CME Group’s FedWatch Tool.



It comes shortly after the summary of minutes from the Fed’s July meeting said that the “vast majority” of participants “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”



Investors on Wednesday also reacted to a significant downward revision to U.S. hiring figures, which showed there were 818,000 fewer jobs than originally reported in the 12-month period through March 2024.



Attention now turns to comments made at the annual Jackson Hole symposium that kicks off on Thursday. Federal Reserve Chair Jerome Powell is scheduled to speak on Friday.



On the data front, the latest reading of weekly initial jobless claims will be released at around 8:30 a.m. ET on Thursday.



A flash reading of manufacturing purchasing managers’ index (PMI) for August and services PMI for August, existing home sales data for July and the Kansas City Fed’s survey for August will all follow slightly later in the session.



— CNBC’s Alex Haring, Sophie Kiderlin &amp; Jesse Pound contributed to this report.

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Treasury yields rally as Federal Reserve signals readiness for September rate cut

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu-820x462.jpg" alt="" class="wp-image-521505" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu-820x462.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108023023-1724177843627-Shein_Temu.jpg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Shein and Temu. Yuki Iwamura | Bloomberg | Stefani Reynolds | AFP | Getty Images</figcaption></figure>



Chinese-linked fast-fashion giant Shein is suing rival Temu, alleging the retailer stole its designs and built an empire using counterfeiting, intellectual property infringement and fraud. 



The suit, filed Monday in Washington, D.C., federal court, comes as Shein itself fends off similar allegations from a wide variety of brands and independent artists, including Levi Strauss and H&amp;M. 



In its complaint, Shein alleges that Temu, owned by PDD Holdings, is “masquerading” as a legitimate online marketplace because it encourages its sellers to steal other brands’ designs and then prevents them from removing products from the platform, even after they have admitted to infringement.



“Temu draws U.S. consumers into downloading and using its mobile application with promises of extremely low pricing. But Temu is not profiting from the sale of these products, which are priced so low that Temu must subsidize each sale, losing money on every transaction,” the complaint said.&nbsp;



“Only by encouraging its sellers to infringe the intellectual property rights of others and sell counterfeit or sub-standard goods can Temu hope to minimize the massive losses it is subsidizing,” the lawsuit added.



The dueling e-tailers have taken the retail industry by storm with their ultra low-priced products and their ability to respond to trends far faster than their legacy competitors. Along the way, the two have racked up a mountain of criticism related to their labor practices, their connections to the Chinese government and their alleged use of other brands’ designs. 



As the two jockey for market share, they have taken to the courts to accuse each other of a series of scandalous allegations. Last year, Temu sued Shein over copyright concerns and allegations that it uses “mafia-style intimidation of suppliers” to bully them into exclusivity agreements. 



In Shein’s complaint, the company accused Temu of “brazen” illicit behavior. It said at least one of Temu’s employees stole “valuable trade secrets” that identified best-selling Shein products, along with internal pricing information, to help it in its efforts to compete.&nbsp;



“Armed with this stolen information, Temu then directed its sellers to copy those and other best-selling Shein products and sell knock-off versions on Temu’s website and mobile application,” the complaint said.&nbsp;



“Temu is no garden-variety infringer,” the suit said. “In order to advertise the counterfeit versions of Shein products, Temu has reproduced virtually identical copyrighted images of Shein products and used them, or instructed sellers to use them, as promotional images on the Temu website and mobile application.”



The company goes as far as to say that Temu has falsely pretended to be Shein on social media site X in an effort to “misdirect customers away from the Shein platform to the Temu platform.”&nbsp;



The complaint includes a screenshot of a Temu-sponsored Google ad that shows Shein in the headline, but Temu as the web address.&nbsp;



“To further deceive consumers, Temu has instructed its paid social media influencers to falsely claim that Temu products which are often counterfeits of Shein products are cheaper and of higher quality than genuine Shein goods,” the complaint said. “Temu has gone to great lengths to imitate Shein, including by poaching resources, employees, and suppliers from Shein.”&nbsp;



Shein’s 80-page complaint includes more than a dozen examples of clothes and designs that Temu allegedly ripped off.&nbsp;



It has asked the court to rule in its favor and enter an order that would prohibit Temu from using Shein’s confidential information, among other requests.&nbsp;



Temu did not immediately respond to CNBC’s request for comment.

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Shein sues Temu over copyright infringement, alleges rival loses money on every sale

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="929" height="523" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM.jpeg" alt="" class="wp-image-519571" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM.jpeg 929w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108021270-1723768369491-gettyimages-2157639739-CHINA_LUJIAZUI_FORUM-768x432.jpeg 768w" sizes="(max-width: 929px) 100vw, 929px" /><figcaption class="wp-element-caption">Pan Gongsheng, governor of the People’s Bank of China (PBOC), during the Lujiazui Forum in Shanghai, China, on Wednesday, June 19, 2024.  Bloomberg | Bloomberg | Getty Images</figcaption></figure>



BEIJING — China’s financial risks have dropped, including from local government debt, People’s Bank of China Governor Pan Gongsheng said in state media interviews published late Thursday.



Pan also said the central bank will work with the Ministry of Finance to enable China to reach its full-year growth targets. He said that monetary policy would remain supportive.



Beijing has increasingly prioritized addressing risks from high debt levels in the real estate sector, which is closely linked to local government finances. International institutions have long called on China to reduce its ballooning debt levels.



“China’s overall financial system is sound. The overall risk level has significantly declined,” Pan said in an interview released by state broadcaster CCTV. That’s according to a CNBC translation of the transcript.



He noted that “the number and debt levels of local government financing platforms are declining,” and that the cost of their debt burden has “dropped significantly.”



Local government financing vehicles emerged in China in the last two decades to enable local authorities, who couldn’t easily borrow directly, to fund infrastructure and other projects. LGFVs primarily obtained financing from shadow banking.



The lack of regulatory oversight often meant indiscriminate funding of infrastructure projects with limited financial return. That raised the debt burden on LGFVs, for which the local governments are responsible.



Coordinated efforts in the last year by local governments, financial institutions and investors have “alleviated the most pressing repayment needs of the weakest LGFVs and boosted market sentiment,” S&amp;P Global Ratings analysts said in a July 25 report, one year since Beijing made a concerted effort to reduce LGFV risk.



However, the report said LGFV debt “remains a big problem.” The analysis found that more than 1 trillion yuan ($140 billion) of LGFV bonds are due to mature over the next couple of quarters, while such debt growth remains in the high single digits.



Exacerbating debt challenges is China’s slowing growth. The economy grew by 5% in the first half of the year, raising concerns among analysts that the country would not be able to reach its target of around 5% growth for the full year without additional stimulus.



The International Monetary Fund on Aug. 2 said in its regular review of China’s financial situation that macroeconomic policy should support domestic demand to mitigate debt risks.



“Small and medium-sized commercial and rural banks are the weak link in the large banking system,” the IMF report said, noting China has nearly 4,000 such banks that account for 25% of total banking system assets.



<h2 class="wp-block-heading" id="h-addressing-real-estate"><a></a>Addressing real estate</h2>



The number of high-risk small and medium-sized banks has dropped to half of what it was at their peak, Pan said via state media on Thursday, without sharing specific figures.



In real estate, he pointed out the mortgage down payment ratio has reached a record low of 15% in China, and that interest rates are also low. Pan noted central authorities are helping local governments with financing so they can acquire property and turn them into affordable housing or rental units.



Property and related sectors once accounted for at least one-fourth of China’s economy. But in recent years Beijing has sought to shift the country away from relying on real estate for growth, toward advanced tech and manufacturing.



Pan’s public comments come after a week of heightened volatility in the government bond market.



Earlier on Thursday, the PBOC made the rare decision to delay a rollover of its medium-term lending facility in favor of a 577.7 billion yuan capital injection via another tool called the 7-day reverse repurchase agreement. Pan highlighted that 7-day tool in June when discussing PBOC efforts to revamp its monetary policy structure.



The PBOC is scheduled Tuesday morning to release its monthly loan prime rate, another benchmark rate. The central bank cut the 1-year and 5-year loan prime rates by 10 basis points each in July, after keeping the 1-year unchanged for 10 straight months, and the 5-year unchanged for four months.

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China’s central bank says risks from local government debt have dropped

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1200" height="675" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK.png" alt="" class="wp-image-519226" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK.png 1200w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK-300x169.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK-820x461.png 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK-160x90.png 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108020266-1723639428249-gettyimages-2160057485-UK_YORK-768x432.png 768w" sizes="(max-width: 1200px) 100vw, 1200px" /><figcaption class="wp-element-caption">A guided tour in the center of in York, UK, on Friday, June 7, 2024. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



The U.K. economy grew by 0.6% in the second quarter of the year, the Office for National Statistics said Thursday, continuing the country’s cautious recession rebound.



The reading was in line with the expectations of economists polled by Reuters and follows an expansion of 0.7% in the first quarter.



Economic growth was flat in June, in line with a Reuters poll, as activity in the U.K.’s dominant services sector dipped 0.1%. Construction and production output rose by a respective 0.5% and 0.8% in the month.



The British economy has recorded slight but steady growth almost every month so far this year, as the U.K. exits a shallow recession. GDP was also flat in April, when wet weather quelled retail sales and construction output.



On an annual basis the economy was 0.9% bigger in the second quarter, against a forecast of 0.8%.



“These figures confirm that the UK’s recovery from recession picked up steam in the second quarter, despite strike action and wet weather causing activity to flatline in June,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note.



“The UK’s strong second quarter owes more to temporary momentum from the large recent falls in inflation and a boost to consumer spending from events like Euro 2024 than from a meaningful improvement in the UK’s underlying growth trajectory,” Thiru continued.



The pace of growth is unlikely to continue into the second half amid weaker wage growth, high interest rates and supply challenges, Thiru added.



U.K. inflation rose to 2.2% in July, data published Wednesday by the ONS showed, coming in slightly below a consensus forecast of 2.3%. The headline figure had been at the Bank of England’s 2% target rate for the two months prior, helping spur the central bank’s decision to cut interest rates by 25 basis points at the start of August.



The July figures were described by analysts as supportive of consistent monetary easing through the rest of the year, despite stubbornness in services inflation.



Over the April-June period, U.K. wage growth excluding bonuses cooled to a two-year low, but remained relatively hot at&nbsp;5.4%.



Richard Carter, head of fixed interest research at Quilter Cheviot, said lower interest rates should “help stimulate more economic growth by making borrowing more affordable for households and businesses” in the coming months — but noted that it would take time for the impact to be felt.



The British pound ticked slightly higher following Thursday’s GDP release, and was up by 0.1% against the U.S. dollar and 0.2% against the euro at 7:35 a.m. in London.



Institutions including the International Monetary Fund, investment bank Goldman Sachs and the Bank of England have all hiked their growth forecasts for the U.K. economy in recent months. The IMF now sees growth of 0.7% this year, up from 0.5% previously.



Factors cited include the decline in inflation and reforms to planning and business rules planned by the new Labour government, which took office in July. Prime Minister Keir Starmer and Finance Minister Rachel Reeves have repeatedly stated that boosting economic growth will be the bedrock of their policymaking, setting a target for the U.K. to achieve the fastest per capita GDP growth among the Group of 7 nations.



“The new Government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth and a £22 billion black hole in the public finances,” Reeves said in a statement Thursday.



Labour is due to deliver its first budget on Oct. 30, with analysts saying the announcement will give more clarity on the government’s fiscal strategy and plans for changes to taxation and public spending.



Because of this, “it is unlikely that we will see a marked acceleration in GDP in the short term,” said Quilter Cheviot’s Richard Carter.



“For now, the economy is expected to continue on its relatively moderate growth path, bolstered by wage growth that remains ahead of inflation and the recent easing of monetary policy,” he added.

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UK economy expands 0.6% in second quarter; June growth stalls

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-820x461.jpeg" alt="" class="wp-image-518888" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108001452-1720019731770-gettyimages-1223257669-dsc04844_2020050625641680.jpeg 1920w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Inflation rose as expected in July, driven by higher housing-related costs, according to a Labor Department report Wednesday that is likely to keep an interest rate cut on the table in September.



The consumer price index, a broad-based measure of prices for goods and services, increased 0.2% for the month, putting the 12-month inflation rate at 2.9%. Economists surveyed by Dow Jones had been looking for respective readings of 0.2% and 3%.



Excluding food and energy, the core CPI came in at a 0.2% monthly increase and a 3.2% annual rate, meeting expectations.



The annual rate is the lowest since March 2021, while the core is the lowest since April 2021, according to the Bureau of Labor Statistics report. Headline inflation was 3% in June.



A 0.4% rise in shelter costs was responsible for 90% of the all-items inflation increase. Food prices climbed 0.2% while energy was flat.



Stock market futures were mildly negative after the report, while Treasury yields were mostly higher.



Though food inflation was soft on the month, multiple categories saw sizeable increases, most notably eggs, which were up 5.5%. Cereals and bakery items declined 0.5% while dairy and related products fell 0.2%.



Inflation readings have been gradually drifting back to the central bank’s 2% target. A report Tuesday from the Labor Department showed that producer prices, a proxy for wholesale inflation, rose just 0.1% in July and were up 2.2% year over year.



Fed officials have indicated a willingness to ease, though they’ve been careful not to commit to a specific timetable nor to speculate about the pace at which cuts might occur. Futures market pricing currently points to a slightly better chance of a quarter percentage point reduction&nbsp;at the Fed’s next scheduled meeting, Sept. 17-18,&nbsp;and at least a full point in moves by the end of 2024.



“Today’s CPI print removes any lingering inflation obstacles that may have been preventing the Fed from starting the rate cutting cycle in September,” said Seema Shah, chief global strategist at Principal Asset Management. “Yet, the number also suggests limited urgency for a 50 basis point cut.”



As inflation has eased, percolating concerns about a slowing labor market seemed to have raised the likelihood that the Fed will start cutting for the first time since the early days of the Covid crisis.



“Coming down, but the sticky areas continue to be sticky,” Liz Ann Sonders, chief investment strategist at Charles Schwab, said in describing the CPI report. “We have to keep a close eye on both the inflation data as well as the employment data.”



There were several crosscurrents in the report that indeed suggest inflation is stubborn in some areas.



Automotive prices continued to decline, with new vehicles down 0.2% and used cars and trucks off 2.3% for the month and 10.9% from a year ago. However, auto insurance costs climbed another 1.2% and are up 18.6% on a 12-month basis.



On the shelter component, which makes up more than one-third of the index, an item that asks property owners what they could get in rent increased 0.4% and was up 5.3% annually, again defying Fed expectations for an easing in housing-related costs.



On the other hand, multiple categories showed signs of deflation on the month, including medical care services (-0.3%), apparel (-0.4%) and core commodity prices (-0.3%).

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U.S. annual inflation rate slows to 2.9% in July, lowest since 2021

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-820x547.jpg" alt="" class="wp-image-518409" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-1536x1025.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/KMHFEW5PZNIVDJA5S7C2XIOQ3M-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A logo of the Bank of America is seen on an office building at the Gujarat International Finance Tec-City (GIFT) at Gandhinagar, India, December 8, 2023.REUTERS/Amit Dave/File Photo</figcaption></figure>



LONDON, Aug 13 (Reuters)&nbsp;&#8211;&nbsp;Investors increased their allocations to cash and reduced their overweight position in stocks in August, as&nbsp;expectations&nbsp;for global growth dropped to&nbsp;their lowest&nbsp;in&nbsp;eight months, a BofA survey of fund mangers published Tuesday showed.



According to the survey, 31% of respondents said they were overweight&nbsp;in&nbsp;stocks in August, down from 51% in July, while their average cash level was 4.3% of their assets under management, up from 4.1% a month before.



BofA attributed the shift to weak U.S. payrolls data for July, and the volatility shock associated with the rebound in the Japanese yen.



The S&amp;P 500 is down 3.6% so far this month. It tumbled 2.7% on the day of the payrolls report and a further 2% the following session, after Japan&#8217;s Nikkei share index fell by its most in a day since 1987.&nbsp;.SPX



Market players have also pointed to the rebound in the yen and the resulting wind-down of carry trades used by investors to juice their bets, as being behind the sell off.



Shares around the world have been rebounding in recent sessions, however.



BofA said 189 participants with $508 billion of assets under management responded to the&nbsp;survey, and a net&nbsp;47% of survey respondents expect a weaker global economy in the next 12 months, down 20 percentage points from July.



However, 76% of respondents to the survey said they still expect a &#8220;soft landing&#8221; for the global economy, referring to a gradual slowdown as opposed to a more dramatic &#8220;hard landing&#8221; or a &#8220;no landing&#8221; scenario in which growth does not slow at all.



This conviction &#8220;is driven by expectations for lower interest rates,&#8221; BofA said, as 93% of respondents expect short-term rates to be lower in 12 months&#8217; time, the highest in the past 24 years.



The survey found 60% of respondents expect four or more rate cuts from the U.S. Federal Reserve over the next 12 months.



Allocation to Japanese equities saw the largest one-month drop since April 16. Investors moved from a net 7% overweight in July to a net 9% underweight in August, the first net underweight since July 2023.



(Reporting by Alun John; editing by Dhara Ranasinghe and Sharon Singleton)

A logo of the Bank of America is seen on an office building at the Gujarat International Finance Tec-City (GIFT) at Gandhinagar

Investors reduced allocations to stocks, moved to cash in August, BofA survey shows

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-820x462.jpeg" alt="" class="wp-image-518027" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The London skyline. Andrea Pucci | Moment Open | Getty Images</figcaption></figure>



LONDON — European stocks kicked off the new trading week higher, with U.S. and U.K. inflation data set to dominate focus this week.



The pan-European Stoxx 600 index nudged 0.3% higher at Monday’s open as investors hunt for signs that last week’s market rout is finished. Financial services and insurance led gains, both up by around 0.6%.



European stocks followed their counterparts in Asia-Pacific higher, continuing to shake off recent volatility. Global stock markets see-sawed last week with steep sell-offs followed by a sharp rebound.



The Stoxx 600 index ended up with a weekly gain of 0.27%, according to LSEG data, rebounding from a 2.9% decline the week before.



U.S. stock futures were little-changed Monday as investors await key inflation data, with the core producer price index Tuesday followed by July’s consumer price index Wednesday.



Major Wall Street averages rose Friday, with the indexes making a sharp recovery from a downturn.



Investors this week are hoping to get a better sense of the state of the U.S. economy after recent fears of a job market slowdown spooked traders and rocked the market.



U.K. inflation data is due on Wednesday, the first print since the Bank of England cut interest rates by 25 basis points.

107430312-1718715743467-gettyimages-539259934-img_1239_40_fused

European markets open higher as rebound continues; U.S., UK inflation in focus this week

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="546" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-820x546.jpg" alt="" class="wp-image-517945" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-820x546.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-768x511.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-1536x1022.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Students attend a class at Super Climax Academy, a coaching institute training students to prepare for competitive examinations to secure government jobs, in Prayagraj, India, June 21, 2024. REUTERS/Sahiba Chawdhary</figcaption></figure>



ZURICH, Aug 12 (Reuters)&nbsp;&#8211;&nbsp;Youth unemployment worldwide last year dipped to a 15-year-low and is likely to continue falling through 2025, although weaker growth means Asia has lagged this trend, the International Labour Organization said in a report published on Monday.



The ILO said 64.9 million people aged between 15 and 24 worldwide were unemployed last year, good for a rate of 13%, and it forecast that proportion would decrease further over the following two years to sit at 12.8% in 2024 and 2025.



The improvement in the market was driven by robust economic growth rates following the COVID-19 pandemic which has spurred demand for youth labour, the ILO said.



Youth unemployment rates in 2023 returned to their pre-pandemic rates or lower in most, but not all subregions.



For young people in the Arab States, East Asia, and South-East Asia and the Pacific, youth unemployment rates were higher last year than in 2019, the ILO said.



For the Arab States, this was a continuation of the pre-COVID-19 trend. But for the Asian subregions, it marked a change of direction from the stronger growth of the pre-COVID years.



The ILO also noted that the far lower average age of the population in Africa than in more developed nations has raised questions about economic sustainability there.



The imminent &#8220;youthquake&#8221; in Africa means job creation is becoming a critical issue for social justice and the future of the global economy, the organization said.



(Reporting by Dave Graham, Editing by Rachel More)

India’s youth flock to cram schools in search of security of government jobs

Global youth unemployment in decline and seen falling further, report finds

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-820x461.jpeg" alt="" class="wp-image-516437" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy.jpeg 1600w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A bank employee count China’s renminbi (RMB) or yuan notes next to U.S. dollar notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023. Athit Perawongmetha | Reuters</figcaption></figure>



BEIJING — Chinese companies seeking growth from exports face a new challenge: a strengthening yuan.



The “offshore” yuan traded in Hong Kong surged Monday against the U.S. dollar to its strongest level for 2024 — below 7.1 — before weakening slightly to around 7.18 as of Wednesday afternoon, according to Wind Information.



The sharp moves came amid a global stock market sell-off as investors reassessed their outlook for the U.S. economy and potential interest rate cuts. High rates have bolstered the U.S. dollar and related assets.



A strong greenback has also helped keep the Chinese yuan weak, which in turn kept Chinese exports competitively priced abroad. After steadily weakening in the first half of the year, the offshore yuan has strengthened against the U.S. dollar over the last month.



Many trade companies, especially smaller ones, have “currently adopted a strategy of ‘preferring not to take orders rather than take loss-making orders,’” Winnie Wang, president of the Shenzhen Cross-Border E-Commerce Association, said Tuesday in Chinese, according to a CNBC translation.



She noted the case of one such company, which made 20 million yuan ($2.8 million) in revenue during the yuan’s weakening during the first half of the year, allowing it to raise employee salaries. But she said the company did not win a single order in July because the stronger yuan forced it to repeatedly raise its prices.



Ryan Zhao, director at an export-focused company called Jiangsu Green Willow Textile, said Tuesday that recent fluctuations in foreign exchange will cut into about 2% of profits on accounts receivable this month.



“We are concerned that a prolonged appreciation of the yuan will lead to price increases by Chinese suppliers, which will affect the export businesses,” he said in Chinese, according to a CNBC translation. He said the company’s way of dealing with exchange rate fluctuations is to negotiate a middle exchange rate with the customer.



China reported slower-than-expected growth in U.S. dollar-denominated exports for July on Wednesday, while imports surprised with a better-than-expected increase.



Exports have stood out as a bright spot as China’s economic growth slows. Many local companies from automakers to e-commerce players have accelerated overseas expansion plans to capture opportunities for faster growth abroad.



That also means Chinese companies are now more exposed to currency fluctuation risks. China’s foreign exchange regulator has in the last two years published guides on how businesses can mitigate such risks.



“Apart from geopolitical reasons, Chinese companies are increasingly focused on hedging currency risk because they are localizing operations globally – which makes their operations more complex than they used to be,” said Chris Pereira, president and CEO of consulting firm iMpact.



“In addition to hedging against traditional USD/RMB fluctuations, Chinese cross-border e-commerce companies are increasingly also hedging against the Euro, British Pound, and Japanese Yen,” he said Tuesday. Cross-border e-commerce refers to online shopping platforms selling products between different countries.



Pereira said many of his clients work with fintech companies such as Airwallex and LianLian Pay. “Larger Chinese cross-border e-commerce companies generally work with banks to secure forward contracts or options, allowing them to lock in exchange rates for future transactions,” he said.



<h2 class="wp-block-heading" id="h-changing-expectations"><a></a>Changing expectations</h2>



Global businesses and investors have increased their focus on currency risk in recent days. Many institutional investors on Monday started to unwind a popular ”carry trade” in the Japanese yen, which had played an attractive role in global asset allocation until the Bank of Japan raised interest rates last month to their highest since 2008.



The Chinese yuan has held a similarly attractive role due to low interest rates in China. But several analysts expected that could change.



“A large amount of foreign currency is awaiting settlement” against the yuan, Zhou Ji, macro FX analyst at Nanhua Futures, said in Chinese translated by CNBC.



Zhou noted lack of willingness to settle earlier in the year due to widespread expectations that the yuan would weaken against the U.S. dollar, a view partly supported by the People’s Bank of China’s latest interest rate cuts.



Fast-fashion giant Shein and PDD Holdings’ Temu are two of the most well-known examples of Chinese cross-border e-commerce companies. Many small businesses — which may have their own factories in China — have entered the industry to sell on TikTok, Amazon.com or platforms run by Alibaba.



Chinese policymakers have also encouraged the development of cross-border e-commerce by supporting special economic zones and overseas warehouse construction.



Official data claim explosive growth in the industry, with more than 120,000 cross-border e-commerce entities in China as of June.



Such online international commerce grew by 10.5% year-on-year in the first half of the year to account for nearly 5.8% of total trade, according to CNBC calculations of official data. That’s up slightly from a share of about 5.7% in the first quarter. A breakdown by exports and imports for the first half of the year was not immediately available.



Wang from the Shenzhen Cross-Border E-Commerce Association pointed out that large Chinese companies have tended to negotiate deals with business partners to mitigate currency risks.



For many smaller businesses, their expansion overseas has been part of an effort to move capital outside China, making them less affected by the latest currency moves, said Chris Sun, founder and CEO of BrandPal, an AI-based marketing company focused on short video monetization. The company claims its backers include Plug and Play Tech Center.



He said the companies, many newly registered in the last year or two, have focused on spending yuan within China while making U.S. dollars via overseas sales.

107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy

China’s exporters enjoyed the benefits of a weak yuan. Now that’s changing and cutting into profits

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="929" height="523" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV.jpeg" alt="" class="wp-image-516045" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV.jpeg 929w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-768x432.jpeg 768w" sizes="(max-width: 929px) 100vw, 929px" /><figcaption class="wp-element-caption">The Japanese flag flutters over the Bank of Japan (BoJ) head office building (bottom) in Tokyo on April 27, 2022. Kazuhiro Nogi | Afp | Getty Images</figcaption></figure>



Bank of Japan Deputy&nbsp;Governor&nbsp;Shinichi Uchida said on Wednesday the central bank&nbsp;won’t&nbsp;raise&nbsp;interest&nbsp;rates&nbsp;when&nbsp;financial&nbsp;markets&nbsp;are&nbsp;unstable.



The recent strengthening of the yen would affect the&nbsp;BOJ’s policy decision because it reduces upward pressure on import prices, and therefore overall inflation, Uchida said.



Stock market volatility would also influence the central bank’s decision by affecting corporate activity and consumption, he said.



“As we’re seeing sharp volatility in domestic and overseas financial&nbsp;markets, it’s necessary to maintain current levels of monetary easing for the time being,” Uchida said in a speech to business leaders in the northern Japan city of Hakodate.



The&nbsp;BOJ’s interest rate path will “obviously” change if market volatility affects its economic and price outlook, its view on risks, and the likelihood of durably achieving its 2% inflation target, he said.



“We&nbsp;won’t&nbsp;raise&nbsp;interest&nbsp;rates&nbsp;when&nbsp;financial&nbsp;markets&nbsp;are&nbsp;unstable,” Uchida said.

107193967-1676336822877-gettyimages-1240268939-AFP_32927KV

Bank of Japan won’t raise rates when markets unstable, deputy governor says

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1600" height="900" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3.jpeg" alt="" class="wp-image-515777" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3.jpeg 1600w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-1536x864.jpeg 1536w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Pedestrians walk past a currency exchange shop in central Tokyo on April 17, 2024. Richard A. Brooks | Afp | Getty Images</figcaption></figure>



Rapid interest rate cuts from the Federal Reserve could make matters worse for the global “carry trade” unwind, according to economists at TS Lombard.



The warning comes as market participants seek to aggressively roll back on carry trades following a dramatic global sell-off in risk assets.



Carry trades refer to operations wherein an investor borrows in a currency with low interest rates, such as the Japanese yen, and reinvests the proceeds in higher-yielding assets elsewhere. The trading strategy has been hugely popular in recent years.



Stock markets in Europe were unsettled on Tuesday, paring earlier gains amid a faltering sense of relief.



An August stocks slump has been partly driven by weaker-than-expected U.S. economic data at the end of last week. The readings led investors to worry that the Federal Reserve may be behind the curve in cutting interest rates to fend off a recession.



“The natural reaction from the Fed to soft labour market data and fresh recession risks would be to cut rates and to do so relatively rapidly. But this would exacerbate any carry trade unwind,” economists at TS Lombard said in a research note published Monday.



“The US economy should trump all else, but it would make sense for central bankers to be cautious,” they added.



<h2 class="wp-block-heading" id="h-triple-whammy"><a></a>‘Triple whammy’</h2>



Led by Freya Beamish, economists at the investment strategy research firm said they hoped to see a coordinated message from the Bank of Japan and Fed to soothe market nerves.



“Then if the carry trade unwind really is a problem, we’d hope these central banks would take steps to introduce some form of quantity measures that would help prevent Japanese and other investors that have run on yen carry trades from having to sell assets, and facilitate the Fed cutting rates in due course without exacerbating financial fragilities,” economists at TS Lombard said.



A spokesperson for the Federal Reserve declined to comment when contacted by CNBC on Tuesday.



Traditional safe haven assets, such as the yen and Swiss franc, surged on Monday, fueling speculation that investors were seeking to quickly unload profitable carry trades to cover their losses elsewhere.



The Japanese currency has risen sharply against the U.S. dollar in recent weeks, trading at 145.07 per dollar at 1:10 p.m. London time on Tuesday. It marks a stark contrast from the run-up to the July 4th U.S. holiday, when the yen fell to 161.96 per dollar for the first time since December 1986.



Strategists at HSBC said there had essentially been a “triple whammy” of concerns in recent days, citing the unwind of carry trades, the monetization of artificial intelligence and the prospect of an imminent U.S. recession.



“We think it’s too early to buy just yet, but fundamentals are still broadly supportive,” HSBC strategists said in a research note published Tuesday.



“We think the biggest risk now is a self-feeding sell-off that would eventually prompt a recession, given negative wealth effects and tighter credit conditions,” they added.



<h2 class="wp-block-heading"><a></a>‘Reawakened with a vengeance’</h2>



Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a recent research note that “the big carry unwind is underway.”



“You can’t unwind the biggest carry trade the world has ever seen without breaking a few heads. That is the impression markets give us this morning,” Juckes said on Monday.



Juckes flagged that the biggest foreign exchange market reaction was still one of “position reduction.” He said long positions against the Japanese yen for the Australian dollar, British pound, Norwegian krone and U.S. dollar were all being taken off.



A push below 140 a dollar for the Japanese yen in the near term “would be unsustainable given the impact on equities and inflation,” he added.



Economists at TS Lombard said Monday that global assets — from the U.S. to China — “look exposed.”



“Maturity mismatch in the external balance sheet, built up over years of BoJ excess accommodation, drove Japanese investors out of foreign assets as the curve flattened though the early part of the pandemic,” they continued.



“But monetary divergence since the Fed started raising rates then presented a new opportunity – the old carry trade reawakened with a vengeance.”



— CNBC’s Michael Bloom contributed to this report.

108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3

The popular ‘carry trade’ is unwinding — and economists fear Fed rate cuts could make matters worse

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-820x462.jpeg" alt="" class="wp-image-515647" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A view of storage tanks and pipelines at the Shell Carson Distribution Complex, a distribution hub for petroleum products, in Carson, California, on March 11, 2022. Bing Guan | Reuters</figcaption></figure>



U.S. crude oil futures fell to a six-month low on Monday as equity markets sold off on fears the economy might be teetering on the brink of a recession.



West Texas Intermediate is now up roughly 2% for the year while Brent is now down marginally for 2024, after trading higher for months on geopolitical risk in the Middle East and forecasts that the oil market would tighten in the third quarter.



U.S. crude oil closed below $73 per barrel, the lowest settlement since Feb. 5.



“In times of crises all assets correlate,” Matt Smith, lead oil analyst for the Americas at Kpler, said of oil following equity markets lower. But geopolitical tensions in the Middle East and OPEC’s ongoing production cuts are providing a floor for crude prices, Smith said.



Here are Monday’s closing energy prices:



<ul class="wp-block-list">
<li>West Texas Intermediate&nbsp;September contract: $72.94 per barrel, down 58 cents, or 0.79%. Year to date, U.S. crude oil is up 1.8%.</li>



<li>Brent&nbsp;October contract: $76.30 per barrel, down 51 cents, or 0.66%. Year to date, the global benchmark has fallen about 1%.</li>



<li>RBOB Gasoline&nbsp;September contract:&nbsp;$2.33 per gallon, up more than 1 cent, or 0.69%. Year to date, gasoline is up 10.99%.</li>



<li>Natural Gas&nbsp;September contract: $1.94 per thousand cubic feet, down more than 2 cents, or 1.27%. Year to date, gas is down 22.75%.</li>
</ul>



The sell-off comes after U.S. job growth disappointed in July, with the unemployment rate rising to 4.3%, the highest level since October 2021. The U.S. manufacturing sector also contracted in July for the fourth consecutive month.



The weak economic data in the U.S. comes as lackluster demand in China had already been spooking traders.



“Already before we had the jobs report, already before the manufacturing data, we were concerned about weaker imports into China, weaker refinery utilization rates in China,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said on CNBC’s “Squawk Box” on Monday.



<h2 class="wp-block-heading" id="h-opec-plans-face-challenges">OPEC plans face challenges</h2>



OPEC+ is also expected to start increasing production in October, though the group indicated last week that this decision “could be paused or reversed, depending on prevailing market conditions.” Croft said OPEC+ is now unlikely to start ramping up production.



“If the trend continues, I just can’t imagine OPEC would go forward with increasing output into this market. The question is, would they go the opposite way given the conditions we’re seeing,” Croft said, suggesting the oil producers could cut production again.



Bob Yawger, executive director of energy futures at Mizuho Securities, said OPEC+ seems interested in moving forward with the production increase based on last week’s statement, but they may not be able to afford to do so at this point. Rolling oil bank onto the market at current prices would “tank” the market, Yawger said.



<h2 class="wp-block-heading" id="h-geopolitical-risk"><a></a>Geopolitical risk</h2>



Geopolitical risk remains present with Israel preparing for an attack from Iran after the assassination of Hamas leader Ismail Haniyeh in Tehran last week.



“That exchange of fire in April between Iran and Israel was relatively contained, did not lead to any market disruptions,” Croft said. “But the question is now are we looking at something more coordinated with Hezbollah, Iran, Hamas.”



Bob McNally, president of Rapidan Energy, warned that tensions in the Middle East are “climbing the escalation ladder.” If Iran strikes Israel and kills civilians, the Netanyahu government will hit back much harder, he said.



“Israel is in a not in an eye for an eye mode,” McNally said. “They’re in three eyes for one eye mode.

107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline

U.S. crude oil falls to six-month low as market sells off on recession fears

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2-820x462.jpeg" alt="" class="wp-image-515303" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A man looks at an electronic boarddisplaying stock prices of the Nikkei 225 listed on the Tokyo Stock Exchange in Tokyo on April 30, 2024.  Kazuhiro Nogi | Afp | Getty Images</figcaption></figure>



Investors on Monday turned to safe-haven assets as a global stock sell-off deepened, following weaker-than-expected U.S. jobs data at the end of last week.



The disappointing jobs report spurred investor fears that the Federal Reserve made a mistake last week when it kept interest rates unchanged, and that the world’s largest economy is headed toward a recession.



The stock sell-off has also been exacerbated by volatility in some of the major earnings and a more hawkish Bank of Japan, which has led to speculation that the popular yen “carry trade” has imploded over a short-term basis. A “carry trade” takes place when investor borrows in a currency with low interest rates, such as the yen, and reinvests the proceeds in a currency with a higher rate of return.



On Monday morning, the Swiss franc strengthened 1.2% against the dollar to trade at 0.847 against the greenback, or its strongest level since January this year.



Similarly, U.S. Treasury yields extended their fall to notch a one-year low. At 2:41 a.m. ET, the yield on the 10-year Treasury was down by over eight basis points to 3.7099%. The 2-year Treasury yield was last trading at 3.7315% after falling by around 14 basis points. The yield on Japan’s 10-year government bond also dipped to 0.204%.



Gold futures climbed 0.38% to trade at $2,479.2 per ounce.



The buying was in sharp contrast to the selling seen in the stock markets. U.S. stock futures fell early Monday, with the Dow Jones Industrial Average futures declining by some 600 points by 4 a.m. ET, or roughly 1.5%. S&amp;P 500 futures and Nasdaq-100 futures dipped 2.8% and 4.9%, respectively.



Japan stocks confirmed a bear market in Asia overnight. The 12.4% loss on the Nikkei — which brought it to close at 31,458.42 — marked the worst day for the index since the “Black Monday” of 1987. The loss of 4,451.28 points on the index was also the largest decline in terms of points in its entire history.



In Europe, the regional Stoxx 600 index was 2.34% lower, with all sectors and major regional bourses trading in the red. Tech stocks shed as much as 5% before paring losses slightly to trade down 2.8%. Mining stocks also lost 3.65%, while banks were 3.22% lower.



Ted Alexander, chief investment officer at BML Funds, said that the current volatility in markets has “been a long time coming,” and that it was not a reason to panic.



“Everyone’s been expecting it for a while, [it’s] great for active managers,” he told CNBC via email, adding that the shake up may actually bring equity investors back if stocks offer better value.



“Stock markets aren’t cooked yet. Don’t abandon some exposure to tech and growth,” Alexander said.



—CNBC’s Sarah Min and Lim Hui Jie contributed to this report

107408859-1714578761524-gettyimages-2150252824-AFP_34QJ4L2

A global stock rout is deepening with investors fleeing to safe havens

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="929" height="523" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS.jpeg" alt="" class="wp-image-515270" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS.jpeg 929w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS-768x432.jpeg 768w" sizes="(max-width: 929px) 100vw, 929px" /><figcaption class="wp-element-caption">Pedestrians cross an intersection in the Shibuya district of Tokyo, Japan, on Tuesday, Feb. 6, 2024.  Bloomberg | Bloomberg | Getty Images</figcaption></figure>



Japan stocks confirmed a bear market on Monday as Asia-Pacific markets continued the sell-off from last week, with the Nikkei 225 and Topix dropping over 12%.



The benchmark indexes have fallen more than 20% from their all-time highs on July 11.



The 12.4% loss on the Nikkei — which saw it close at 31,458.42 — was the worst day for the index since the “Black Monday” of 1987. The loss of 4,451.28 points on the index was also the largest in terms of points in its entire history.



The Nikkei also erased all its gains so far this year, moving into a loss position year to date.



The broad-based Topix also saw a rout as it tumbled 12.23% and closed at 2,227.15.



Heavyweight trading houses such as Mitsubishi, Mitsui and Co, Sumitomo and Marubeni all plunged over 14%, with Mitsui seeing a wipeout of almost 20% of its market cap.



Monday’s decline follows Friday’s rout when Japan’s Nikkei 225 and Topix fell more than 5% and 6%, respectively. The broader Topix marked its worst day in eight years, while the Nikkei marked its worst day since March 2020.



In Monday trading, the yen also strengthened to its highest level against the dollar since January, and was last trading at 142.09.



South Korea’s Kospi fell 8.77%, closing at 2,441.55, and the small-cap Kodaq saw a 11.3% wipeout, ending at 691.28.



Due to the magnitude of the sell-off, the exchanges hit circuit breakers, halting trade for the Kospi index at 2.14 p.m. Seoul and at 1.56 p.m. for the Kosdaq. The halt was for 20 minutes. Circuit breakers are activated if stocks rise or fall 8%.



Investors, meanwhile, awaited key trade data from China and Taiwan this week, a well as central bank decisions from Australia and India.



China’s service sector expanded at a faster pace in July, with the country’s purchasing managers’ index climbing to 52.1 in July, up from 51.2 in June.



The Caixin survey said the acceleration of growth was due to faster new business growth, “supported by sustained improvements in underlying demand conditions and an expansion of services offerings.”



Taiwan’s benchmark index, the Taiwan Weighted Index, was down over 8%, dragged by tech and real estate stocks , while Australia’s S&amp;P/ASX 200 fell 3.7% to 7,649.6.



The Reserve Bank of Australia kicks off its two-day monetary policy meeting Monday. Economists polled by Reuters expect the central bank to hold rates steady at 4.35%, but markets will monitor the monetary policy statement for clarity on whether the RBA is still considering a rate hike.



Hong Kong Hang Seng index was down 1.61%, while mainland China’s CSI 300 was down 0.48%, seeing the smallest loss in Asia.



On Friday in the U.S., stocks fell sharply as a much weaker-than-anticipated jobs report for July ignited worries that the economy could be falling into a recession.



The Nasdaq was the first of the three major benchmarks to enter correction territory, down more than 10% from its record high. The S&amp;P 500 and Dow were 5.7% and 3.9% below their all-time highs, respectively.



The S&amp;P 500 dropped 1.84%, while the Nasdaq Composite lost 2.43%. The Dow Jones Industrial Average fell 610.71 points, or 1.51%.



—CNBC’s Pia Singh and Hakyung Kim contributed to this report.

107383735-1709777816198-gettyimages-1981632561-JAPAN_COMMUTERS

Japan’s Nikkei logs worst day since 1987 Black Monday crash

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751-820x462.jpeg" alt="" class="wp-image-514180" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The lights of Frankfurt am Main’s banking skyline glow in the last light of day. Boris Roessler | Picture Alliance | Getty Images</figcaption></figure>



LONDON — European stocks extended losses on Friday amid a global downturn, as weak U.S. economic data sparked fears of a recession.



The regional Stoxx 600 index was down 1.43% at 9:34 a.m. Technology stocks dropped 3.6%, as U.S. giant Intel fell more than 21% in premarket trade after reporting a big earnings miss.



Global markets have been pulled lower by a flurry of central bank action — with the Bank of England cutting interest rates for the first time since 2020, the U.S. Federal Reserve holding rates and the Bank of Japan raising them this week — along with shaky corporate earnings and data releases.



The Stoxx 600 on Thursday suffered its worst session since the middle of June, weighed down by financials as French bank Societe Generale downgraded its outlook, and the BOE voted to reduce rates. Financial services were down another 3.1% Friday.



The Thursday decision took the British central bank’s key interest rate from 5.25% to 5%, following a narrow 5-4 vote among policymakers. Markets had not been fully convinced that the BOE would take the step.



BOE Governor Andrew Bailey told CNBC that the direction for interest rates was “pretty clear,” but he would not comment on the extent or timing of further cuts and said services inflation and wage data would be watched closely. Market pricing suggests expectations for a rate hold in September, followed by another rate trim in November.



U.S. stock markets tumbled on Thursday, as jitters grew around the state of the economy. Weekly initial jobless claims came in higher than expected, while manufacturing data slowed.



More information will be added to the U.S. economic picture on Friday, as the U.S. Bureau of Labor Statistics releases the nonfarm payrolls report, while Europe is quiet on the data front.



Asia-Pacific markets logged steep losses Friday, with Japan’s benchmark indexes tanking as much as 5%.



Cedric Chehab, global head of country risk at BMI, told CNBC’s “Street Signs Asia” that a U.S.-led sell-off started a week and a half ago but escalated in the middle of this week. That was due to factors including the hawkish Bank of Japan imploding the popular yen carry trade in the short term, weak U.S. data and volatility in earnings.



“But one thing people aren’t remembering is that usually between the period of July and October there is a seasonal rise in volatility for equity markets, so this isn’t completely unexpected,” Chehab said.



“Especially after the fact that there was such a large rally in U.S. stocks and global stocks, the fact that earnings came in a bit mixed and valuations are high, but also monetary policy remains very tight in real terms,” he added.

108013392-1722337017522-gettyimages-2021271708-20090101240221-99-73751

European markets lower amid global sell-off; technology, financial stocks tumble

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou-820x462.jpeg" alt="" class="wp-image-514095" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107433735-1719423521960-gettyimages-2159383303-jr029067_kd08rrou.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena on June 26, 2024, in Sunrise, Florida.  Joe Raedle | Getty Images</figcaption></figure>



The U.S. labor market may have cooled some in July, as a gradual slowdown in the economy and Hurricane Beryl are expected to have taken some of the steam out of hiring.



Still, even if the Labor Department’s nonfarm payrolls report for July, to be released Friday at 8:30 a.m. ET, does indicate a weaker jobs picture, the decline is expected to be only incremental and in keeping with the type of gentle downshift the Federal Reserve is looking to engineer.



“If the Fed was going to manufacture the soft landing, this is probably what it was going to look like,” said Mike Reynolds, vice president of investment strategy at Glenmede. “You’re seeing just modest on-the-margin weakness in the labor market that [isn’t likely to] spiral out of control into a negative feedback loop.”



Indeed, the report from the department’s Bureau of Labor Statistics is forecast to show payroll gains of 185,000 on the month, down from 206,000 in June, with the unemployment rate holding at 4.1%, according to the Dow Jones consensus estimate. Job reports for the past year and a half have routinely beaten the consensus.



But some economists think the report could be on the light side; Goldman Sachs expects Beryl, which ravaged large parts of Texas, particularly Houston, to pull down the jobs number by 15,000. The firm thinks the total payroll gain will be more like 165,000. Citigroup projects an even lower number — 150,000 on payrolls and a tick higher in the unemployment rate to 4.2%.



Should the unemployment rate keep climbing, it could raise fears that the so-called Sahm Rule is in danger of being triggered. The rule has observed without fail that when the unemployment rate over a three-month period averages half a percentage point higher than the 12-month low, the economy is in recession. A year ago, the jobless level as at 3.5% before it started climbing.



<h2 class="wp-block-heading" id="h-optimism-at-the-fed">Optimism at the Fed</h2>



Job gains have averaged 203,000 a month for the first half of 2024, while the unemployment rate has drifted higher as more workers have come into the labor force and the level of those considered unemployed but looking for work or temporarily laid off has hit its highest level since October 2021.



Fed Chair Jerome Powell on Wednesday noted that the previous disparity between supply and demand in the labor market has come into near-balance. Open jobs now outnumber available workers just 1.2 to 1, down from 2 to 1 a few years ago as inflation roared.



Should the factors continue to come into balance and other inflation indicators show progress, Powell strongly hinted that an interest rate cut could be coming in September.



“Our confidence is growing, because we’re getting good data,” he said at a news conference following the Fed’s policy meeting. “Frankly, the softening in the labor market conditions gives you more confidence that the economy’s not overheating.”



Markets will be watching Friday’s numbers for confirmation that Powell’s view on the labor market is accurate — and that the Fed isn’t overconfident and waiting too long to start lowering rates.



There has been a growing chorus on Wall Street for the Fed to start easing now that most indicators show that the inflation rate is only a short distance from the central bank’s 2% goal. DoubleLine CEO Jeffrey Gundlach, for instance, told CNBC on Wednesday that he thinks the economy already is teetering on recession.



“When we look back at today, …. I kind of believe that we will say that we were in recession in September 2024,” he said.



<h2 class="wp-block-heading"><a></a>Eyes on earnings</h2>



The Fed at its meeting voted to hold its benchmark overnight borrowing rate in a range of 5.25%-5.5%, where it has been for the past year.



Markets rallied on the news but gave back those gains Thursday following news that unemployment claims rose last week and the manufacturing sector slumped further into contraction.



“By holding off on cutting interest rates today, the Federal Open Market Committee is betting the labor market is strong enough to wait until the fall for confirmation that inflation is returning to 2%,” said Nick Bunker, Indeed Hiring Lab’s economic research director for North America. “Let’s hope it pays off.”



As always, markets also will have eyes on the average hourly earnings portion of the report for signs of underlying inflation.



The forecast is that earnings rose 0.3% on the month and 3.7% from year ago. If the latter is correct, it will represent the lowest earnings increase since May 2021.



“Even if wage pressures were to unexpectedly remain ‘stuck’ or slightly re-accelerate in this report, we think that the progress the Fed has made on inflation thus far means that there should still be an opportunity for the Fed to cut rates in September so long as subsequent data releases (eg July CPI) cooperates,” said BeiChen Lin, investment strategist at Russell Investments.

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International

A recession is coming in the U.S., and ‘a few rate cuts’ won’t prevent it, says strategist

Treasury yields rally as Federal Reserve signals readiness for September rate cut

Shein sues Temu over copyright infringement, alleges rival loses money on every sale

China’s central bank says risks from local government debt have dropped

UK economy expands 0.6% in second quarter; June growth stalls

U.S. annual inflation rate slows to 2.9% in July, lowest since 2021

Investors reduced allocations to stocks, moved to cash in August, BofA survey shows

European markets open higher as rebound continues; U.S., UK inflation in focus this week

Global youth unemployment in decline and seen falling further, report finds

China’s exporters enjoyed the benefits of a weak yuan. Now that’s changing and cutting into profits

Bank of Japan won’t raise rates when markets unstable, deputy governor says

The popular ‘carry trade’ is unwinding — and economists fear Fed rate cuts could make matters worse

U.S. crude oil falls to six-month low as market sells off on recession fears

A global stock rout is deepening with investors fleeing to safe havens

Japan’s Nikkei logs worst day since 1987 Black Monday crash

European markets lower amid global sell-off; technology, financial stocks tumble

Here’s everything you need to know about Friday’s big jobs report

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