In Today's Digital Newspaper A weakening Chinese economy has prompted the central bank to cut rates. China's youth jobless rate edged up to a fresh record in May to nearly 21%. Meanwhile, torrential rains have impacted China's wheat harvest, which is nearing completion at the end of June. More in China section.
Global rice stockpiles are currently near record levels, but the arrival of El Niño could put those reserves to the test. The Biden administration is advancing a new market for large companies to purchase clean-energy tax credits, a key component of last year's climate law. More below. MARKET FOCUS Equities today: Global stock markets were mixed overnight. U.S. Dow opened around 15 points lower then turned higher. In Asia, Japan -0.1%. Hong Kong +2.2%. China +0.7%. India -0.5%. In Europe, at midday, London flat. Paris -0.8%. Frankfurt -0.7%.
• U.S. import prices for May are expected to decrease 0.5% from the prior month. UPDATE: US import prices in May fell by 0.6% month-over-month, a larger decrease than the 0.5% decline predicted by the market. This followed a 0.3% rise in April . The decrease in import prices was primarily driven by a 6.4% drop in fuel prices due to lower petroleum and natural gas costs, which experienced the most significant monthly fall since August 2022. In contrast, nonfuel import prices only declined by 0.
Although the Fed did not provide explicit guidance on its next moves, officials' updated forecasts spooked markets, with several rate hikes expected in 2023. The median outlook suggests two additional increases this year, with officials seeing higher rate expectations for 2024 and 2025. Their projections for GDP, unemployment, and inflation have also been updated.
Markets still do not believe the Fed will increase rates more than once. CME Fed funds futures show the highest probabilities for a 25-basis-point increase in July which would take the target range to 5.25% to 5.5%. for the remaining meetings of the year, the highest probabilities are for the target range to stay at that level.
• Saudi Arabia's decision to reduce crude output in order to stabilize global oil markets has not had the desired effect thus far. In fact, prices have dropped in four out of the past five sessions and are now approaching the lowest levels of 2023. This can be attributed to higher-than-expected production in sanctioned countries like Russia and Iran, as well as concerns about a potential industrial slowdown that may affect fuel demand growth.
India's outlook heavily relies on the southwest monsoon, with normal rainfall predicted to support production. Despite the challenges El Niño may pose to rice harvests, the overall output is expected to remain steady at 512.5 million metric tons due to rising demand. Agricultural research firm The Rice Trader states that there is no shortage, but maintaining healthy strategic stocks is important. Link to more via Bloomberg.
While details about this trip are limited, Blinken will meet with Foreign Minister Qin Gang and possibly Chinese President Xi Jinping. In a recent phone call between Blinken and Qin, the Chinese official placed the responsibility for strained ties on Washington and urged the U.S. to respect China's core interests. Qin's comments highlight Beijing's skepticism of American intentions.
— China unveils plans to modernize agricultural production. China aims to produce 40% of its vegetables and 60% of aquaculture in modern facilities by 2030 to better ensure safe and stable food supplies. The plan targets greater use of digital solutions and advanced equipment to boost food output, China's ag ministry said.
The new rules, part of the Inflation Reduction Act, permit entities like utility-scale solar installations to sell their tax credits to companies that had no involvement in the project but want to lower their tax bill. This system replaces the previous, less efficient process of tax-equity financing. Although there are still some uncertainties related to the new market, proponents of the change believe this will quickly drive more investment into clean-energy projects.
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