One-Third of Businesses Plan To Raise Prices In The Coming Quarter

Over a third of all businesses (38%) anticipate raising the price of their goods or services by more than usual in the next three months, a similar result to March 2022, according to the Australian Bureau of Statistics (ABS).

ABS Head of Industry Statistics, John Shepherd, said: “Most of these businesses were finding that increases in the cost of products and services (92 per cent) and fuel and energy costs (78 per cent) were leading factors for planned price increases.”

The other side

The survey results also showed nearly half (48 per cent) of all businesses have no plans to increase their prices over the next three months. “Of these businesses, nearly half (46 per cent) said it was to retain customers and 46 per cent said they had fixed-price contracts in place.” Mr Shepherd said.

The results also provided information about planned capital expenditure over the next three months. Almost one in five businesses (18 per cent) have planned capital expenditure in May 2022, consistent with findings in May 2021 (17 per cent). Nearly half (48 per cent) of businesses planning capital expenditure indicated it would be higher than what is usual for this time of year, fewer than a year ago when 59 per cent planned for higher expenditure.

The biggest Influencing factors on whether businesses were planning for capital expenditure were uncertainty about the future state of the economy (25 per cent) and supply chain disruptions (23 per cent).  Current inflation in Australia, as in much of the rest of the world, is the result of a combination of short-term and long-term factors and concerns about demand and supply.

The Reserve Bank of Australia previously raised the official cash rate for the first time in over 11 years from 0.1 per cent, which it had been at since November 2020, during the height of the Covid pandemic. It was raised to 0.35 per cent, which was higher than expected, and the RBA stated that additional increases were on the way.

Furthermore, the Russian war on Ukraine increased commodity prices significantly above pre-COVID levels. They produce more than one-tenth of the world’s oil and wheat.

By: Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

Source: One-third of businesses plan to raise prices in the coming quarter: Survey

Critics by Patricio Ibáñez, Ricardo González Rugamas, Sajal Kohli, and Eric Kuehl 

To understand the process of determining which price increases are fair and which are not, consider an example. A leading apparel retailer recently received price increases from suppliers for many of its primary brands, each citing the inflationary environment as the reason for the increase. The company wasn’t sure how it should respond.

This retailer needs to determine whether suppliers are passing along an increase that’s in line with inflation’s effect on the supplier’s costs. Although it’s not possible to answer this question exactly, the retailer can at least pressure test the increase by determining if it falls within a fair range.

To do this, it began by identifying the main cost inputs that have the highest level of change, especially in an inflationary environment. In this example, these cost inputs were commodities (such as cotton, polyester, spandex), as well as labor and transportation (such as import costs, shipping, and freight).

Second, it estimated the percentage of the total cost these inputs make up. We would expect that fabric makes up about 50 percent of the total cost of a men’s cotton T-shirt. It’s safe to assume that cotton fiber (which has a commodity index, making its cost relatively easy to research) makes up roughly one-third of the fabric’s cost.

Immediate commercial opportunities to mitigate volatility typically include maximizing spend on existing contracts whose prices aren’t indexed for inflation and requesting clawbacks on unindexed contracts that covered periods when commodity prices fell. Digital and analytics solutions can enhance cleansheet analysis to uncover how much purchases should cost for large parts of company spending, which lets managers quantify the extent to which inflationary pressure should affect supplier prices.

To improve future resilience, supplier collaboration can drive joint efficiencies and potentially help the organization look beyond price and at changes to quality or specifications or at finding ways to use less. Finally, companies can consider ramping up collaboration between pricing and procurement teams to weigh inflation’s possible effects on the prices the company charges its own customers.

The defensive, technical levers to respond to inflation include accelerating value engineering and adjusting batch sizes or order frequency. Reducing SKUs or high-cost features and attributes by modifying specifications is a potential medium-term technical lever that can help improve resilience. Depending on the sector, options to address volatility in the short-to-medium term include optimizing supplier footprints for better control over logistics, cost, tariffs, and inventory.

Longer-term volatility challengers could include strategic inventory stockpiling, relying more on vendor-managed inventory, expanding cross-industry collaboration to share commodity exposures, and partnering through the end-to-end supply chain to derisk certain nodes.

To approach suppliers in high-priority categories, a targeted playbook can help strengthen negotiation strategies, with pressure testing via mock negotiation sessions that anticipate potential supplier counterarguments…

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Transparency In Crypto Industry ‘Critical’: Ripple CEO

Speaking with “Mornings with Maria” from the World Economic Forum in Switzerland, Garlinghouse discussed regulation for the industry, noting that he traveled to Davos for the conference to engage with other CEOs and finance ministers from around the world “to talk about how these technologies can actually solve real world problems, and reduce costs and improve efficiency.”Garlinghouse also addressed volatility in the crypto market on Tuesday.

“There’s no question that regulation around crypto is still trying to find solid footing and finding the right posture for the United States,” Garlinghouse said before arguing that “the United States has really been behind other G-20 of markets,” including the U.K., Switzerland and Singapore.

He said that those markets “have led in establishing a framework that works for investors as well as entrepreneurs who are taking advantage of the new technologies and building the next generations of Google and Facebook.”

Ticker Security Last Change Change %
COIN COINBASE GLOBAL INC. 59.48 -6.62 -10.02%
BITQ EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E 7.45 -0.57 -7.11%

Along with the stock market, bitcoin has experienced a lot of volatility recently. Two weeks ago, bitcoin plunged to the $25,000 level, its lowest since December 2020, then bounced back over $30,000, according to CoinDesk. As of Tuesday morning, the crypto was trading around the $29,000 level, down from its all-time high of over $68,000 reached in November 2021.

The crypto is down more than 36% year-to-date.“There’s no question there’s been a lot of turbulence in the crypto market,” Garlinghouse said, noting that “if you zoom out, though, over the last two years, you have to remember that bitcoin was at about $8,000 two years ago. Today it’s around $30,000.”

Brad Garlinghouse, the CEO of financial technology company Ripple Labs, discussed regulation and volatility in the cryptocurrency markets from the World Economic Forum in Davos, Switzerland. “This is a new market,” he continued. “There’s certainly been a lot of excitement about what’s going on in the market [and] sometimes that excitement gets ahead of the reality.”

“We’ve been focused on how do we use technologies to solve real problems for customers and those are the kind of solutions that will scale regardless of the turbulence and volatility of the market,” he went on to argue.

Bitcoin and other cryptocurrencies have had some rough weeks in anticipation of and following the half-point interest rate hike by the Federal Reserve. It was the second of several anticipated increases this year as the central bank seeks to combat soaring inflation, which is at a high not seen in four decades.

The expectation now is that the Fed will take aggressive action to try and curb inflation, which remains near 40-year highs, according to the data for April released earlier this month, which has reduced investor appetite to hold assets perceived as higher risk.

Adding to more fears of volatility in the crypto market was the decoupling of the TerraUSD, a stablecoin whose value was tied to $1, the Wall Street Journal reported. The world’s largest stablecoin by market cap, tether, also briefly edged down from its $1 peg.  Garlinghouse pointed out on Tuesday that “stablecoins have been in the news because that was one of the catalysts that really drove the market a couple of weeks ago.”

Stablecoins are digital currencies with values that are pegged to traditional assets, like the dollar, another currency or gold. Its correspondence with the dollar is what, in theory, makes it stable. However, volatility in the crypto market last week challenged that presumption.

Brad Garlinghouse, the CEO of financial technology company Ripple Labs, discusses the turbulance in the crypto market from the World Economic Forum in Switzerland. “I think now more than ever the transparency that companies like Ripple have championed across the crypto industry is critical,” Garlinghouse told host Maria Bartiromo.

“That transparency for tether I think is to really make sure the people participating feel, buy and have access to whatever financial information they need to feel comfortable that it is in fact dollar-backed.”

U.S. Treasury Secretary Janet Yellen told a House committee hearing earlier this month that the sharp drop in crypto markets highlighted the need for additional federal regulation to respond to the wave of speculative investment in the currency whose secrecy is a major part of its attraction. In addition, a top official at the SEC indicated that tighter rules around crypto stablecoins could be drawing closer, Reuters reported.

Source: Transparency in crypto industry ‘critical’: Ripple CEO | Fox Business

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After Meltdown, Tech-Bottom Signals Have Yet to Scream ‘Buy Now’

Calling the bottom in the tech-sector meltdown isn’t easy, even after a $5.5 trillion wipe-out, yet there are some signals giving investors hope.

Tech stocks have been hammered this year as rising interest rates, slowing economic growth and soaring inflation form a perfect storm of negative catalysts. That’s hurt everyone from retail investors who loaded up on Cathie Wood’s Ark Investment exchange-traded funds last year to deep-pocketed asset managers who invested in Apple Inc.

The price charts paint a dire picture: The tech-heavy Nasdaq 100 Index just capped its seventh straight week of declines, the longest such streak since 2011, and has shed nearly 30% from its peak last year. The U.S. trillion-dollar quartet of Apple, Microsoft Corp., Amazon.com Inc. and Alphabet Inc. has led the charge lower in the latest leg of this selloff.

Yet a number of investors are starting to see a light at the end of the tunnel. The Nasdaq 100 now trades for about 20 times its estimated forward earnings — in-line with long-term averages — as frothy valuations built up during the pandemic recede. The Philadelphia Semiconductor Index, home to chipmakers including Intel Corp. and ASML Holding NV, trades at about 15 times expected earnings for the next 12 months, well below a peak of 24 hit in early 2021.

“It’s hard to be patient when there’s been so much carnage. But the pain should end, possibly soon,” said Jordan Stuart, client portfolio manager at Federated Hermes. “Our recommendation is growth investors need to be ready.”

Last week, Jefferies strategists turned bullish on the information-technology sector, saying in a note that a “dash for cash” by investors discounting extreme interest-rate scenarios “has been more than reflected in the compression of market multiples.”

Source: After Meltdown, Tech-Bottom Signals Have Yet to Scream ‘Buy Now’

The stock market, as measured by the S&P 500 Index SPX, +0.01%, got off to a rocky start this week. But that produced enough of an oversold condition that buyers stepped in and have taken the benchmark index all the way back to the top of its trading range, at 4700 points.

The lower end of the trading range is 4500 (see the accompanying chart, below), although there is also support at this week’s lows, 4530. SPX has tried many times to break out over 4705 and hold those gains but has been unable to do so. But market internals have improved somewhat, so maybe this time it will do so.

The extreme volatility that has been on display within the trading range has pushed the 20-day historical volatility (HV20) of SPX up to a historically large 21%. That is a sell signal in itself. Only if that volatility begins to retreat (falls below 15%, say), will this sell signal be terminated.

Equity-only put-call ratios have continued to rise — until yesterday (December 22nd), when they plateaued a bit. However, our computer analysis programs are still “saying” that these ratios are on a sell signal. Obviously, they are quite high on their charts, meaning they are oversold.

So a potential buy signal exists, but we need to see them begin to trend lower (and for the computer analysis programs to agree) before we can say that they are on buy signals.

Market breadth was abysmal when the market was going down. But it has recovered strongly with the rally since Monday, and now both breadth oscillators are on buy signals. We had a contingent bull spread recommendation in place and those contingencies have been fulfilled.

These oscillators had reached extreme oversold conditions in late November and early December — extremes not seen since the pandemic selling of March 2020. That sets the stage for a strong buy signal, and it is usually the second such one that is the “true” buy signal. This current signal is that second one, so this is promising for the bulls. For the record, the cumulative breadth indicators are nowhere near their old highs.

New 52-week lows have continued to outnumber new 52-week highs, even with the market rallying back this week. This situation could reverse in the coming week, but so far it has not. That means this indicator is still clinging to a sell signal. In a broad sense, it is not a constructive thing for SPX to be right at its highs, yet there are more stocks making new 52-week lows than making new 52-week highs.

The implied volatility indicators are mostly bullish, but not totally. First, the VIX “spike peak” buy signal remains in effect. Action was wild in VIX, though, as it exploded to above 27, then closed below 23 on one day (Monday, December 20th).

It is the trend of VIX that represents something of a problem. That is, VIX has continued to close above its 200-day moving average, which is just below 19 and going sideways. VIX has nearly fallen to that level for the first time in a month (note the box on the accompanying VIX chart). A clear close below that 200-day MA will be another bullish sign for stocks.

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Inflation Increases Risk of Recession In Global Economy

The Federal Reserve’s bid to calm inflation by raising interest rates and withdrawing emergency stimulus programs is gearing up just as the global economy is displaying worrisome signs of weakness, aggravated by the war in Ukraine and covid’s continuing hold on industrial supply chains.

The risk, some economists said, is that the Fed and other central banks that are implementing similar anti-inflation policies may adjust too slowly to a complex and fast-changing global landscape.

However, the persistence of a tight labour market and high inflation pose concerns for the Biden administration and the Federal Reserve. This week, the US central bank raised its benchmark interest rate by 0.5 percentage points for the first time since 2000 — to a target range of between 0.75 and 1 per cent — to curb rising prices. Inflation in the US is currently running at a 40-year high.

Meanwhile, US stocks fell on Friday, extending sharp losses from the previous session, as signs of a tightening jobs market compounded inflation worries. European shares also declined, with the regional Stoxx 600 index losing almost 2 per cent, putting it on track to end the week more than 4 per cent down. London’s FTSE 100 lost 1.3 per cent and Germany’s Xetra Dax also fell 1.3 per cent.

The Nasdaq Composite, comprised of many of the largest US technology companies, closed down 5 per cent yesterday, in its biggest one-day decline since 2020. The blue-chip S&P 500 index also declined on Thursday with a 3.5 per cent loss. As the world continues to deal with the economic impact of the pandemic, the war in Ukraine is exacerbating inflationary problems.

Central banks are faced with the risk that controlling rising prices could lead to economic decline. The Bank of England warned yesterday that the UK economy was heading towards a recession and inflation would hit 10 per cent this year, as it lifted the interest rate to 1 per cent, the country’s highest level since 2009.

With UK prices likely to rise at their fastest rate in more than 40 years as sustained double-digit inflation becomes possible for the first time since the 1970s, the BoE — which is celebrating 25 years of independence this week — faces challenges that it has not encountered in the past quarter of a century, writes economics editor Chris Giles.

Line chart of CPI inflation and successive BoE forecasts, 2021-22 (%) showing The Bank did not expect to have to tackle double-digit inflation Latest news Ukraine urges Médecins Sans Frontières to evacuate wounded from Azovstal steel plant Glass Lewis advises Amazon shareholders to vote against pay policy German industry suffers biggest drop in output since start of pandemic For up-to-the-minute news updates.

Need to know: the economy China’s president Xi Jinping has reaffirmed his commitment to the country’s controversial zero-Covid strategy, warning against “any slackening” in the effort and vowing to crack down on criticism of the policy despite signs of damage to the economy. US homebuyers are stretching their budgets to buy new homes and rushing to strike deals to avoid higher mortgage financing costs, according to the latest industry data.

Mortgage rates have reached their highest levels in more than a decade, according to the recent Freddie Mac survey. Latest for the UK/Europe Momentum is building for the European Central Bank to raise interest rates in July to fight soaring inflation, after dovish policymakers indicated they were ready to accept an end to almost eight years of negative borrowing costs.

The EU is considering providing more time and money to Hungary to adapt to an embargo on Russian oil after talks on Brussels’ plans for imposing sanctions became “stuck”. Vodafone, the UK telecoms group under pressure from an activist investor, has strengthened its board with two appointments. They are Simon Segars, former chief executive of Arm, the UK-based chip business, and Delphine Cunci, an industry heavyweight in France.

Europe’s largest activist fund Cevian Capital has been pushing the mobile group to refresh its management, which it believes has insufficient experience. Help us compile our ranking of Europe’s Diversity Leaders. Employees and workplace experts are invited to complete a short survey to assess companies’ progress on inclusivity by June 12.

Coronavirus infections in England have fallen to their lowest level since the start of the year, according to official data published today, as the spread of the disease slows across the UK. Global latest US regulators have travelled to mainland China to discuss a potential compromise over audit disclosures that could stop around 270 Chinese companies from being delisted by New York exchanges, according to two people close to the matter.

Tomorrow you can hear Henry Kissinger, Chimamanda Ngozi Adichie and more at our inaugural US FTWeekend Festival in Washington, DC. Business German sportswear group Adidas has warned that its operating profit this year would be lower than previously expected, as the company struggles with disrupted supply chains, closed shops in China and rising costs.

Operating profit tumbled 38 per cent to €437mn in the first quarter as the company was hit by the economic fallout from China’s strict Covid policies. Australia’s biggest investment bank Macquarie Group profited from volatility on global commodity markets and record dealmaking, driving full-year net profit up 56 per cent from the previous year to a record high of A$4.7bn ($3.3bn).

British Airways has been forced to cut flight schedules further as it struggles to hire staff quickly enough to meet renewed demand for travel after culling nearly 10,000 jobs during the pandemic, raising concerns that the carrier could miss out on a bumper summer for European airlines. France has warmly welcomed Binance’s bid to put down roots in one of Europe’s top financial centres, drawing a deep divide with watchdogs in the UK that rejected the crypto giant.

Binance this week received a nod from French financial regulators, a move that clears the way for the crypto exchange to establish a significant presence in the G7 nation that could also help the company unlock access to other jurisdictions across Europe. Boeing will move its headquarters to the Washington, DC area from Chicago, bringing the company closer to federal lawmakers and rival defence contractors.

The move comes during a tumultuous period for the company, which has been subject to greater regulatory scrutiny following two fatal crashes of its 737 Max jet in 2018 and 2019 as well as the discovery of flaws in its 787 Dreamliner. Science round-up The true total global pandemic death toll was about 15mn by the end of 2021, based on an analysis of excess mortality, said the World Health Organization.

Source: Federal Reserve is raising interest rates even as the global economy struggles – The Washington Post

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A Recession is Now The Base Case Scenario For Wells Fargo

Wells Fargo slashed its economic outlook this week, with a year-end recession now the bank’s base case scenario as the Federal Reserve moves to tame red-hot inflation.

In an updated forecast, Wells Fargo cuts its 2022 GDP growth target to 1.5%, down from 2.2%, and slashed its 2023 target to a decline of 0.5%. The bank had previously predicted that gross domestic product, the broadest measure of goods and services produced in a nation, would expand by 0.4% next year.

Overall, Wells Fargo expects a total peak-to-trough contraction of 1.3% across three quarters. By comparison, the economy shrunk 10% during the very brief, but sharp, pandemic-induced recession in 2020. During the 2008 financial crisis, the economy fell by 3.8%.

In making the new projection, Wells Fargo noted that “consumer activity has weakened” considerably as the economy confronts new COVID-19 outbreaks and restrictions, sky-high inflation and a strong U.S. dollar, in addition to the Russian war in Ukraine and aggressive Fed monetary policy.

Economic growth in the U.S. is already slowing. The Bureau of Labor Statistics reported earlier this month that gross domestic product unexpectedly shrank in the first quarter of the year, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession.

Wells Fargo is not alone in its gloomy economic outlook; there are growing fears on Wall Street that the Fed may inadvertently trigger a recession with its war on inflation, which climbed by 8.3% in April, near a 40-year high. Other firms forecasting a downturn in the next two years include Bank of America, Fannie Mae and Deutsche Bank.

Fed policymakers already raised the benchmark interest rate by 50 basis points earlier this month for the first time in two decades and have signaled that more, similarly sized rate hikes are on the table at coming meetings as they rush to catch up with inflation. Chairman Jerome Powell recently pledged that officials will “keep pushing” until inflation falls closer to the Fed’s 2% target.

Still, he has acknowledged there could be some “pain associated” with reducing inflation and curbing demand but pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing is not assured. 

“It’s going to be a challenging task, and it’s been made more challenging in the last couple of months because of global events,” Powell said Wednesday during a Wall Street Journal live event, referring to the Ukraine war and COVID lockdowns in China.

But he added that “there are a number of plausible paths to having a soft or soft-ish landing. Our job isn’t to handicap the odds, it’s to try to achieve that.”

Source: A recession is now the base case scenario for Wells Fargo | Fox Business

Wells Fargo & Co. clients are coping well with inflation and rising interest rates, which hasn’t yet stressed business at the bank, according to Chief Financial Officer Mike Santomassimo.

“So far, so good,” he said Thursday in a Bloomberg Television interview. “Clients come into this both on the consumer side and the corporate side in a much better position than they would have in other rising-rate environments.”

Wells Fargo reported first-quarter results earlier in the day, missing Wall Street estimates on revenue and expenses. Non-interest expenses were $13.9 billion, higher than what analysts had forecast. Revenue declined, bringing net income down to $3.7 billion, the San Francisco-based lender said in a statement

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