Former minister discusses the importance of economic security and Japan's pioneering role. Stock market awaits fresh inflation data and faces a crucial week of new economic data. Plus, insights into the labor market and the Magnificent Seven valuations on Asking for a Trend.
Sources:
https://www.japantimes.co.jp/news/2024/08/13/japan/politics/takayuki-kobayashi-interview/
https://markets.businessinsider.com/news/stocks/stock-market-today-inflation-cpi-ppi-economy-fed-rate-cuts-2024-8
https://finance.yahoo.com/video/labor-market-magnificent-7-valuations-221612702.html
https://markets.businessinsider.com/news/stocks/stock-market-today-inflation-cpi-sp500-economy-fed-rate-cuts-2024-8
Outline:
(00:00:00) Introduction
(00:00:42) Economic security is about strengthening and sustaining growth, former minister says
(00:04:24) Stock market today: Indexes close mixed before fresh inflation data
(00:06:53) Labor market, Magnificent 7 valuations: Asking for a Trend
(00:09:18) Stock market today: Indexes slide to start heavy week of new economic data
Simply Economics
Japan’s Role in Economic Security, Stock Market Awaits Inflation Data
Former minister discusses the importance of economic security and Japan's pioneering role. Stock market awaits fresh inflation data and faces a crucial week of new economic data. Plus, insights into the labor market and the Magnificent Seven valuations on Asking for a Trend.Sources:https://www.japantimes.co.jp/news/2024/08/13/japan/politics/takayuki-kobayashi-interview/https://markets.businessinsider.com/news/stocks/stock-market-today-inflation-cpi-ppi-economy-fed-rate-cuts-2024-8https://finance.yahoo.com/video/labor-market-magnificent-7-valuations-221612702.htmlhttps://markets.businessinsider.com/news/stocks/stock-market-today-inflation-cpi-sp500-economy-fed-rate-cuts-2024-8Outline:(00:00:00) Introduction(00:00:42) Economic security is about strengthening and sustaining growth, former minister says(00:04:24) Stock market today: Indexes close mixed before fresh inflation data(00:06:53) Labor market, Magnificent 7 valuations: Asking for a Trend(00:09:18) Stock market today: Indexes slide to start heavy week of new economic data
- Duration:
- 12m
- Broadcast on:
- 13 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Tuesday, August 13th. On today's show, economic security is about strengthening and sustaining growth, according to a former minister. Plus, the stock market closes mixed ahead of fresh inflation data, and later we'll discuss the labor market and the valuations of the Magnificent Seven. Let's coverage in more up next. I'm David, and you're listening to Simply Economics. We start off with a look at the concept of economic security in an age of geopolitical tumult, with great power competition between the United States and China, and conflicts in Ukraine and the Middle East. Women and diplomats in the West are increasingly talking about this nascent concept. Here to discuss it further is our correspondent. So what exactly is meant by economic security? Economic security is a broad term that encompasses building resilience in critical infrastructure and supply chains, especially in strategic areas such as semiconductors, batteries, and rare earth minerals. It also involves protecting advanced technologies from theft or espionage, and guarding against economic coercion from adversaries. The goal is to ensure that a nation's economy can withstand shocks and disruptions, whether from natural disasters, pandemics, or geopolitical tensions, and which countries are leading the way in this field. Japan is considered one of the pioneers in economic security, partly due to its proximity to China and its long history of dealing with the economic superpower. Since the world's third largest economy, Japan has significant economic ties with China, but also views it as a potential threat. In recent years, Japan has taken steps to diversify its supply chains, invest in domestic production of critical components, and tighten controls on sensitive technologies. It has also worked closely with the United States and other allies to coordinate policies and share intelligence. What are some of the specific measures that Japan has taken? In 2020, Japan's Parliament passed the Economic Security Promotion Act, which established a new government agency to oversee economic security policies. The act also provided funding for research and development in critical technologies, such as quantum computing and artificial intelligence. Japan has also tightened export controls on sensitive materials and equipment, and has worked to attract foreign investment in domestic manufacturing. Additionally, Japan has sought to build stronger economic ties with other countries in the region, such as Australia and India, as a counterbalance to China's influence. How are other countries approaching economic security? The United States has also made economic security a top priority, particularly in its competition with China. The Biden administration has launched a number of initiatives aimed at boosting domestic production of semiconductors, batteries and other critical components. It has also worked to strengthen alliances with key partners, such as the European Union and Japan, to coordinate policies and investments. Other countries, such as Australia and Canada, have also taken steps to protect their economies from foreign interference and to build resilience in key industries. What are some of the challenges in implementing economic security policies? One of the biggest challenges is balancing the need for economic openness and global trade, with the desire for greater self-sufficiency and security. Many countries rely on international supply chains and foreign investment to drive economic growth, and overly restrictive policies could harm competitiveness. There are also concerns about the potential for economic nationalism and protectionism, which could lead to trade disputes and economic fragmentation. Additionally, implementing economic security policies requires significant government investment and coordination across multiple agencies and sectors, which can be difficult to achieve. Despite the challenges, it seems clear that economic security will remain a top priority for many countries in the years ahead, as they seek to navigate an increasingly complex and unpredictable global landscape. Speaking of economic developments, U.S. stocks closed mixed to start the week as traders struggled to extend a comeback rally after erasing most losses from last week's big route. New inflation data will arrive on Tuesday with the Producer Price Index report for July. For more on this, let's bring in our correspondent. So what exactly happened with the markets today? Stocks seesawed between gains and losses throughout the session, unable to decisively erase the losses from last Monday's sell-off, which was the win two years. Investors are anxiously awaiting new inflation data throughout this week. On Tuesday, the Producer Price Index, a measure of wholesale inflation, is expected to be in line with the June data at 0.2%. But the main event will be the Consumer Price Index later in the week, which will show the rise in inflation faced by the average consumer last month. And what are economists expecting from that Consumer Price Index reading? How might it impact the Fed's plans for interest rates? Economists expect the CPI reading to show a slight rise on a monthly basis, though not enough to scramble predictions for the Fed to begin cutting interest rates at its policy meeting next month. However, rate cuts are a double-edged sword. Markets are clamoring for lower interest rates, but a move by the Fed would also be an acknowledgement that the economy is slowing. Fears of a recession are what sparked the latest big sell-off, and any weakness in the economic picture could be the catalyst for the next big move down in stock prices. Interesting. Were there any other notable factors impacting markets to start the week? Geopolitical tensions also flared anew to start the week, with the Pentagon sending more U.S. forces to the Middle East ahead of a potential attack by Iran. The U.S. has been anticipating an attack on Israel following the assassination of a Hamas leader in Tehran. This caused U.S. crude prices to surge as much as 4% on Monday. Additionally, veteran investor Louis Nevelier noted that "The bears are thinking that an aggressive Fed cutting schedule is a recession warning, not an all-clear reflection that inflation has been tamed." Thanks for that insight and analysis. Certainly a lot for investors to digest as they await that key inflation data later this week. Speaking of economic indicators, the latest jobs report has sparked concerns about the health of the labor market as the Federal Reserve continues its fight against inflation. For more insight, we turn to our economics correspondent, Abby. The July jobs numbers fell short of expectations. What's your take on the broader implications? While the initial reaction to July's jobs report was one of panic, taking a step back provides important context. Chief economist Noah Yosef, from the American Staffing Association, notes that despite the higher unemployment rate, it remains at a very healthy level overall. He also points out that worker productivity is increasing due to higher borrowing costs and wages are outpacing inflation. So while July's numbers weren't stellar, the labor market as a whole is still in a considerably strong position. Meanwhile, stocks closed mixed to start the week as investors braced for a flurry of economic data and corporate earnings reports. What are the key market trends you're watching? Yahoo! Finance's Jared Blickery highlights several important trends, including a cooling of risk momentum in the market and a loss of liquidity stemming from increased volatility. He also provides an update on the Japanese yen carry trade, which has been a significant factor in recent market movements. As the week unfolds, these trends could contribute to further market swings as investors digest the incoming data and earnings reports. Turning to the tech sector, the so-called Magnificent Seven stocks have seen their valuations come under pressure lately. What's the current state of play for these tech giants? Josh Shafer from Yahoo! Finance notes that the recent decline in valuations for the Magnificent Seven has prompted investors to reevaluate whether these stocks are becoming attractive investment opportunities once again. As these companies continue to innovate and adapt to changing market conditions, their long-term growth prospects remain a key focus for investors. However, the near-term volatility and valuation concerns underscore the importance of carefully assessing the risks and rewards associated with these high-profile tech stocks. As always, a lot to unpack in the world of economics and markets. Thank you, Abby, for your insights. Speaking of which, US stocks were lower on Monday, as investors looked to new economic data due out this week. Late last week, major indexes nearly erased all of the losses incurred in a sharp three-day sell-off. This week, markets will get updates on consumer and producer inflation, as well as retail sales for July. For more, let's bring in our simply economics correspondent. So what exactly are investors watching for in the economic data this week? The main focus will be on the consumer price index report for July coming out on Wednesday. Core CPI, which excludes volatile food and energy prices, is expected to rise 0.2% month over month, slightly ahead of June's 0.1% reading. On an annual basis, core inflation is forecast to hold steady at 3%. While a modest uptick wouldn't derail expectations for the Fed to cut rates next month, the magnitude of the cut is still up for debate. Markets are currently pricing in almost even odds of a 25 or 50 basis point reduction. And how might the inflation data impact the stock market's trajectory after last week's rebound from the steep sell-off? Bank of America analysts say the market reaction will likely hinge on whether the CPI figures come in hotter or cooler than anticipated. A soft inflation reading could spark a relief rally extending the recovery. However, they warn that a hotter than expected print poses the risk of a major downside event since it would catch investors off-guard. The Fed's response to the data will be key. As Bofe puts it, equities need the Fed at least until the next strong macro data. What's missing is the Fed's nod, restoring confidence that growth is ultimately going to be supported. All right. And as we await that crucial data, where do the major indexes stand to start the week? As of shortly after opening bell, the S&P 500 is down 0.3%. The Dow Jones industrial average has shed about 220 points or 0.6% and the NASDAQ composite is off 0.1%. Elsewhere, oil prices are higher with WTI crude up 1.3% and Brent crude gaining 1%. Gold is up nearly half a percent while Bitcoin has dipped about 1.3%. The 10-year treasury yield is little changed. Up one basis point to 3.96%. Lots to keep an eye on in the week ahead. Thanks for that update from Simply Economics. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [BLANK_AUDIO]