New Poll: Swing State Voters Support Policies To Encourage Oil And Natural Gas Production

Data Interpretation

Summary:

Poll shows overwhelming support for permitting reform; strong opposition to energy and vehicle mandates.

The American Petroleum Institute (API) released new battleground state polling conducted by Morning Consult demonstrating widespread support for policies that encourage domestic oil and natural gas production and limit reliance on foreign sources. The poll shows inflation remains a top concern for voters in Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, and an overwhelming majority oppose vehicle mandates. As Congress continues to debate bipartisan permitting reform legislation, voters in battleground states expressed strong support for reforms to streamline the approval process for energy infrastructure projects.

With less than 100 days until Election Day, API is urging policymakers on both sides of the aisle to support commonsense energy policies, including those outlined in API’s Five Point Policy Roadmap to unleash America’s energy security and help reduce inflation.

“The U.S. continues to be a global leader in energy production, but the American people recognize that our leaders in Washington must advance an agenda to grow our nation’s energy advantage for decades to come,” API President and CEO Mike Sommers said. “With geopolitical tensions rising and inflation remaining a top concern, we need policies that reinforce the role of American energy on the world stage and support access to the affordable, reliable energy consumers need.”

The poll conducted by Morning Consult found:

——More than 9 in 10 voters are concerned about inflation. (AZ: 94% GA: 93% MI 94% NV: 94% NC: 92% PA: 91% WI: 91%)

——8 in 10 voters agree that producing more oil and natural gas here in the U.S. could help lower energy and utility costs for American consumers. (AZ: 83% GA: 88% MI: 84% NV: 86% NC: 85% PA: 83% WI: 80%)

——A majority of voters oppose government mandates that restrict consumer choice, including banning new gasoline, diesel and hybrid vehicles. (AZ: 69% GA: 76% MI: 80% NV: 75% NC: 75% PA: 77% WI: 78%)

——Approximately 8 in 10 voters support fixing our broken permitting system to streamline the process of approving energy infrastructure projects. (AZ: 79% GA: 81% MI: 82% NV: 81% NC: 80% PA: 84% WI: 80%)

——More than 8 in 10 voters agree producing oil and natural gas here in America helps make our country more secure against foreign adversaries. (AZ: 89% GA: 91% MI: 87% NV: 85% NC: 88% PA: 86% WI: 87%)

——More than 8 in 10 voters support leveraging America’s domestic resources rather than relying on other regions of the world. (AZ: 85% GA: 89% MI: 86% NV: 82% NC: 82% PA: 86% WI: 84%)

——Nearly 8 in 10 voters support advancing a sensible federal tax policy that encourages American energy production and strengthens the country’s economic and energy security. (AZ: 82% GA: 85% MI: 80% NV: 76% NC: 80% PA: 78% WI: 76%)

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Alex

Economic

Data Interpretation

The Federal Statistical Office of Germany released the July PPI report on August 20:

German PPI was down 0.8 percent from a year ago in July, in line with expectations, followed by a 1.6 percent decline in June.

German PPI rose by 0.2 percent from a month earlier in July, in line with expectations and unchanged from June's 0.2 percent increase.

Energy prices rose 0.5 percent month-on-month in July but fell 4.1 percent year-on-year. Lower prices for natural gas and electricity had the biggest influence on the year-on-year rate of price change for energy. Natural gas prices fell by 12.3 percent year-on-year; electricity prices fell by 9.2 percent year-on-year. By contrast, prices for mineral oil products (+2.7 percent) and motor fuel (+0.5 percent) both increased. Excluding energy prices, the PPI was up 0.9 percent year-on-year and 0.1 percent month-on-month.

Intermediate goods prices rose 0.3 percent year-on-year and edged up 0.2 percent month-on-month in July. Price trends varied across product categories. Prices of metals fell by 2.0 percent year-on-year, wood and products of wood and cork by 2.6 percent, and paper and paper products by 1.8 percent, while prices of stone, sand, clay and kaolin (+5.5 percent), mortar (+5.2 percent), gypsum products for construction (+3.3 percent) and lime (+2.0 percent) all rose.

Capital goods prices rose 2.0 percent from a year earlier in July and were unchanged from a month ago. Prices of non-durable consumer goods rose 0.6 percent year-on-year and fell 0.1 percent month-on-month. Food prices rose 0.2 percent year-on-year. Durable goods prices rose 0.7 percent year-on-year and were unchanged month-on-month.

Overall, lower energy prices continued to be the main reason for the year-on-year decline in the PPI in July, while higher prices had to be paid for consumer and capital goods.

Germany PPI for July

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Swissquote

Central Bank

Economic

Stocks

The week kicked off on a positive note on expectation that when Federal Reserve (Fed) Chair Jerome Powell speaks at the Jackson Hole meeting on Friday, he will deliver a strong hint that the rate cuts will begin soon in the US.

How soon ? Probably in September? By how much? Probably a reasonable 25bp? Would the markets be upset with the idea of a 25bp cut instead of a 50bp? Probably not, because a 50bp cut would require a severe economic slowdown, a crisis or a panic mode, which is not good for risk appetite. Therefore, the best of both worlds would be the hint of a 25bp cut that would keep the market mood in the sweet soft-landing spot. And this is what investors hope to hear.

And that hope has pushed the S&P500 up for the 8th straight session on Monday. The index added another 1% yesterday and is now just 1% below its ATH level. Nasdaq 100 jumped 1.30% and above its 50-DMA for the first time in almost more than a month. Roundhill’s Magnificent 7 ETF advanced more than 1.60% while the Russell 2000 gained 1.20%.

In summary, both the Big Tech and small companies in the US gained with the thought of an approaching rate cut in the US. Even the energy stocks had a good session despite a heavy selloff in crude oil, which was triggered by the news that Israel accepted a ceasefire proposal in Gaza if Gaza says yes. US crude fell more than 2.5% to below $75pb yesterday and remains under pressure this morning but could – once the geopolitical factors are priced in – see the support of the Fed optimism and rebound back to $78/80pb range.

Zooming out, what I want to say is that both the big and small stocks gained yesterday, and the S&P500’s equal-weighted index neared an ATH level as the market rally of today isn’t boosted by AI – but by the Fed expectations – and the latter benefit to other sectors than only the ones that see the direct benefits of AI investments.

AMD steps up efforts to offer something more than just, chips

AMD announced to buy ZT Systems to increase ‘its capabilities and expertise to optimise solutions at the systems, rack and the data center levels’ because customers no longer want only chips, but it want ready-to-use AI solutions – a thing that Nvidia does better than the rivals with its ecosystem and the others should improve at. AMD plans to sell ZT System’s data center infrastructure manufacturing unit and keep its system-design business and hope to compete with Nvidia in offering fast and at-scale AI solutions. AMD jumped 4.5%.

The news didn’t tame appetite for Nvidia, which also rallied more than 4% and closed the session at $130 per share. Even Intel gained yesterday.

Overall, the chipmakers are doing better now than a month ago, but the Fed optimism should enhance rotation toward the non-tech pockets of the market that were left behind over the past year-and-a-half and provide only a limited upside potential to the Big Tech.

Elsewhere

The European Stoxx 600 also opened the ween on a positive note and jumped above the 50 and 100-DMA, and the Japanese Nikkei 225 is better bid today after a moody Monday on a yen rebound. I expect the market mood to remain mainly optimistic into the Jackson Hole meeting with no major data points to hamper optimism. We will have a glance on the European and Canadian inflation numbers today, FOMC minutes tomorrow and flash manufacturing numbers for August on Thursday. I guess that the US weekly jobless claims will also be watched more seriously than usual, but all in all there should be nothing major to change the week’s focus until the Powell speaks.

The US dollar remains weak – too weak – into that speech, the EURUSD consolidates gains near 1.1080 before today’s CPI read and Cable tests the 1.30 offers supported by relatively strong fundamentals. The UK has been the best performing economy among major peers in the first half of the year. Despite political shenanigans, the Brexit pain and the cost-of-living crisis, the British economy grew more than its major peers in the first two quarters of the year – even better than the US. Germany has ranked at the bottom of the range after France and Italy. And the surprisingly good performance of the British economy keeps the Bank of England (BoE) doves more contained than their Fed peers, and gives support to the pound against the greenback.

But again, I still think that the US dollar’s weakness has gone a bit too far and we shall see some downside correction before an eventual rise above the 1.30 mark. If nothing, the US economy is doing better than most peers and that alone should give the Fed doves less reason to believe that the Fed will cut more than the peers in the coming months.

Still in the UK, while the British economy and Cable outperformed peers over the past months, the British blue-chip index, the FTSE 100 – which is more concerned about the global economic health than the UK’s own matters due to its high exposure to energy – didn’t do better than the others. But the energy-heavy index should continue to see the benefits of reflation flows, if the rate cuts start while we are still in the soft-landing zone.

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ADP

Economic

So, are you cutting rates or not?

Federal Reserve Chair Jerome Powell has probably been asked this question more times in the last six months than any Fed chair in the last 20 years. The last time benchmark rates were this high was early 2001.

But rate cuts won’t be the most pressing question for Powell or other Fed members this week when they gather in scenic Jackson Hole, Wyoming. This annual convocation of roughly 120 high-profile academics, global policymakers, and business leaders has another mission entirely.

This year, in a location known for its fly fishing, the Fed will be casting for fish bigger than the timing of its next rate cut.

The agenda at this year’s Jackson Hole Economic Policy Symposium includes discussion on an overarching issue: Reassessing the Effectiveness and Transmission of Monetary Policy. In plain English, attendees will weigh how the economy reacts, or doesn’t react, to Fed rate decisions.

It’s an important topic, one that will give Fed policymakers an opportunity to polish the central bank’s brand as a strategic steward of price stability and full employment. Here’s how.

Rewarding patience

Last week’s economic data could have not broken better as a prelude to Jackson Hole. After a topsy-turvy two weeks, steadfast central bank policymakers were rewarded with an abundance of good news when three big macroeconomic watch points—inflation, the labor market, and consumer spending—all came out strong.

Initial jobless claims, a measure of layoffs, dropped to a five-week low. The Consumer Price Index fell to 2.9 percent, the lowest level in more than three years. And July retail sales exceeded expectations, signaling that consumers are still in good shape as the primary drivers of economic growth.

Confronted with this upbeat data, Wall Street shook off the recession fears that had caused wild market swings just a few days earlier, and again embraced the possibility that the Fed had indeed engineered a soft landing for the economy.

Focusing on the long term

Last week’s data wasn’t all good. One area of the economy that’s been particularly resistant to the Fed’s policy charm is housing.

The July CPI measure of shelter costs, which estimates the monthly cost of renting, rebounded to a 0.4 percent increase month over month, erasing a drop in June. Shelter costs composed 90 percent of the monthly increase in inflation, according to the Bureau of Labor Statistics.

Housing inflation can’t be slowed by interest rates alone. It requires an increase in affordable inventory, which appears to be waning. Census data on housing starts shows residential construction down 16 percent from last year.

Housing isn’t the only problem that rate cuts won’t solve. Demographics and globalization, once disinflationary forces, have grown less effective in tamping down price growth. Periodic bouts of inflation are likely to be more common in the future.

At Jackson Hole, it would behoove the Fed to remind market participants that they’re in it for the long haul, not just for hotly anticipated rate cuts in September.

Reframing the discussion

In Jackson Hole, Powell will have the opportunity to address several open questions in his highly anticipated remarks.

For example, the central bank’s current monetary framework was adopted when the Fed was trying to solve for too-low inflation. Do policymakers need to change their target inflation comfort zone?

Another open question is when the Fed should employ quantitative easing, the central bank’s big-scale purchases of bonds and other financial assets, to help drive interest rates down. What’s the best way to reverse those moves—to employ quantitative tightening—when they’re no longer needed?

Finally, it’s critical for Fed policymakers to provide context on the new normal. Main Street and Wall Street have become accustomed to rock-bottom interest rates and record-low unemployment, both of which can’t be sustained. The Fed should take the lead in defining what constitutes normal for benchmarks in a healthy U.S. economy.

My Take

In 2022, the Jackson Hole conversation turned to the new potential for higher-for-longer inflation and interest rates in the wake of the pandemic. In 2023, the discussion centered on permanent changes to the structure of the global economy caused by the pandemic.

As in previous years, thisyear’s symposium is likely to generate more hard questions than easy answers.But it’s also chance for reinvention.

For the past three years, market-watchers have criticized the Fed for being late to recognize the pandemic’s inflation threat, and late to cut rates as that threat receded.

But the recent run of good economic data has turned this year’s Jackson Hole conference into a chance at redemption, of sorts, for the data-dependent central bank. At this critical economic juncture, it’s a chance for the Fed to refresh its reputation as a central bank that’s not behind the curve, but in front of it.

I’ll be in Jackson Hole this week, and Main Street Macro will be on hiatus until Sept. 9.

The Week Ahead

Wednesday: Fed meeting minutes from July will provide clues to policymakers’ thinking on the state of the economy and the need for rate cuts.

Thursday: We’ll get signals on the current state of manufacturing and services providers and their hiring plans from the S&P Global flash PMI survey.

Existing home sales data from the National Association of Realtors will give us a read on how the summer selling season it progressing after getting a boost from slightly higher inventory and slightly lower mortgage rates.

Friday: The eyes and ears of all economists, including mine, will be tuned into Powell’s speech from the Jackson Hole. Just bear in mind that whatever he talks about, he won’t tell us when the Fed will cut rates. That’s a question for next month.

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Warren Takunda

Economic

Collated forecasts from the world's leading investment banks show the exchange rate will end the third quarter at higher levels, with the median estimate now residing some 70 pips higher than the current level in the spot exchange rate.

Forecast estimates - available as a free discretionary download from Corpay - show that although the median estimate for Pound-Euro is higher, the mean is slightly lower than current levels.

These data suggest the recent fall in the Pound leaves it better balanced from a valuation perspective, and if the 'big brain' is right, it is set for a gentle and modest appreciation trend into the quarter-end.

Looking at some of the more gutsy calls amongst the investment banks, LBW Bank remains the bull in the pack, holding out for a peak at 1.22 by the end of the third quarter. Amongst the bears, UK high street name Santander thinks a return to 1.15 is possible by the end of September.

Having a median and mean forecast from over 30 of the world's best analysts allows us to gauge the scale of August's fall and assess how this has impacted perceptions of Pound Sterling's value.

The Pound to Euro exchange rate fell 2.30% peak-to-trough at one stage earlier this month, with declines following a Bank of England interest rate cut that prompted investors to reduce a significant long exposure to the British Pound.

The subsequent technical rebalancing in the market has left positioning somewhat cleaner, and the Pound has recovered about half of its decline to trade at around 1.1730 at the time of writing.

Those analysts who think the Pound can end the third quarter higher than it currently trades say the UK's relatively high interest rates can underpin the currency over the coming weeks.

"GBP remains the best performing G10 currency year-to-date. The fundamental/secular positives remain the same and we are reassured that recent weakness has not been a reflection of the UK outlook," says Bank of America in a recent note.

It was reported last week that the UK economy experienced a strong first half of the year as GDP grew 0.6% over the three months to June. It was also reported the unemployment rate fell to 4.2% in June from 4.4% in May, bolstered by a higher-than-expected pace of hiring.

These data will lessen the need for the Bank of England to deliver back-to-back interest rate cuts in 2024, further bolstering UK interest rate expectations and the Pound.

"A rebounding labour market would, all else equal, boost wage forecasts for 2025. Indeed, some surveys suggest pay growth has picked up momentum in recent months," says Rob Wood, UK Economist at Pantheon Macroeconomics. "All told, we see a high probability the MPC will keep interest rates on hold in September. We forecast a cut in November if growth or inflation fails to surprise significantly to the upside."

Source: Poundsterlinglive

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Danske Bank

Central Bank

In focus today

In Sweden, the Riksbank’s rate decision, a policy statement and a shorter policy report will be published at 09.30 CET. A press conference follows at 11.00 CET. There will be no new macro forecasts and no new rate path. A 25bp rate cut is – or should be – a done deal. Instead, market focus will be on communication. We expect that they will guide toward two more cuts this year, which is slightly more dovish than in June, though less dovish than market is pricing (three more cuts).

In the euro area, we will get final inflation figures for July. The final HICP data allow us to see how the important domestic inflation indicator (‘LIMI’) fared in May, see Research Euro Area – The importance of domestic inflation guiding ECB policies, 6 August. The preliminary figures showed that service price pressures eased to around 0.3% m/m, which is still too high, but lower than a couple of months ago.

In Denmark, we get national accounts data for Q2. We expect 1% GDP growth in Q2. GDP declined 1.4% q/q in Q1 on the back of a very strong fourth quarter in 2023. This leaves room for growth in Q2.

In Turkey, the central bank will announce its rate decisions at 13.00 CET. The Central Bank of Turkey has concluded its hiking cycle and is expected to keep the policy rate unchanged at 50%. Since the July meeting, inflation has developed largely in line with their forecasts, as headline inflation in month-on-month terms increased temporarily in July, while the rise in underlying inflation was limited.

Fed’s Bostic will be on the wire in the evening at 19.35 CET.

Economic and market news

What happened overnight

Peoples Bank of China (PBOC) left loan prime rates unchanged as expected in the market, after interest rates were lowered in July. More easing is expected later in Q3 as the economy is struggling and PBOC has been waiting for the Fed to start easing before cutting rates (to avoid downward pressure on the renminbi).

What happened yesterday

In the euro area, ECB’s Rehn (voting member) spoke about monetary policy. He said that ECB may need to lower interest rates at the September meeting, due to negative growth risks arising, while inflation is on the right track in his eyes. Markets price in a 90% probability of a rate cut in September. We, however, still stick to our call of no cut in September.

Market movements

Equities: Global equities were higher yesterday, and this morning’s post might start to sound like a broken record with the MSCI World Index gaining for its eighth consecutive day. Equities were up, volatility was lower (VIX below 15), and cyclicals outperformed defensives. As US stocks rallied into the cash close, all 25 industries finished higher on a day that saw virtually no headline news to drive the market.

FOMO is back, and all the fear about a recession among equity investors seems to have gone. Please remember, this is typically how investor behaviour appears when we are very late in the cycle. In the US yesterday, Dow +0.6%, S&P 500 +0.97%, Nasdaq +1.4%, and Russell 2000 +1.2%. This morning, most Asian markets are higher, led by Japanese markets, which are up more than 2%, while Chinese stocks are moving in the opposite direction. Futures in Europe are mixed, while in the US, futures are marginally stronger.

FI: Markets waiting for the important ECB data and Jackson Hole speech later this week resulted in a tight trading range. Markets are also waiting for toda’s supply with an expected 5y Finland deal and a 10y and long-end German bond tap. 10y Bunds ended virtually unchanged at 2.45%. Key events this week are the EA and US PMIs on Thursday, EA negotiated wage data on Thursday as well as Powel’’s speech in Jackson Hole on Friday. Lane speaks on Saturday.

FX: JPY was the top performer among G10 currencies yesterday, were the USD stay on a weak footing. EUR/SEK declined below 11.50 before the Riksbank rate decision today.

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New Poll: Swing State Voters Support Policies To Encourage Oil And Natural Gas Production

The poll conducted by Morning Consult found: