Investors may be underestimating the degree of potential market turbulence stemming from the Federal Reserve's economic symposium at Jackson Hole, Wyoming, potentially leaving them more vulnerable to a hawkish surprise, options strategists said.
Some strategists believe that the outlook may not be cautious enough, especially if last year is any guide.
A more hawkish-than-expected message from Powell at Jackson Hole last August sank the S&P 500 by 3.4% on the day of his address - the biggest reaction to a Fed chair’s speech at the annual symposium in at least 11 years, a Reuters analysis showed. At that time, options markets were primed for a move of around 1.4%.
With many investors sitting on big year-to-date gains in stocks and bond yields pushing higher, investors may be caught flat-footed if a hawkish Powell spurs a run out of risky assets, Steve Sosnick, chief strategist at Interactive Brokers, said. Markets "have shaken off some of the outright complacency that existed about a month or two ago but (they) are hardly risk averse," he added.
Though the Fed has made significant progress in cooling consumer prices, the pressure may be on Powell to reinforce his "higher for longer" mantra on rates to avoid giving the impression that the battle against inflation was already won, BofA's analysts wrote.
SpurTree recorded a net profit attributable to shareholders of $3.04Mn for the quarter that ended June 30, 2023. This represents a 92.1% yoy decrease in profitability. Similarly, net profit for the six months ending June 2023 decreased by 51.2% to record a profit of $43.56Mn
Revenue for the quarter was up by 37.9% yoy to $278.22Mn, while revenues for the six months increased by 50.8% yoy to $661.90Mn. While there was a commendable performance in traditional sectors such as seasonings and sauces, revenue for the period was negatively impacted across the group by low availability and consequent low production of ackee for sale during the quarter.
Cost of sales saw an increase of 63.7% and 69.9% over the three-month and six-month periods respectively. This subsequently resulted in a fall in gross margin to 25.0% (from 36.8%) in Q2 and 29.3% (from 37.2%) for the first half of the year.
Admin and other expenses for the quarter increased by 92.8% over the same period in 2022 as well as 84.8% yoy over the six months. This increase is attributed to increased salary costs arising from the addition of talent in critical areas, depreciation expenses, promotional activities in the US market to reintroduce the brand and products directly to customers post-COVID, and legal and professional fees.
SpurTree’s stock price has decreased by 34.8% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.10 and currently trades at a P/E of 35.0x which is above the Junior Market Manufacturing Sector Average of 17.3x.
The company has highlighted that Exotic Products (a manufacturing partner to the company) is nearing completion of a second production line, enhancing its capacity to yield substantial ackee quantities during each crop. The factory will also introduce new lines of canned products, packed for Spur Tree Spices that are expected to drive growth for the company.
The Bank of Jamaica has admitted that the Central Bank’s digital currency, JAMDEX, is behind its projected target.
BOJ’s Governor Richard Byles conceded that "we are not where we wanted to be." He explained that this is due to several issues, including the slow transition of the existing technology to accept JAMDEX, specifically the point of sale machines, which need to be adjusted to take a JAMDEX QR code, and that is an avenue that is being worked on.
He further highlighted that other payment technologies are seeing increased use.
Byles explained that smaller merchants, in particular, who do not rely on POS machines have been recruited to take JAMDEX.
Currently, there are over two hundred thousand individuals, who have the capacity on their phone to pay for their services and goods with JAMDEX and once that happens, it means that every supermarket, every fast food enterprise; and all kinds of merchants will be able to take JAMDEX.
Colombia's banks have called on the country's central bank to tackle liquidity issues amid lower-than-expected government spending and compliance with the international regulatory framework Basel III, which strengthens bank risk management.
Colombian banking association Asobancaria suggested the central bank cut the reserves that financial institutions are required to hold, buy dollars at the spot market rate and allow foreign entities to purchase fixed-term certificates of deposit (CDTs).
Analysts attribute the financial system's decrease in liquidity to the government's slower budgetary spending and higher tax collection. The funds are stored in the central bank and have not flowed into the economy.
So far this year, the government has spent 47% of its planned budget, according to the finance ministry. However, some lawmakers warn some ministries have spent just 20%.
Furthermore, banks are required to retain a certain level of reserves under Basel III, adding to the liquidity strain. "It's necessary to adopt a series of measures to guarantee liquidity in accordance with the needs of the economy," Asobancaria said in a report published on Tuesday.
A World Bank study has highlighted that the Dominican Republic must increase its productivity by implementing reforms to strengthen human capital, competitiveness, innovation, efficiency in public spending, and resilience to climate events.
In recent years the country has experienced low productivity growth, as pending structural reforms have not been implemented and this has contributed to the stagnation of real wages.
The report, “Rethinking Productivity to Boost Growth Leaving No One Behind, DR Economic Memorandum,” highlights that economic growth in the DR averaged 5.8% per year between 2005 and 2019, more than double the average for Latin America and the Caribbean.
However, the drivers of this exceptional growth are reaching their limit due to low productivity growth in recent years, hampered by insufficient human capital to meet the needs of the business sector, the occurrence of climate change-related disasters, and distortions in key markets, including the inefficient allocation of tax exemptions.
“The model that has generated so many social and economic benefits for the country can be revitalized to become more dynamic, inclusive and sustainable, which will allow for the continued reduction in income gaps, especially for women, and that promotes better jobs and more opportunities for more households and regions in the country,” said Alexandra Valerio, resident representative of the World Bank.
The structural reforms proposed in the report are: Strengthening human capital; first, adapting the education system to the needs of the market, through the modernization of secondary studies, and continuing education for adults. Second, reducing inequality of opportunities between genders and between rural and urban areas.
For the Promotion of competition: reducing barriers to entry and expansion of companies in key economic sectors, revision of sectoral protection provisions for established companies, production and export quotas, and price controls, among others.
To incentivize innovation: technological extension services, improvement of management capabilities, development of basic infrastructure for innovation, and implementation of subsidies for small and medium-sized enterprises that have not benefited from tax incentives.
Another reform is improvements in the efficiency of public spending and the tax system, among which the elimination of tax exemptions and the broadening of the tax base continue to be priorities. Further, increasing resilience to external shocks and weather events by developing fiscal risk strategies was another suggestion.
U.S. business activity approached the stagnation point in August, with growth at its weakest since February as demand for new business in the vast service sector contracted.
S&P Global said its flash U.S. Composite PMI index, which tracks manufacturing and service sectors, fell to a reading of 50.4 in August from 52 in July, the biggest drop since November 2022. While August's reading was the seventh straight month of growth, it was only fractionally above the 50 level separating expansion and contraction as demand weakened for both manufactured goods and services.
For months, a strong labour market and resilient consumer spending have increasingly assuaged fears of recession and led to upward revisions of GDP growth forecasts. However, Wednesday's data painted a more tepid picture of the economy.
Service sector business activity growth was the slowest since February at 51.0 in August, and the Manufacturing PMI fell deeper into contraction territory at 47.0 down from 49.0 in July, the fourth straight month of contraction.
Consumer demand posed a substantial drag on revenue for firms, as new business and orders contracted for firms across all sectors. New business in the service sector declined for the first time in six months, falling to 49.2 from 51.0 the month prior.
Both manufacturing and service sector businesses tamed price hikes to attract more customers and slowed headcount growth to compensate for resurgent input costs.
Britain's economy is slowing and might be heading for a recession as it feels the impact of 14 back-to-back interest rate increases by the Bank of England to fight high inflation.
Despite being buffeted by Brexit, the COVID-19 pandemic and last year's surge in energy prices, the British economy has defied forecasts of contraction so far this year, but signs of a slowdown are mounting, highlighting the BoE's dilemma as it continues to grapple with inflation.
A survey published on Wednesday showed activity among businesses shrank by the most since January 2021, when Britain was still in a coronavirus lockdown.
The housing market is weakening and the jobless rate is up, but the BoE looks set to keep on raising rates with inflation still more than three times its 2% target. Core inflation in July held close to its highest in more than 30 years.
Most worrying for Governor Andrew Bailey and his colleagues, pay growth is at its fastest since at least 2001, raising the risk of persistently high inflation.
Jamaica is estimated to have recorded gross domestic product (GDP) growth of 2.9% for the first six months of 2023. Director General, of the Planning Institute of Jamaica (PIOJ), Dr. Wayne Henry, made the disclosure during the agency’s digital press conference on Thursday (August 17).
He informed that the Services Industry grew by 3.5%, while the Goods Producing Industry expanded by 1%. The industries that were estimated to have recorded the largest increases during the first half of the year were Mining and Quarrying, up 137.7%; Hotels and Restaurants, up 18.5%; Other Services, up 11.4%; and Transport, Storage and Communication, up 6.1%.
He noted that the short-term prospects for the overall economy are positive, based on expected improved performances in the abovementioned industries and informed that there is also anticipated strengthening in business confidence, which is based on firms’ perception that business conditions will improve. This, he outlined is expected to drive demand.
The short-term prospects are also based on the continued recovery of the global economy, which augurs well for external demand. This is supported by recent projections from the International Monetary Fund (IMF) indicating a strengthening in global growth for 2023.
However, this positive outlook could be significantly impacted by adverse weather conditions, including drought and heavy rainfall; plant downtime, due to relatively aged equipment in major industries, particularly in the manufacturing industry; and slower than expected growth in the economies of Jamaica’s main trading partners.
Adoption of the Blue Ocean Strategy has the potential to revolutionize Jamaica’s tourism industry in ways that will differentiate the island from its regional competitors, says Minister of Tourism, Hon. Edmund Bartlett.
The implementation of the strategy will not only stimulate economic growth by attracting new investments and increasing visitor spending but will, in turn, create employment opportunities across various sectors.
The Blue Ocean Strategy, developed by Professors W. Chan Kim and Renée Mauborgne, suggests that businesses can achieve remarkable success by identifying and capturing untapped market spaces, termed ‘blue oceans’. These blue oceans represent areas where competition is low or nonexistent, allowing businesses to create and capture new demand by focusing on differentiation and innovation rather than competing in overcrowded market spaces.
By targeting new customer segments, the Tourism Ministry aims to identify untapped markets, such as adventure tourism, wellness tourism, and eco-tourism, to attract a diverse set of travellers with varied interests, noting that by catering to niche segments and developing tailored experiences, Jamaica can meet the evolving demands of modern travellers. By pursuing strategic partnerships, the Tourism Ministry also plans to foster collaborations between the public and private sectors, local communities and international stakeholders.
Bartlett added that future trajectory would support the Government’s aim to break away from traditional tourism approaches and create untapped market spaces, allowing the country to thrive in an era of increased global competition.
The CARICOM Development Fund (CDF) and the African Export-Import Bank (Afreximbank) have signed a Memorandum of Understanding (MoU) to provide a framework for cooperation between the two organisations and assist with delivering services to the CARICOM Member States.
Through the MoU, the CDF and Afreximbank have pledged to collaborate and explore the best possible funding options from debt and equity capital markets to support the development of critical infrastructure projects in the CARICOM region. The MoU is a clear indication of the collective effort of both organisations to increase financing opportunities for CARICOM Member States and strengthen south-south cooperation between the African continent and the Caribbean region.
Reflecting on the MoU, the CEO of the CDF, Mr. Rodinald R. Soomer said the Barbados-based CDF is keen to work with Afreximbank to facilitate the creation of new and exciting trade and investment opportunities for the private sector in the CARICOM region. He also urged regional small- and medium-sized enterprises (SMEs) to take advantage of the generous capacity-building assistance offered by the bank, which can help them to scale up and expand their businesses.
‘As a recently established shareholder of Afreximbank, the CDF stands in partnership with the bank to assist with its newly minted regional operations. Specifically, we aim to do so by collaborating on transactions and projects that are aligned with the strategic objectives of the Africa-Caribbean Trade Initiative and by supporting client awareness of the services that will be offered to the Caribbean private sector to enable them to do business with Africa. This partnership and commitment of the CDF’s support are affirmed through the signing of the MoU between CDF and Afreximbank’, stated CEO Soomer.
In December 2022, the Board of Directors of Afreximbank approved funding worth 1.5 billion USD to aid CARICOM Member States in accessing the bank’s financing instruments. This funding will support SMEs and various economic sectors, such as renewable energy, tourism, and agriculture.
