Eagle Bites August 21st

Jackson Hole Symposium

This upcoming week the Kansas City Fed will be hosting its annual symposium in Jackson Hole with this year’s theme being “Structural Shifts in the Global Economy”. The event from the 24-26th gathers some of the top central bankers, economists, financial organizations, and government leaders to discuss themes in policy. Federal Reserve Chair Jerome Powell is expected to make a public speech on the 25th and our expectation is Chairman Powell will retain his stance that more rate hikes or rates held may be necessary depending on upcoming data.  

China Recap

Chinese markets had a gloom-ridden slate of news last week. In chronological order, China’s retail sales and industrial production figures both came in weak; Auto sales & other consumer durables are partially to blame for the large stray from more upbeat consensus forecasts. Next, following the second consecutive record high in youth unemployment, Fu Linghui of the National Bureau of Statistics announced that China would no longer release the demographic’s unemployment data. On account of persisting growth struggles spanning the consumer and property markets, the PBoC made an emergency 15bp rate cut in their medium-term lending rate, the most significant decline since the pandemic hit. Despite intentions to help reignite the economy, Thursday, China’s second-largest property developer, Evergrande, filed for bankruptcy. The slew of negativity has pushed international investors to dump their Chinese stocks leaving the major exchanges down on the week.

Italian Windfall Taxes

Last week, Italy introduced windfall taxes on the banking sector in an attempt to redistribute the gains made by commercial banks in a high-interest-rate environment. For over a year, Italian banks have profited from higher interest rates in the form of higher net interest margins. These margins grew drastically as the gap between depositor payout and interest income grew. These additional earnings caught the eyes of Italian regulators, who decided to develop a windfall tax to curb the excessive profits being made. The surprise move was made by Italy’s Deputy Prime Minister Matteo Salvini, and included a 40% tax on excess profits made by banks over the past year. Specifically, the 40% tax applies to Net Interest Income exceeding 3% from 2021 to 2022 and 6% from 2022 to 2023. Banks reacted unfavorably to this news, as a myriad of Italian financial institutions experienced a decline of 6-10% in their share prices upon the announcement of the tax plan. 

Amazon Extends Domestic Delivery to Third-Party Sellers

Amazon.com (NASDAQ:AMZN) is expanding its shipping service to third-party sellers, citing an email invitation to the sellers. The in-house delivery service delivers products sold on Amazon’s marketplace and other sites, including the seller’s own or other channels. For now, the services within the contiguous U.S. Amazon Shipping first launched a beta service in 2018 in select cities, including Los Angeles and London. It was suspended when the pandemic hit. Amazon’s share of parcel volume in the U.S. stood at 23% last year, according to data from e-commerce logistics layer Pitney Bowes. The US Postal Service and UPS account for 32% and 24%, respectively. FedEx had 19% market share. 

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