Daily Commentary

MarketMinder’s View: Profits among China’s industrial firms rose 15.8% y/y in March, boosted by equipment and high-tech manufacturing. As the title suggests, this rebukes worries that energy price spikes and supply chain snarls due to the Strait of Hormuz’s closure would raise costs while curbing demand for China’s many manufacturing- and export-based businesses. Instead, wholesale prices rose for the first time in three years, ending a long deflationary streak as broader demand enabled factories to pass higher costs to customers. This piece attributes that partly to Beijing’s ongoing policy measures, which may be true, as boosting oil reserves early this year probably helped. But there are also broader signs of economic health in China’s full run of March and Q1 data, and most of Beijing’s targeted stimulus aims at services and consumers. So even without “major policy easing,” which this article cautions against expecting when the Politburo meeting meets this week, China probably keeps growing just fine. Modest stimulus has already helped the world’s second-largest economy avoid the long-dreaded hard landing and continue adding to global GDP.

MarketMinder’s View: This article mentions several publicly traded companies in passing, so please note MarketMinder doesn’t make individual security recommendations. Now, we don’t highlight this because we think seeking financial or investing advice from chatbots is wise, as all these models can do is regurgitate conventional wisdom, which includes a lot of mythology. But investment advice isn’t the only reason some folks would use chatbots. Preparing a budget, making sense of jargon-laden documents and the like are also enticing uses for those who dabble with this technology. If that is you, this is news you can use, because if you enter the wrong things into a chatbot, you risk exposing your personal information to scammers. “A Stanford study examining the privacy policies of six major AI companies … found that all six use chat data by default to train their models, and some keep this information indefinitely.” Any information you include in a query could be made publicly available, leaving you exposed to thieves and fraudsters. To protect yourself, avoid putting the titular five details into any AI chatbot: personally identifiable information (address, social security number), employment information, specific debt data, specific transactional data and financial documents. As the last tip here suggests, keep your AI inputs as generic and anonymous as possible. For instance, if you are working on the family budget, you won’t be at risk if you simply ask your chatbot for general guidelines on the percentages to allocate toward housing, food, leisure, etc. (though always check those against your needs, common sense and sources you know are reputable). But if you tell it your actual salary, mortgage payment and the like, that information can be pilfered to steal your identity. Tread lightly.

MarketMinder’s View: Here is a scattershot look at a common UK fear as the Bank of England’s (BoE) Monetary Policy Committee prepares to meet this week. The titular “risk” can be boiled down to one quote here: “Whatever policymakers decide this week, the risk of making a mistake is high. Hold rates down for too long and a fresh cost of living crisis could erupt. Overreact and ramp up borrowing costs too fast and it could crush an already weak economy.” That might have merit if UK inflation were elevated because the BoE had spiked money supply and now had to sop up excess—after all, inflation is always and everywhere a monetary phenomenon of too much money chasing too few goods and services. But UK money supply growth is benign, and CPI is up because of energy costs and how those feed into the household energy price cap. The main forward-looking risk policymakers are eyeing on this front is higher oil and natural gas prices due to the Strait of Hormuz’s closure. Rate hikes won’t do anything to address these prices, which stem from global supply and demand factors and are already easing. So we disagree with the premise that a rate hike is necessary or helpful. However, while we agree aggressive hikes would invite some economic risks, we are a long way from that right now. The UK’s yield curve spread has widened over the last year, with long rates presently about 1.25 percentage points above the Bank Rate (per FactSet). That gives policymakers some wiggle room—absent a radical drop in long rates, a hike or two shouldn’t invert the yield curve and choke off lending and growth. So overall, this Catch 22-type sentiment strikes us as more evidence sentiment toward the UK remains in the doldrums, creating a low bar for reality to keep beating expectations.