On the political front, Israel continues to carry out attacks in Gaza and bombs Hezbollah positions in Lebanon. On the other hand, there is uncertainty about Xi Jinping’s possible visit to the United States.
From an economic perspective, it is now more expensive to buy a home in the United States than to rent one due to rising mortgage rates. In turn, the yield on 10-Year Treasury bonds exceeds 5% in a trend change. Additionally, a strong Japanese economy benefits the global economy, but a rise in Japan’s interest rates could pose significant risk.
On the business front, Chevron is preparing to acquire Hess in the latest major oil deal.
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Policy
- On Monday, Israel declared it had struck hundreds of targets in the Gaza Strip and bombed Hezbollah positions in Lebanon, as President Biden spearheaded an international diplomatic effort to prevent the conflict from spreading to other nations in the region. According to authorities in Gaza, more than 5,000 people have died since October 7, when Israel began retaliating for an attack by the militant group Hamas, which killed 1,400 people. The Biden administration has advised Israel to delay a ground invasion into Gaza, a move that would allow more time for hostage negotiations and for humanitarian aid to reach the enclave.
- China has not yet confirmed whether its leader, Xi Jinping, will accept President Biden’s invitation to attend the Asia-Pacific Economic Cooperation (APEC) leadership summit scheduled for next month in San Francisco. Xi last set foot in the United States in April 2017, when he visited then-President Donald Trump in Florida. Biden has not traveled to China as president yet. Tensions between the countries involve a wide range of areas, ranging from the commercial sphere to the military sector.
Economy
- In the United States, the gap between the costs of buying a home and renting a home has reached its most extreme level since at least 1996. The average monthly payment for a new mortgage is 52% higher than the average cost of renting an apartment . In theory, purchase and rental costs should be roughly equivalent. From 1996 to mid-2003, the average cost of buying or renting effectively stayed more or less balanced. However, after the global financial crisis, extremely low interest rates and an abundant supply of housing meant that, on average, it was 12% cheaper to buy a home than to rent one during the 2010s.
- The 10-year Treasury yield topped 5 percent on Monday for the first time in 16 years, extending a weeks-long slide in bonds as investors bet the U.S. Federal Reserve would keep rates on hold. interest rates at their current levels for longer and expanding a steady reassessment of government debt driven by better-than-expected economic data and the U.S. government’s vast borrowing plans.
- In recent years, while interest rates have risen around the world, they have seen a decline in Japan. However, after decades of keeping interest rates near zero, there is uncertainty over whether the Bank of Japan can raise the price of money without triggering a systemic financial crisis. A strong Japan benefits the global economy, being the world’s third-largest economy, although a rise in Japanese interest rates could present a significant risk. Considering the factors driving rising inflation and interest rates globally, it is becoming increasingly clear that Japan’s monetary policy can no longer be implemented independently.
Business
- Chevron, the American energy giant, announced its agreement to acquire Hess, a mid-sized competitor, in an all-stock transaction with a total value of $53 billion. The transaction follows oil company Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources, a company specializing in shale extraction, earlier this month. This reflects the continued confidence of major industry players in the future of fossil fuels, despite efforts by political leaders to encourage cleaner energy sources.
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