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[Quick Facts]

1. OPEC+ is unlikely to tweak production policy on Friday, but a surprise cannot be ruled out.

2. Shinichi Uchida calls for a focus on the balance among wages, prices, and private consumption.

3. Fitch downgrades U.S. credit rating.

4. Biden and Trump's approval ratings are the same at 43%.

5. ADP beats expectations for the fourth straight month.

[News Details]

OPEC+ is unlikely to tweak production policy on Friday, but a surprise cannot be ruled out

OPEC+ is unlikely to tweak its current oil output policy at Friday's OPEC+ Meeting of the Joint Ministerial Monitoring Committee (JMMC), six OPEC+ sources said, as tighter supplies and resilient demand drive an oil price rally. One of them cited the rising oil price as a reason to take no action.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, will meet on August 4. They can call for a full OPEC+ meeting if warranted. Oil prices rose to a three-month high above $85 a barrel this week as tighter supplies and rising demand overshadowed concerns that interest rate hikes and inflation could hit economic growth. However, a surprise cannot be ruled out. The Saudi energy minister said in July that OPEC+ would "continue its efforts to surprise the market." In April, several OPEC+ members announced production cuts ahead of the JMMC meeting, while the market had not expected any action at that meeting.

Shinichi Uchida calls for a focus on the balance among wages, prices, and private consumption

The basic structure of Japan's labor market will be unchanged next year and beyond, Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said in a speech on Tuesday. This means that firms will continue to hold concern over labor shortages, and wages are likely to continue to increase, he added.

Regarding the outlook, it is necessary to carefully examine the balance among wages, prices, and private consumption, with particular focus on whether wages will continue to increase sufficiently relative to prices, which have increased by more than expected, whether such wage increases will be able to support private consumption in a sustained manner, and whether this will then lead to sustained wage increases next year and beyond.

There are two hypotheses for why inflation has been higher than expected recently: the effects of cost-push factors are lasting longer than expected, and firms' wage- and price-setting behavior is changing somewhat earlier than anticipated. The answer may lie somewhere in between. In Shinichi Uchida's assessment, signs of change have been seen in firms' wage- and price-setting behavior.

It is unlikely that Japan will see inflation consistently above 2% as it has in Europe and the U.S., so the BOJ needs to patiently continue with monetary easing in the current phase and support Japan's economy so that wages continue to rise steadily next year.

Fitch downgrades U.S. credit rating

Fitch Ratings, a big credit rating agency, announced on August 1, local time, that it had downgraded the credit rating of the United States. The credit rating for long-term debt denominated in foreign currencies was downgraded from the highest AAA to AA+. The reason was the expected fiscal deterioration in the next three years and the political chaos surrounding the debt ceiling issue.

Fitch said the downgrade reflects the prospect of an increased debt burden on the U.S. government. "The repeated debt limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."

Fitch's move makes financial markets start worrying about the U.S. economy, but the market's focus remains on the Fed's most aggressive interest rate hiking cycle in decades. In that sense, the Fed's action could have a much bigger impact on U.S. interest rates than Fitch's downgrade of the U.S. rating. Moody's still assigns the U.S. its top rating, which becomes even more important after Fitch's downgrade.

Biden and Trump's approval ratings are the same at 43%t

U.S. President Joe Biden and former President Donald Trump remain neck-and-neck among voters at 43 percent each, according to a new poll conducted jointly by The New York Times and Siena College.

Biden is in a better political environment than last year when nearly two-thirds of Democrats wanted a different party candidate. Now, most Democrats have embraced Biden as their flag bearer.

Among voters who say they plan to vote for Biden in November 2024, about 30% say they want Democrats to nominate someone else; only 20% of Democrats are strongly in favor of Biden as the party's presidential nominee in 2024; and another 51% say they would agree, but it is not a must.

Biden doesn't have a big advantage against Trump. Biden has shown little strength and has not capitalized well on his opponent's weaknesses, according to the New York Times. Despite the improving economy, his approval ratings do remain mediocre.

ADP beats expectations for the fourth straight month

ADP employment rose by 324,000 in July, beating expectations by 189,000 and marking the fourth consecutive month in which the data has exceeded expectations. Specifically, job growth was relatively broad-based, with the leisure and hospitality sector adding 201,000 jobs, which was also a key driver of the growth.

Service-related industries dominated job creation, adding 303,000 jobs during the month.

This underscores the strength of the U.S. job market, particularly in the service sector, despite the Federal Reserve's long-term actions to slow economic growth and reduce inflation.

The data also showed 1.6 job openings for every unemployed person in June, little changed from May.

[Focus of the Day]

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