- A + A NEW YORK/BENGALURU (June 29): US stocks fell on Wednesday with a gloomy first-half of the year approaching its end, marred by concerns of an aggressive monetary policy that risks pushing the economy into a recession. Investors fretted over the impact of hefty rate increases on the US economy, as data showed the GDP contracted in the first quarter amid a record trade deficit, following a Tuesday report that showed consumer confidence hit a 16-month low. With just one more day to end the second quarter, the benchmark S&P 500 was on track for its biggest drop in the first half of a year since 1970, while the Nasdaq Composite looked set for a record slide over the same period. Investors are now bracing for the latter part of the year, anticipating the impact of rising prices, higher yields and a hawkish Federal Reserve on the economy at large, as well as on second-quarter company earnings. "There are concerns that we're ahead of ourselves in terms of … [Read more...] about Wall St falls in choppy trading on rate hike, growth concerns
Us rate hike
Share to Twitter Share to Linkedin The Fed’s decision to hold rates steady in January while signalling a rate increase is coming “soon”, sets the stage for a probable rate hike in March. In fact, according to the CME’s FedWatch Tool , the market is now factoring in a 9 out of 10 chance for a rate hike at the Fed’s March 2022 meeting. The markets actually see a greater chance of Fed funds being at 50-70bps (effectively a double hike), by the March meeting, than no rate change at all. The recent volatility in markets, with large swings even within the trading day, also suggests change is coming. What’s Next? Beyond that where should we expect rates to go for the rest of 2022? Here things are more nuanced. The most likely outcome, according to rate futures, is for rates to end 2022 at around 1.25%. That implies 4 hikes in 2022, up from an expectations of three hikes about a month ago . However, the range of outcomes remains very broad. Anywhere … [Read more...] about Fed Tees Up March Hike, But What’s Next?
Share to Twitter Share to Linkedin When the Fed meet next week, it’s highly likely in the eyes of the both the bond markets and recent statements from Fed policymakers that rates rise. However, the prospect of a 50bps move that was suggested earlier this year is now largely off the table. However, looking beyond that, the market sees aggressive rate increased in 2022, perhaps more so than before the Ukraine invasion began. Commodity Spike A lot has changed, Russia’s invasion of Ukraine has, in part, pushed global stock markets generally lower and various commodities including energy and, notably, wheat far higher. Inflationary Pressures If anything inflation may increase further for 2022 as higher energy and other prices, if sustained, could feed into many other goods and services. That puts the Fed in a tricky position. Yes, geopolitical tensions may have increased risk and disrupted supply chains. That and higher gas prices hurting consumer’s … [Read more...] about Despite Ukraine, Markets Still See Aggressive Fed Action This Year
Representative image The GST Council has accepted the recommendations of a group of ministers (GoM) on correcting the so-called inverted duty structure and pruning the list of exemptions, while giving the panel three more months to decide on rate rationalization measures, officials said on June 29. When asked whether rate rationalization could happen given the inflation pressures in the economy, Finance Minister Nirmala Sitharaman said that if the rate rationalisation -- if and when it happens – results in an increase, it will be making up for inefficiencies in the value chain. ALSO READ: GST average rates need correction, finance minister says The council also considered a report by another group of ministers on taxing online gaming, casinos and horse racing and have given the GoM time until July 15 to firm up its report after speaking to stakeholders. The apex decision making body of the indirect tax system will meet in the first week of August in Madurai to … [Read more...] about GST Council gives GoM three months to decide on rate rationalization
Jerome Powell (Bloomberg filepix) - A + A (June 29): Federal Reserve Chair Jerome Powell said the US economy is in “strong shape” and the central bank can reduce inflation to 2% while maintaining a solid labour market, even though that task has become more challenging in recent months. He also vowed to ensure rapid price increases don’t become entrenched, saying that “we will not allow a transition from a low inflation environment to a high inflation environment”. “We hope that growth will remain positive,” Powell said during a panel discussion Wednesday during the European Central Bank’s annual policy forum in Sintra, Portugal. Household and business finances are also in solid shape, and “overall the US economy is well positioned to withstand tighter monetary policy.” Raising interest rates without sparking a recession “is our aim and we believe there are pathways to achieve that,” Powell said, reiterating comments he’s made this month after the Fed on June … [Read more...] about Powell says US economy in strong shape, Fed can avert recession
Share to Twitter Share to Linkedin Six months ago, I tried my hand at imagining how 2022 might transpire in markets, economies and politics. Whilst I am usually highly sceptical about forecasting (‘its role is to make astrology respectable’), my prognostics were sufficiently telling that I will now claim a certain wisdom. The secret is to make ambiguous statements about a wide range of events, and some of them will stick. In this respect I prefigured Boris Johnson’s difficulties, the war in Ukraine (Bosnia was also a potential hotspot), Macron’s win and China closing down. Looking ahead, it is stating the obvious that the shape of the next six months will be determined by the damage caused by the war in Ukraine and the policy response to high inflation though what is more interesting and challenging is to frame their secondary effects. Market Stress Perhaps the easiest factor to parse is the change in monetary policy from the Fed and … [Read more...] about What Will It Take To Get Inflation Down? Is Oil The Key?
Federal Reserve Chair Jerome Powell returns to Capitol Hill today for the second day of his semiannual testimony on monetary policy , addressing lawmakers on the House Financial Services Committee. Yesterday, Powell told Senate lawmakers that although the odds of recession “are not elevated,” he said that it was “certainly a possibility” as rates climb, but that he believes the U.S. economy is "very strong” and will be able to handle tighter monetary policy . He reiterated his stance that the aggressive rate hikes are necessary because “it is essential we bring inflation down.” Powell also highlighted that some price increases are beyond the Fed’s ability to control, such as the recent rise in gasoline and oil prices, fueled by global forces. Yesterday, President Biden called for Congress to suspend the federal fuel tax for three months to ease prices at the pump for U.S. drivers. Powell said the central bank would continue its rate hike campaign until it sees clear … [Read more...] about Powell Returns to Capitol Hill for Second Day of Testimony
Jerome Powell (Bloomberg filepix) - A + A (June 29): Federal Reserve Chair Jerome Powell said the US economy is in “strong shape” and the central bank can reduce inflation to 2% while maintaining a solid labor market, even though that task has become more challenging in recent months. He also vowed to ensure rapid price increases don’t become entrenched, saying that “we will not allow a transition from a low inflation environment to a high inflation environment.” “We hope that growth will remain positive,” Powell said Wednesday during a panel discussion at the European Central Bank’s annual policy forum in Sintra, Portugal. Household and business finances are also in solid shape, and “overall the US economy is well positioned to withstand tighter monetary policy.” Raising interest rates without sparking a recession “is our aim and we believe there are pathways to achieve that,” Powell said, reiterating comments he’s made this month. The Fed on June 15 raised … [Read more...] about Powell says Fed can avert recession but task getting tougher
- A + A NEW YORK (June 29): US investment-grade corporate bond spreads have breached a key 150 basis point threshold that analysts and investors say could start to disrupt the flow of credit. The figure, which measures the extra yield investors demand to own corporate bonds instead of US Treasuries, is the highest in two years, according to data compiled by Bloomberg . Spreads recovered after the Federal Reserve took the unprecedented step of purchasing corporate bonds to boost liquidity around that time, but are coming under pressure again, amid concerns about a potential recession. While the central bank has so far shown little sign of slowing its pace of interest-rate hikes, spreads are moving toward a point where officials could begin to face pressure over the path of policy tightening, according to Winifred Cisar, global head of credit strategy at CreditSights Inc. “Historically, investment grade spreads tend to trade to 150 basis points, and then break … [Read more...] about Credit markets signal caution as US spreads surge past 150 mark
- A + A HONG KONG/LONDON/BENGALURU (June 29): The latest easing of coronavirus travel rules combined with other encouraging policy signals have began luring some foreign investors back to Chinese stocks, raising the chances that the market can sustain its bounce after months of heavy selling. As the S&P 500 is about to close its worst first half of any year since 1970 and bonds have taken a thrashing, China's beaten-down equity markets start looking like a shelter from a global storm of runaway inflation, interest rate hikes, and recession fears. China's blue-chip CSI300 index is up about 20% from April lows, as is the Shanghai Composite after losses of more than 10% in the first quarter. The gains, together with the relaxation of lockdowns and signals that Beijing could ease up both on virus policies and regulatory clampdowns, have tempted money managers, who were quitting China en-masse in March, to return. Those who were on the sidelines, "have shown some … [Read more...] about Easing Covid-19 rules, growth focus aid China bulls’ cautious return