The prospect of a Fed rate hike rattles investors; Oil prices at seven-year high – WSJ

Have a good day. Investors anxious about potential interest rate hikes by the Federal Reserve sold stocks and bonds across the board on Tuesday, as interest rate futures markets indicated investors are betting on four to five hikes rate this year, against three to four on Friday. Some analysts are even bracing for a 50 basis point rate hike in March, a move that would help signal to markets that the Fed is serious about trying to curb soaring inflation, according to a former senior Fed official. central bank. Meanwhile, in another sign of inflationary pressures, crude prices have risen to their highest level since the shale-induced oil crash of 2014, gaining momentum as geopolitical tensions threaten to dent supply.

Now on to today’s news and analysis.

Top news

Stocks end lower as bond yields hit two-year high

U.S. stock indexes fell on Tuesday and bond yields hit two-year highs as investors worried about whether the Federal Reserve would raise interest rates faster and more aggressively than expected.

All three indices fell, with the S&P 500 slipping 1.8% and the Dow Jones Industrial Average losing 1.5%. The Nasdaq Composite fell 2.6%.

Meanwhile, the yield on the benchmark 10-year Treasury bond rose to 1.866% – its highest level in two years – from 1.771% on Friday.

With rate hikes looming, investors are dumping money-losing company stocks

Oil prices hit their highest level in seven years due to growing geopolitical tensions

Among the factors behind a rise in oil prices are fears that tensions in the Middle East and Europe could spill over into energy markets by reducing supplies from major crude producers, including Russia and the United Arab Emirates.

Oil demand will exceed pre-Covid levels in 2022, says IEA

American economy

As employers scramble to fill jobs, workers relish the sense of power

The United States recorded 4.5 million worker quits in November, the highest quit rate on record, and as the economy continues to rebound, workers feel empowered to seek new opportunities, knowing that are more in demand than ever.

Bitcoin sags in 2022 under the weight of stock selling and Fed policy

The Federal Reserve is casting a shadow over cryptocurrencies. Like stocks, cryptocurrencies have extended selling to start the year due to expectations that the central bank will raise interest rates as early as March.

How to deal with rising food prices as inflation rises

Sticker shock is becoming a regular feature of many consumers’ trips to the grocery store. Since it’s unlikely to dissipate anytime soon, consumers should assess changes in their shopping habits, writes JJ McCorvey of the Journal.

Main developments around the world

UK inflation hits 30-year high, sparking rate hike expectations

Consumer prices in the UK rose at the fastest annual rate for nearly three decades last month, bolstering the case for further increases in the Bank of England’s key interest rate as the country comes out of the Omicron wave.

German benchmark bond yield positive for first time since 2019

Yields on Europe’s most closely watched government bonds turned positive for the first time since 2019, part of a broad readjustment by investors to rising inflation and the global economic rebound from the pandemic.

Sri Lanka debt crisis fuels controversy over Chinese loans

A deepening debt crisis has left Sri Lanka struggling to pay for its imports and has fueled political controversy over Chinese loans to the South Asian nation under the global Belt and Road infrastructure program. from the road to Beijing.

Violent crime and rising costs put South African mining in a deep hole

South Africa’s $24 billion mining sector, which provided the raw material for almost half of all gold bullion and gold jewelry ever produced, is declining under the pressure of violent crime, rising costs and the regulatory uncertainty, as well as depleted mines.

Overview of Financial Regulation

Some lawmakers push to ban co-worker stock trading

Federal judges and central bank officials have come under intense scrutiny of stock trading, due to concerns about potential conflicts of interest or access to nonpublic information. Now the spotlight turns to Congress.

Crypto.com Platform Halts Withdrawals After Suspicious Activity

Singapore-based online platform crypto.com suspended customer withdrawals for about 2 p.m. on Monday after reports of unauthorized activity on some users’ accounts, the company said.

Big Tech and its enemies clash over a bill to limit the power of internet platforms

Big tech companies and their critics are stepping up their lobbying efforts in Congress this week as a key Senate panel passes legislation aimed at dampening the market power of dominant tech platforms.

China notifies firms of tougher investment rules for big tech

Forward-looking indications

Wednesday (every hour ET)

8:30 am: US Department of Commerce releases December housing starts

9:15 a.m.: Bank of England’s Bailey and Cunliffe testify on financial stability report

Wednesday

4 a.m.: Decision on the Norges Bank key rate

06:00: Central Bank of Turkey’s decision on interest rates

7:30 am: The European Central Bank publishes the minutes of the monetary policy meeting of the Governing Council of December 15 and 16

10 a.m.: National Association of Realtors releases December US existing home sales report

6:50 p.m.: Bank of Japan releases December 16-17 meeting minutes

To research

Former Fed Staffer: Real Opportunity to Hike 50bp Rate

Speculation about the possibility of a 50 basis point rate hike rumbles through markets as the Federal Reserve makes a hawkish shift aimed at containing high inflation. In a note Tuesday, Bill Nelson, a former senior Fed official now with the Bank Policy Institute’s industry group, wrote that the central bank “must prepare the public for the possibility of a 50 basis point tightening in March”. He added that such a large increase might be necessary because the Fed is lagging behind on controlling inflation, and that it might have some value in reshaping market expectations toward monetary policy that is seriously aimed at reduce inflation. Even though Fed officials broadly tilted towards a rate hike in March and the prospect of a series of rate hikes thereafter, none offered clear support for a big salvo in opening rates. .

— Michael S. Derby

Remark

A politicized Fed puts the economy at risk

The more ad hoc and discretionary the Fed’s conduct of monetary policy, the harder it is to resist political pressure, so the central bank should adopt a more systematic, predictable and transparent policy framework, writes Jeb Hensarling.

Mr. Hensarling served as U.S. Representative from Texas (2003-19) and Chairman of the House Financial Services Committee (2013-19).

Basis points

Factory activity in New York state leveled off in January from the previous month as demand for goods fell, according to survey data compiled by the Federal Reserve Bank of New York. Its Empire State Manufacturing Survey’s general business conditions index fell to minus 0.7 in January from 31.9 in December, missing the consensus estimate of 25.5 from economists polled by The Wall Street Journal. Readings above zero suggest regional manufacturing is expanding. (Dow Jones Newswires)

U.S. homebuilder confidence fell in January after four months of gains as rising inflation concerns and supply chain disruptions outweighed strong consumer demand, according to the National. Association of Home Builders. Its housing market index, which assesses the single-family housing market, fell to 83 from 84 in December. A number above 50 indicates that more builders rate the conditions as good than bad. (DJN)

Puerto Rico has received court approval to emerge from bankruptcy in the largest ever restructuring of U.S. municipal debt, ending years of conflict with creditors as the U.S. territory faces other issues stubborn economics.

An early indicator of global trade flows developed by the Journal points to a 0.76% decline in November from the previous month, adjusted for seasonal highs and lows in merchandise exports between countries, indicating that the movement of goods to across borders was stabilizing as 2021 drew to a close. (DJN)

Housing starts in Canada fell 22% in December from November, the Canada Mortgage and Housing Corporation reported. (DJN)

Malaysia’s central bank is expected to keep its overnight rate at 1.75% at the next meeting of its monetary policy committee, according to 11 economists interviewed by the Journal. Bank Negara Malaysia is due to announce its policy decision tomorrow. (DJN)

Economic expectations in Germany have rebounded, pushing the ZEW Economic Research Institute’s Economic Expectations Index from 29.9 in December to 51.7 this month. Economists polled by the Journal had forecast a level of 32.5. (DJN)

 

(END) Dow Jones Newswire

January 19, 2022 1:58 p.m. ET (6:58 p.m. GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.


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Felix J. Dixon