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Fed must act ‘forthrightly and aggressively’ to rein in inflation, Bullard says

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© Reuters. FILE PHOTO: St. Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore October 8, 2018. REUTERS/Edgar Su/File Photo

(Reuters) -The Federal Reserve must act boldly in raising U.S. interest rates in order to contain inflation before higher expectations become entrenched, St. Louis Fed President James Bullard said on Friday.

“We have to act forthrightly and aggressively to get inflation to turn around and get it under control … or you could suffer a decade of high and variable inflation,” Bullard said during a panel discussion on central banks and inflation hosted by UBS in Zurich, Switzerland.

“So front-load today, get inflation under control in short order and get inflation back on a path to 2%,” Bullard added.

Last week, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point – its biggest hike since 1994 – to a range of 1.50% to 1.75%, and signaled its policy rate would rise to 3.4% by the end of this year.

Bullard has previously said he wants to see the Fed’s policy rate increase to 3.5% by the end of 2022, a point he repeated on Friday. Once borrowing costs rise high enough to put downward pressure on inflation and disinflationary forces take hold, the central bank could possibly begin to cut rates, he said.

The St. Louis Fed chief also downplayed the risk of recession, saying that rate increases will probably slow the economy to a trend pace of growth, rather than below trend.

“This is the early stages of a U.S. expansion … unless we get hit by a bit shock or something, it would be unusual to go back into recession at this stage,” Bullard said.

On Thursday, Fed Chair Jerome Powell told lawmakers the central bank’s commitment to reining in inflation, which is running at a 40-year high, is “unconditional.”

Economy

Wall Street ends down, pulled lower by growth stocks

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© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks closed lower on Monday, with few catalysts to sway investor sentiment as they approach the half-way point of a year in which the equity markets have been slammed by heightened inflation worries and tightening Fed policy.

The major U.S. stock indexes lost ground after oscillating earlier in the session, with weakness in interest rate sensitive megacaps such as Amazon.com (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc providing the heaviest drag.

“The reason for lack of direction this week and next week is investors are looking for what’s going to happen in the second quarter reporting period,” said Sam Stovall, chief investment strategist of CFRA Research in New York.

All three indexes are on course to notch two straight quarterly declines for the first time since 2015. They also appear set to post losses for June, which would mark three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015.

The S&P was on track to report its fifth worst year-to-date price decline since 1962 as of Friday, Stovall said.

“Every time the SPX rose by more than 20% in a year it fell by an average of 11% starting relatively early in the new year. And all years where the decline started in the first half got back to break even before the year was out.”

“No guarantee that’s going to happen this year, but the market could surprise us to the upside,” Stovall said.

Rising oil prices helped put energy stocks out front, with economically sensitive smallcaps and semiconductors and transports also outperforming the broader market. [O/R]

Economic data surprised to the upside, with new orders for durable goods and pending home sales beating expectations and adding credence to U.S. Federal Reserve Chairman Jerome Powell’s assertion that the economy is robust enough to withstand the central bank’s attempts to rein in decades-high inflation without sliding into recession.

The Dow Jones Industrial Average fell 62.42 points, or 0.2%, to 31,438.26, the S&P 500 lost 11.63 points, or 0.3%, to 3,900.11 and the Nasdaq Composite dropped 93.05 points, or 0.8%, to 11,514.57.

Among the 11 major sectors of the S&P 500, eight ended the session in negative territory, with consumer discretionary suffering the largest percentage loss. Energy stocks were the clear winners, gaining 2.8% on the day.

With several weeks to go until second-quarter reporting commences, 130 S&P 500 companies have pre-announced. Of those, 45 have been positive and 77 have been negative, resulting in a negative/positive ratio of 1.7 stronger than the first quarter but weaker than a year ago, according to Refinitiv data.

Shares of retail stock trading platform Robinhood (NASDAQ:HOOD) Markets rose 14.0% after media reports said Goldman Sachs (NYSE:GS) changed the stock to “neutral” from “sell”.

But the broker double downgrade of cryptocurrency exchange Coinbase (NASDAQ:COIN) Global Inc’s shares to “sell” from “buy”, sent its stock sliding 10.8%.

Advancing issues outnumbered declining ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 29 new lows; the Nasdaq Composite recorded 24 new highs and 84 new lows.

Volume on U.S. exchanges was 10.91 billion shares, compared with the 12.95 billion average over the last 20 trading days.

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Economy

Albemarle plans major U.S. lithium processing plant

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© Reuters. FILE PHOTO: A sign at the approach road leads to Albemarle’s lithium evaporation ponds at its facility in Silver Peak, Nevada, U.S., January 9, 2019. REUTERS/Ernest Scheyder/File Photo

By Ernest Scheyder

PHOENIX, Ariz. (Reuters) -Albemarle Corp plans to build a lithium processing plant in the United States that would produce as much of the electric vehicle battery metal as the entire company produces today, a bullish bet on America’s all-electric future, an executive said on Monday.

The plan reflects Albemarle (NYSE:ALB)’s emerging strategy to lead the U.S. lithium renaissance, from mine development to processing to manufacturing types of the metal used to make high-end EV batteries.

Eric Norris, head of Albemarle’s lithium division, said the company has seen a major shift in the last nine months in the United States with an “unprecedented” number of EV manufacturing plants announced, a harbinger the company believes will fuel a surge in lithium demand.

The company as a result aims to build a processing plant with 100,000 tonnes of annual capacity in the U.S. Southeast somewhere within rail access of a major port, Norris said.

“There isn’t enough (lithium) supply yet to supply the ambitions of the U.S.,” Norris told the Fastmarkets Lithium Supply and Battery Raw Materials conference in Phoenix, Arizona. “This (processing plant) will be essential for our success in the future.”

Albemarle is in active discussions with automakers on buying supply from the facility, Norris said. Albemarle already supplies Tesla (NASDAQ:TSLA) Inc, as well as several other major automakers.

While Albemarle had spoken vaguely in the past about building a U.S processing plant, it used Monday’s conference to announce the specific plan and said it will be key as the company aims to boost its overall lithium production capacity fivefold to 500,000 tonnes annually by 2030.

The U.S. plant would be of a similar design to a processing plant Albemarle recently opened in Kemerton, Western Australia, though it would need to cost less than Kemerton, whose costs ballooned far above its initial target of $1.2 billion, Norris said.

Albemarle plans to self-fund the facility, though it could apply for U.S. Department of Energy loans, he said.

The plant would be supplied from lithium extracted from the company’s Kings Mountain mine in North Carolina, which is currently mothballed but may reopen as soon as 2027.

The Kings Mountain facility would likely compete with a planned lithium mine and processing complex in a nearby North Carolina county from Piedmont Lithium Inc (O:PLL), which faces regulatory and local pushback.

Unlike Piedmont’s mine, Kings Mountain would be a reopening of a facility that closed in the 1980s, a distinction that Norris said he expects to work in Albemarle’s favor.

“This is an existing mine in a town that is very mining oriented,” Norris said. “We’re very present in the community.”

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Economy

Dollar retreats as markets rethink Fed rate bets, eye ECB hikes

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© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic

By Hannah Lang

WASHINGTON (Reuters) – The U.S. dollar struggled versus its major rivals on Monday as softening inflation expectations prompted a reassessment of the prospects for aggressive interest rate hikes but volatile markets cushioned a broader decline.

Aggressive rate hike bets have boosted the dollar with an index rising to a near two-decade high of 105.79 earlier this month. But with some high-frequency data indicators showing economic momentum starting to cool and a broader drop in commodity prices, investors are becoming cautious.

“It’s hard for Wall Street to confidently say there is a bottom in place, so a lot of traders are still looking to fade whatever rallies emerge,” said Edward Moya, senior market analyst at OANDA.

Against its rivals, the dollar edged 0.12% lower to 103.9. Earlier this month, it hit 105.79, its highest since late 2002.

Futures pricing shows traders now anticipating the U.S. Federal Reserve’s benchmark funds rate stabilizing around 3.5% from March next year, a pullback from pricing in rates zooming to around 4% in 2023.

“Today is a consolidation day,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.

“I think that we’re just waiting for more data, and that data comes out later this week,” he added, pointing to a readout expected on Friday detailing consumer prices in the euro zone.

Meanwhile, the euro was buoyed by expectations that the European Central Bank will soon raise interest rates for the first time in more than a decade.

“Everyone is looking forward to this first rate hike that we’re going to get from the ECB, and I think that the risks of a dovish hike are fading,” said Moya.

The euro was up 0.27% at $1.0587.

The euro led gainers versus the dollar as the European Central Bank’s annual forum on central banking in Sintra, Portugal, got under way with ECB President Christine Lagarde and U.S. Federal Reserve Chair Jerome Powell both attending the meeting. Markets will watch for any signs of future policy moves.

Commodity currencies came under pressure on Monday as data showed profits at China’s industrial firms shrank again, albeit at a slower pace, in May after a sharp fall in April.

Elsewhere, Russia’s rouble weakened in the interbank market as Russia headed for its first sovereign default since the Bolshevik revolution a century ago.

Cryptocurrencies stumbled, with the world’s biggest cryptocurrency Bitcoin down 1.7% trading at $20,810.34. It fell to as low as $17,588.88 earlier this month.

========================================================

Currency bid prices at 3:26PM (1926 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.9000 104.0300 -0.12% 8.610% +104.2100 +103.6600

Euro/Dollar $1.0587 $1.0558 +0.27% -6.88% +$1.0615 +$1.0550

Dollar/Yen 135.4450 135.2100 +0.17% +17.66% +135.5400 +134.5300

Euro/Yen 143.40 142.69 +0.50% +10.04% +143.4800 +142.0600

Dollar/Swiss 0.9562 0.9586 -0.22% +4.85% +0.9620 +0.9549

Sterling/Dollar $1.2278 $1.2273 +0.07% -9.19% +$1.2332 +$1.2239

Dollar/Canadian 1.2878 1.2888 -0.07% +1.86% +1.2916 +1.2865

Aussie/Dollar $0.6925 $0.6941 -0.22% -4.72% +$0.6958 +$0.6906

Euro/Swiss 1.0122 1.0113 +0.09% -2.38% +1.0157 +1.0104

Euro/Sterling 0.8621 0.8601 +0.23% +2.63% +0.8627 +0.8578

NZ $0.6297 $0.6314 -0.29% -8.01% +$0.6326 +$0.6283

Dollar/Dollar

Dollar/Norway 9.7880 9.8545 -0.57% +11.23% +9.8810 +9.7740

Euro/Norway 10.3671 10.3937 -0.26% +3.54% +10.4415 +10.3601

Dollar/Sweden 10.0809 10.1325 -0.10% +11.79% +10.1422 +10.0480

Euro/Sweden 10.6734 10.6842 -0.10% +4.29% +10.7092 +10.6439

(Reporting Hannah Lang in Washington; additional reporting by Saikat Chatterjee in London; Editing by Muralikumar Anantharaman, Jane Merriman and Susan Fenton)

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