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Fed seen more aggressive, markets in turmoil after hot inflation data




© Reuters. FILE PHOTO: The Federal Reserve building is seen in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo


SINGAPORE/NEW YORK (Reuters) -Investment banks have ramped up projections for U.S. interest rate rises following evidence that inflation remains red-hot, with several now forecasting a 75-basis-point hike this week, unsettling markets.

The Federal Reserve meets on Wednesday in the midst of heavy selling in stock and bond markets following May data showing U.S. consumer prices rising at their fastest pace since 1981. A 75 basis point hike would be the biggest since 1994.

The S&P 500 appeared on track to confirm a bear market on Monday, while a widely watched part of the Treasury yield curve inverted on fears that big Fed hikes would tip the economy into recession. [.N]

CME’s FedWatch tool, based on the prices of short-term credit futures, shows about a 1/4 chance of a 75 basis point rate hike at this month’s meeting and a better-than-even chance of there being at least one 75 basis point rise by next month’s meeting.

“The May inflation data was so concerning that we think the Fed will react even more aggressively in moving rates ‘expeditiously’,” BNY Mellon (NYSE:BK) strategist John Velis said on Monday. His note forecast a 75 basis point hike on June 15, up from 50 basis points.

“We felt compelled by circumstances to change our view (and) so communicate it.”

Barclays (LON:BARC) and Jefferies also forecast a 75 basis point hike for this week.

“US CPI surprised to the upside and continues to show broad and persistent price pressures,” Barclays analysts said in a Sunday note. “We think the Fed probably wants to surprise markets to re-establish its inflation fighting credentials.”

Standard Chartered said in a Monday note that while it expected a half-point rise this week, it did not preclude larger increases of 75 basis points or even a full percentage point.

It upgraded its forecasts for July and September to a 50 basis point and a 25 basis point increase, respectively, from previous expectations of 25 basis points in July and zero in September.

Markets have braced, too, with a selloff in short-dated Treasuries along with futures tied to the Fed policy rate extending in Asia on Monday. Yields on the two-year Treasury note are at their highest since late 2007. [US/]

Signs of an economic slowdown – including a survey last week showing U.S. consumer sentiment plunged to a record low in early June – are not enough for the U.S. central bank to ease up in its fight against inflation, said Standard Chartered (OTC:SCBFF).

For Rabobank, the risk of ‘stagflation’ – a period of weak growth and high inflation last seen in the 1970s – could give way to the threat of ‘incession’, a combination of inflation and recession, it said in a research note on Sunday.


Large US companies by market cap begin to think more about cutting investments and staff – survey



biggest us companies by market cap

The chief executive officers (CEOs) of the largest US companies by market cap are revising downward their plans for hiring and investment amid a worsening outlook for the US economy, a quarterly Business Roundtable (BRT) survey showed.

That’s because of high inflation and rising costs, said the association, which includes dozens of major U.S. corporations. The S&P 500 and U.S. 100 indices are also declining amid the developments.

The index, which gauges the economic outlook, fell 11 points this quarter, to 73 points. The indicator is still above the 50-point mark, indicating that the economy is growing. However, it fell below the long-term average of 84 points for the first time since the third quarter of 2020.

The index of planned investments fell 7 points to 68 points and expected sales fell 8 points to 91 points, according to the BRT report.

What will the biggest U.S. companies do by market cap?

About 39% of CEOs plan to increase the number of employees at their companies in the next six months, while 28% of respondents intend to downsize. Last quarter, those numbers were 47% and 19%, respectively.

Nearly half (49%) said that labor costs are a major expense at their company. Twenty-one percent of CEOs plan to reduce capex in the next six months and 40% plan to increase it. In the third quarter these proportions were 18% and 43%, respectively.

U.S. CEOs on average forecast that U.S. GDP will increase by 1.2% in 2023. 142 CEOs participated in the BRT survey, which ran from October 31 to November 28.

Earlier, we reported that Saxo Bank presented “shocking predictions” for the next year.

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Saxo Bank predictions 2023: Saxo Bank presents “shocking predictions” for the next year



Analysis Saxo Bank

Saxo Bank predictions 2023: The Danish Bank has published ten “shocking predictions” for 2023. They concern a series of unlikely and underestimated events because of which, however, “the world markets can be covered with a powerful shock wave”..

Saxo Bank analysis – what’s going to happen next year?

Against the backdrop of rising energy prices, leading U.S. technology companies and “billionaire technophiles” will create a multi-billion dollar project aimed at exploring new opportunities in the energy sector, the bank predicts. According to the bank, this project will be comparable to the “Manhattan Project” to study atomic energy and the creation of the nuclear bomb, and investments in the new project will be about $1 trillion.

Inflationary pressures and geopolitical instability will continue to affect not only the global economy but also the financial markets, says the Danish bank. Against this background, states will take a more conservative policy, reducing investments in more complex financial instruments, and investing in traditional assets such as gold. And traders at the same time are considering Gold Futures.

Increased demand for gold in 2023 will, according to Saxo Bank, cause its price to rise from the current $1,800 to $3,000 per ounce.

Earlier, we reported that Apple has postponed the release date of an unmanned electric car for a year.

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Apple postponed the release date of Apple’s electric car by a year



Apple's electric car

U.S. Apple Inc. (NASDAQ:AAPL) has pushed back the release date of Apple’s unmanned electric car by a year to 2026 and somewhat tempered its ambitions about the extent of its self-driving capability, Bloomberg reported, citing sources.

Earlier, Apple announced electric cars. According to the sources, the Titan project has been in limbo for the past few months because top executives at Apple have concluded that their vision of a fully self-driving car with no steering wheel and no pedals can’t be realized with existing technology. The APPLE Price Chart showed a slight decline amid this news. 

In this regard, the company has decided to adjust the project and now plans to create a less autonomous car, with a steering wheel and pedals, with the possibility of fully unmanned driving on highways, sources said.

The driver of the car is expected to be able to do his or her own thing while driving on the highway, such as watching a movie or playing a game, and will receive advance notifications to switch to manual control when approaching city streets or deteriorating weather conditions.

Apple shares fell 2.5 percent in trading Tuesday. Since the beginning of this year, their value has fallen by 19.5%.

We previously reported on World Economic News now through the morning of Dec. 6.

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