Economy

Wall Street tumbles, Treasury yields gain as focus turns to Fed

Published

8 months ago

September 17, 2023

Wall Street tumbles, Treasury yields gain as focus turns to Fed

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks ended sharply lower and Treasury yields headed higher on Friday as plunging chip stocks and mixed economic data dampened investors’ risk appetite, providing a downbeat ending to a tumultuous week.

All three major U.S. stock indexes closed deep in red territory, with chipmakers weighing on the tech-laden Nasdaq.

The and the Nasdaq reversed their weekly advances, while the blue-chip Dow ended the week nominally higher.

The slid 3.0% in the wake of a Reuters report that Taiwan’s TSMC asked major suppliers to delay delivery of high-end chipmaking equipment.

On the economic front, data released on Friday was mixed, with import prices jumping, industrial production beating expectations and University of Michigan consumer inflation expectations cooling.

Economic indicators this week have cemented expectations that the Federal Reserve will leave its key interest rate unchanged at the conclusion of next week’s monetary policy meeting, and fueled hopes that the central bank’s tightening cycle might have run its course.

“There’s a tug of war going on between those who think inflation and interest rates are going to come down and the Fed is going to start cutting rates next year, and those who believe that inflation is going to stay well above the Fed target for a while and therefore rates will stay higher for longer,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Financial markets have priced in a 97% likelihood that the central bank will hold the Fed funds target rate at 5.25%-5.00% when it announces its decision next Wednesday, and a 68.5% likelihood of it doing the same at the conclusion of its November meeting, according to CME’s FedWatch tool.

“If we get a pause in September and November, that could lead to a nice year-end rally, which will feed the belief that the next move by the Fed will be a rate cut in 2024,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

The fell 288.87 points, or 0.83%, to 34,618.24, the S&P 500 lost 54.79 points, or 1.22%, to 4,450.31 and the dropped 217.72 points, or 1.56%, to 13,708.34.

European stocks closed higher, extending a rally sparked by the European Bank signaling an end to its rate-hiking cycle, and logging a weekly gain.

The pan-European index rose 0.23% and MSCI’s gauge of stocks across the globe shed 0.63%.

Emerging market stocks rose 0.33%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.58% higher, while rose 1.10%.

Treasury yields rose ahead of the Federal Reserve policy meeting next week, with two-year yields edging above the 5% threshold amid worries that restrictive interest rates will be in place for longer than expected.

Benchmark 10-year notes last fell 10/32 in price to yield 4.3304%, from 4.29% late on Thursday.

The 30-year bond last fell 17/32 in price to yield 4.4182%, from 4.385% late on Thursday.

The dollar inched lower against a basket of world currencies, but nabbed its ninth straight weekly gain.

The fell 0.08%, with the euro up 0.16% to $1.0658.

The Japanese yen weakened 0.28% versus the greenback at 147.89 per dollar, while Sterling was last trading at $1.2382, down 0.22% on the day.

Oil prices continued to climb, notching their third consecutive weekly gain on supply tightness and optimism that the Chinese economy is gaining strength.

rose 0.68% to settle at $90.77 per barrel, while settled at $93.93, up 0.25% on the day.

Gold prices surged, bouncing off three-week lows in opposition to softness in the greenback.

added 0.7% to $1,922.69 an ounce.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

4 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.