US equity markets are expected to recoup some of their losses when trading begins in New York after minutes from the Federal Reserve’s last monetary policy meeting spooked investors.
The minutes from the March 21-22 meeting revealed policymakers for the first time predicted a “mild” recession in the US, starting later this year. They also showed that several members of the Federal Open Market Committee considered freezing interest rates following the turmoil in the banking sector in the run-up to the meeting.
Those policymakers that argued for a pause in rate rises wanted time to assess the impact of the bank collapses on credit conditions in the US economy, the minutes revealed.
Ultimately, though the FOMC decided to press ahead with a quarter-point rise to a new target range of 4.75 per cent to 5 per cent, but the minutes helped send the benchmark S&P 500 down 0.4 per cent by yesterday’s close while the tech-heavy Nasdaq Composite dropped 0.9 per cent. Futures trading today indicates a small rise when trading resumes later.
In addition to yesterday’s Fed minutes, inflation data illustrated the central bank’s aggressive tightening of monetary policy was bringing inflation down towards its 2 per cent target.
The consumer price index rose 5 per cent last month, according to the Bureau of Labor Statistics, compared with 6 per cent in February. But core inflation, a closely watched measure that strips out volatile food and energy costs, rose 5.6 per cent year on year in March suggesting prices remained elevated in parts of the economy.
Today, we get the release of the US producer price index, which tracks prices businesses receive for their goods. It is also expected to have slowed last month compared with the previous month.
Here’s what else I’ll be looking out for today:
Economic data: New applications for unemployment aid are forecast to have increased as the growth in the labour market slows.
Earnings: Delta Air Lines is forecast to report revenues in its first quarter increased 28 per cent to about $12bn, according to Refinitiv estimates.
Dominion vs Fox: Jury selection begins for voting-machine maker Dominion’s $1.6bn defamation lawsuit against Fox News.
Five more top stories
1. Alibaba shares dropped more than 5 per cent earlier today in Hong Kong after the Financial Times revealed SoftBank had sold more than $7bn worth of shares in the Chinese company this year through prepaid forward contracts. Read more on the FT’s analysis of regulatory filings.
2. JPMorgan Chase is asking its managing directors to be in the office five days a week and warned other employees not to fall short of their “in-office attendance expectations”. The move underscores how Wall Street is working to pull staff back to the office having tolerated more flexible working following the Covid-19 pandemic.
Related: JPMorgan was aware by 2006 that Jeffrey Epstein had been accused of paying cash to have “underage girls and young women” brought to his home, legal filings in New York yesterday alleged.
3. Chinese exports surged last month, fuelled by sales of electric vehicles and their components, despite weak global growth. Customs data showed dollar-denominated exports expanded 14.8 per cent in March compared with the same period a year earlier after falling 6.8 per cent in January and February.
4. Marex is considering a New York listing as it looks to revive plans for an initial public offering, in the latest blow to the London stock market. The commodity broker cancelled a UK listing in 2021 with a targeted valuation of between $650mn and $800mn.
5. Royal Bank of Canada was the fossil fuel industry’s top financier last year, replacing JPMorgan after extending $42.1bn in funding. Here’s why Canadian banks have become the industry’s “lender of last resort”.
Atomic energy: With Germany’s last nuclear power plants set to close on Saturday, the country is torn over how to balance its energy crunch with climate obligations.
Related: G7 climate ministers have challenged Japan’s plans for promoting ammonia as a low-carbon energy source, which critics say is unproven.
The Big Read
Unlike with the bankruptcies of companies and individuals, there is no law governing insolvent countries — only a chaotic, ad hoc process that involves a hodgepodge of contractual clauses and tacit conventions, tortuous negotiations and navigating geopolitical expediency. This fragile patchwork could unravel completely owing to the emergence of a new, disruptive, opaque and powerful force in sovereign debt: China.
We’re also reading . . .
EY power vacuum risk: After the failure of Project Everest, the future of global chief Carmine Di Sibio and other senior executives hangs in the balance.
2008 redux?: Fears of high interest rates leading to defaults on commercial property loans and solvency issues are greatly exaggerated, writes Megan Greene.
Macron on Taiwan: The French president’s remarks that Europe should distance itself from tensions over the island have created an impression of disarray over the EU’s China policy.
Chart of the day
Investors are shying away from the riskiest US corporate debt as fears of an impending recession fuel a growing divide between the highest- and lowest-rated companies in the $1.4tn high-yield bond market.
Take a break from the news
New Zealand’s Stratford-Okahukura railway was abandoned by regular train services long ago. Now known as the Forgotten World Line, you can drive your own “rail cart” (which is really a golf buggy converted to run on rails) across 82km of a rugged landscape and remote hamlets . . . and past an unforgettable pub.
Additional contributions by Tee Zhuo and Emily Goldberg
Source: Economy - ft.com
