FirstFT: Federal Reserve sparks market rally

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Federal Reserve officials have indicated they still expect to cut interest rates by three-quarters of a percentage point this year, sending US equity markets to record highs.

The market reaction came after the Federal Open Market Committee voted unanimously to leave rates unchanged at a 23-year high of 5.25 per cent to 5.5 per cent. The central bank also sharply raised its forecast for US economic growth this year — from 1.4 per cent to 2.1 per cent — while saying inflation would be slightly higher than expected.

The latest statement leaves the Fed on course to begin cutting rates as early as the summer, calling time on a mission to quell inflation that jumped as the US economy emerged from the Covid-19 pandemic, and raising the prospect that borrowing costs could start to fall before November’s election.

“The economy is performing well,” said Fed chair Jay Powell in a news conference after the FOMC announcement.

But he added a word of caution about the future direction of inflation, saying it was still on a “sometimes . . . bumpy road towards 2 per cent”.

The blue-chip S&P 500 closed up 0.9 per cent, at a new record, continuing a rally that has pushed the index 27 per cent higher since October. The Nasdaq Composite gained 1.3 per cent. Read the full story.

Here’s what else I’m keeping tabs on today:

• Interest rates: Central banks in Norway, Switzerland, Turkey and the UK make interest rate decisions today. For more in-depth analysis of monetary policy sign up for Chris Giles’s central banks newsletter.

• Reddit IPO: The social media company’s shares will debut in New York later today after last night pricing its shares at $34 each. The pricing, at the top of the range, gives the company a valuation of $6.4bn on a fully diluted basis.

• EU summit: Emmanuel Macron will urge EU leaders in Brussels today to embrace radical plans to boost defence spending. The summit is likely to highlight divisions over how to finance Europe’s biggest rearmament since the end of the cold war.

Five more top stories

1. Apple’s chief Tim Cook said today that China was “critical” to its business during a visit to the country. Chinese consumers are showing signs of souring on the company’s iPhones and US technology more generally amid rising tensions between the US and China. Cook’s visit kicked off in Shanghai with a promise to invest more in the country. Here’s how local media covered the event.

2. FTX’s caretaker chief executive has branded Sam Bankman-Fried a deluded criminal who masterminded a “colossal fraud” and ran the cryptocurrency exchange with “hubris, arrogance, and a complete lack of respect for the basic norms of the law”. In a letter to Judge Lewis Kaplan, who is due to pass sentence on Bankman-Fried next week, John Ray said the contention by the 32-year-old’s lawyers that the “harm to customers, lenders, and investors is zero” was “categorically, callously, and demonstrably false”. Read more of Ray’s fiery letter.

3. Argentina’s libertarian president Javier Milei has launched an aggressive campaign to overhaul state-owned companies, from an airline and an oil group to the postal service, as lawmakers hold back his plans to privatise them. Officials have begun large-scale cost cuts at dozens of state-owned groups as part of their effort to balance Argentina’s budget this year, opening up fierce conflicts with staff and unions. One study found Milei’s government last month had cut transfers to state-owned companies by 61 per cent, on an inflation adjusted basis, compared with February 2023.

4. Shari Redstone, Paramount’s controlling shareholder, is unconvinced by an $11bn offer from Apollo for its Hollywood studio, people briefed on the matter said and is instead negotiating a rival deal with billionaire David Ellison to secure the future of her family’s media empire. Ellison’s Skydance, which is backed by private equity investor KKR, RedBird Capital and Tencent, has been in talks with Redstone for several months to acquire a majority stake in National Amusements, the holding company through which she controls Paramount. Read the full story.

5. The New York attorney-general yesterday rejected Donald Trump’s claim that it was a “practical impossibility” to post a bond while he appeals against a nearly half-billion dollar fraud judgment, escalating the threat that the state will move to seize his assets as soon as next week. Dennis Fan, a lawyer for the attorney-general’s office, argued that the former president could piece together a series of smaller bonds, or use his real estate portfolio to secure bank credit that could then back a surety bond.

Deep dive

One hundred years ago today, Edward Leffler, a former door-to-door salesman of pots and pans, invented the open-ended mutual fund, giving working and middle-class people an ownership stake in US capitalism. Today, newer and more nimble products that promise tax advantages, lower fees and rapid trading are reshaping asset management. Could this be the end for the mutual fund?

We’re also reading . . . 

Chart of the day

Falling fertility rates in most countries over the next 25 years will drive a global demographic shift that will have a far-reaching social and economic impact, according to a new study published in The Lancet medical journal. Three-quarters of nations are projected to fall below population replacement birth rates by 2050, leaving growth concentrated in a minority of low-income states in sub-Saharan Africa and Asia.

Take a break from the news

For the gentleman wishing to channel his inner flâneur this spring, HTSI offers 24 ways to live like a Frenchman, from the classic Polo Ralph Lauren twill pea coat to an elegant Cartier vintage gold watch and a Lobmeyr handblown crystal wine glass.

Additional contributions from Gary Jones and Benjamin Wilhelm