Aurelia Butler

Chair Powell’s remarks are unlikely to carry the same “pain” warning as last year, Goldman Sachs says, but it seems the overall message will still be one of “seeing the job through.”For the Fed, ‘seeing the job through’ likely resembles an economy achieving below-trend growth, and a pace of inflation that is clearly showing a sustainable downward path.Getting the job done on inflation, however, may also force the Fed to raise its longer-run or neutral rate – a rate at which neither boosts or hinders economic growth –  implying a steeper path ahead for rates. A possible shift in thinking on the neutral rate deserves attention, Morgan Stanley says, because it would imply a shift in the expected path for the policy rate and thereby the yield curve as a whole.Markets, however, aren’t waiting in the dark for fresh remarks from Powell. The bond market appears to be preparing for a more hawkish monetary policy road ahead, paved with higher-for-longer rates as hopes of seeing early-year rate cuts along the way fade.The 10-year Treasury yield jumped to its highest level since 2007 on Monday as jitters grow that Powell may sow the seeds for a higher neutral rate.Policymakers in June forecast a median estimate of the neutral rate of interest of 2.5%, implying a real rate of interest, or so-called r* or “r-star,”– derived by subtracting the Fed’s 2% inflation – of 0.5%.“Conceptually, if the policy rate is above r*, then monetary policy is slowing the economy, and if the policy is below r*, it is stimulating the economy,” Morgan Stanley said in a note.This real neutral rate of interest hasn’t changed since 2019, and following the strength in the post-Covid economy that is less interest-rate sensitive, some have been calling for a higher neutral rate to push policy into restrictive territory, helping to curb growth and inflation.”The household sector is in great shape…has a lot of excess savings and a good employment backdrop, so the economy is less interest rate sensitive as it hasn’t been borrowing to invest,” Phillip Colmar, global strategist at MRB Partners told Investing.com’s Yasin Ebrahim in an interview last month.”This is not a credit driven cycle, so it takes a higher cost of capital to choke the economy,” Colmar added.The string of recent data including a stronger retail sales print for July, showing the consumer remains resilient, indicates there is “little justification” for Powell to turn more dovish at the Jackson Hole symposium, MUFG said in a note.While the pivoteers, pining for sooner-rather-than-later rate cuts, aren’t as vast in numbers nor as vocal as in recent months, there are positives that the Fed chairman will gladly espouse when he takes center stage on Friday morning.In contrast to a year ago, when the Fed chairman warned that higher interest rates will “bring some pain” for the consumer,  Goldman Sachs says the current backdrop is much more reassuring and a “soft landing looks more plausible now than at any point over the last year.” More

It warned, however, that clerical work would likely be the hardest hit, potentially hitting female employment harder, given women’s over-representation in this sector, especially in wealthier countries.An explosion of interest in generative AI and its chatbot applications has sparked fears over job destruction, similar to those that emerged when the moving assembly line was introduced in the early 1900s and after mainframe computers in the 1950s. However, the study produced by the International Labour Organization concludes that: “Most jobs and industries are only partially exposed to automation and are thus more likely to be complemented rather than substituted by AI.”This means that “the most important impact of the technology is likely to be of augmenting work”, it adds.The occupation likely to be most affected by GenAI – capable of generating text, images, sounds, animation, 3D models and other data – is clerical work, where about a quarter of tasks are highly exposed to potential automation, the study says.But most other professions, like managers and sales workers, are only marginally exposed, it said.Still, the U.N. agency’s report warned that the impact of generative AI on affected workers could still be “brutal”.”Therefore, for policymakers, our study should not read as a calming voice, but rather as a call for harnessing policy to address the technological changes that are upon us,” it said. More

(Reuters) -Canada’s main stock index fell on Monday to a near two-month low as a drop in oil prices pressured energy shares and rising bond yields weighed on dividend-paying stocks.The Toronto Stock Exchange’s S&P/TSX composite index ended down 33.52 points, or 0.2%, at 19,784.87, its lowest closing level since June 27.”Interest rates continue to climb, which is something negative for the TSX which is littered with dividend payers,” said Barry Schwartz, a portfolio manager at Baskin Financial Services. “The higher rates go, the less attractive those dividend payers become.”Canada’s 5-year yield rose 5.4 basis points to 4.143%, trading near its highest level since November 2007, as investors bet that the Bank of Canada and some other major central banks will leave interest rates at elevated levels for longer than previously thought.Stocks paying high dividends dominate the real estate, utilities and financials sectors.Real estate fell 1.5% and utilities were down 0.9%. Financials, which account for 29% of the TSX’s weighting, lost 0.5%.Energy was also a drag, falling 0.6%, as oil settled 0.7% lower at $80.72 a barrel.In contrast, the materials group, which includes precious and base metals miners and fertilizer companies, added 1% as gold and copper prices rose.Technology was another bright spot, rising 1.3%.Shares of Restaurant Brands International (NYSE:QSR) gained 0.9% after J.P.Morgan initiated coverage on the stock with an “overweight” rating. More

Today’s top storiesUkraine is finalising a deal with global insurers to cover grain ships travelling to and from its Black Sea ports, helping create a safe corridor for exports after Russia withdrew from a UN-brokered deal last month. Some are drawing parallels with the 1984-1988 “tanker war” between Iran and Iraq.German producer prices fell a more-than-expected 6 per cent in June from a year earlier, the first such decline since 2020 and the biggest since 2009 in another indication that inflationary pressures are declining. Here’s our explainer on the economic challenges facing the country.Goldman Sachs is exploring a sale of the investment advisory business it acquired four years ago, marking a further retreat from efforts to be a major bank to mass-market customers. For up-to-the-minute news updates, visit our live blogGood evening.New moves from China to address faltering economic growth, a flailing property sector and a weakening currency have fallen flat, disappointing markets and throwing doubt on the country’s growth targets.The People’s Bank of China today cut the one-year loan prime rate, a reference for bank lending, by less than expected, while leaving the equivalent five-year rate, significant for mortgage lending, unchanged. Share prices and the renminbi fell in response, while Citigroup cut its China growth forecast, joining other Wall Street banks in casting doubt on whether the country will hit its official target of “about 5 per cent”.Calls for more government stimulus have grown after recent data showed the economy slipping into deflation (read our explainer here), exports falling and youth unemployment soaring so much that the government has decided to stop publishing the figures altogether. Stephen Roach, an academic at Yale, says Chinese policymakers, by opting for a combination of market-based and state-directed solutions are unwittingly engaging in “whack-a-mole” — an approach that creates more problems than it solves. Today’s moves come as Beijing attempts to step up its influence on the world stage by turning the Brics bloc of emerging economies into a full-scale rival to the G7. As the FT revealed, several countries including Iran and Venezuela could be invited to join the core group of Brazil, Russia, India, China and South Africa at a summit in Johannesburg from Wednesday. 

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Some existing members are sceptical. China sees itself as the natural leader of the global south but other leading players such as India are wary of allowing the Brics to become a China “club”. And South African president Cyril Ramaphosa, host of this week’s summit, has also made clear that his country would “not be drawn into a contest between global powers”. India and Brazil have also expressed doubts about adding new members, highlighting tensions over whether the Brics bloc should remain an economic forum for diverse developing nations.As our new Big Read explains, the jockeying comes amid the birth of a new world order, in which America’s role as sole superpower comes to an end and traditional alliances give way to more fluid arrangements where “middle powers” can flex their muscles and take advantage of US-Sino tensions.FT foreign editor Alec Russell characterises the changes as a move to a new “à la carte” world. “The age of the western set menu is over. And the new menu, while heavily influenced by two lead chefs, is still being written,” he writes.Need to know: UK and Europe economyThe Office for National Statistics said UK core inflation had begun to fall in the past two months according to a more sophisticated analysis than used normally. It found the underlying annual rate had dropped to 6.8 per cent in July, down from 7 per cent the previous month and 7.3 per cent in May.Asking prices for UK homes recorded their sharpest August drop since 2018 in another sign that the property market is cooling. Housebuilder Crest Nicholson issued a profit warning and said sales were slowing.European natural gas prices jumped as the prospect of a strike at a liquefied natural gas producer in Australia intensified fears of disruption to global supplies. Germany’s deputy chancellor Robert Habeck proposed increased scrutiny of Chinese direct investment in critical sectors such as semiconductors and artificial intelligence.Shares in Turkish banks slumped after the country’s central bank said it would begin to unwind a scheme to protect depositors whenever the lira depreciates against the dollar and the euro. It said at the weekend it would begin to deter savers and businesses from stashing funds in foreign exchange protected savings accounts.Need to know: Global economyEcuador’s presidential election is heading for a run-off on October 15 afterleftist Luisa González scored 33 per cent of yesterday’s vote, ahead of centrist candidate Daniel Noboa on 24 per cent.Anti-corruption campaigner Bernardo Arévalo won a landslide victory in Guatemala’s presidential election. Analysts are braced for a tense transition and efforts to block Arévalo from taking office or governing effectively.An FT Big Read tells the story of Lebanon’s discredited central banker Riad Salameh and how his rise and fall mirrors that of a country blighted by deceit and corruption.India is launching a voice-based payments system powered by artificial intelligence as part of push to bridge internet and literacy gaps in rural areas. Ethiopia is looking for $20bn from international institutions and foreign investors to help fund its recovery from a two-year civil war.Need to know: businessDomino’s pizzas will no longer be available in Russia after the US brand’s local operator said it was following other western companies in leaving the country. Many businesses have suffered financial losses as a result of selling at significant discounts or closing their Russian operations. Moscow has also carried out forced nationalisations of some foreign-controlled businesses.The global private funds industry is bracing for one of the most sweeping regulatory reforms in its history as the US Securities and Exchange Commission prepares to impose tough rules on private equity, real estate and hedge funds. The changes would also affect overseas managers who take money from US investors.US restrictions are failing to dampen Chinese hunger for the latest AI microchips — even though they have been deliberately hobbled for the Chinese market to limit their capabilities. Our series on next generation battery makers continues with a look at the potential winners and losers as car manufacturers, mining companies and battery developers all vie for a piece of the action.Another Big Read looks at the potential for driverless taxis now they have been permitted to operate in San Francisco despite local resistance. Will the rest of the world follow suit?The World of WorkThere may not be as many annoying fish taco-eaters and gym-gear wearers, but hybrid working has made offices noisier places for many people, writes columnist Pilita Clark, as companies cut back on space and herd staff into the cacophonous wastelands of open plan.Some good newsIt can be difficult for doctors to distinguish between common viral infections, bacterial infections and inflammatory diseases in children. New research however indicates that looking at gene patterns in their blood could significantly speed up diagnosis. More

NEW YORK (Reuters) -Fintech investment adviser Titan Global Capital Management USA LLC agreed to pay over $1 million to settle charges from the U.S. Securities and Exchange Commission (SEC) that it misled investors about performance metrics and custody of clients’ crypto assets. Titan, a New York-based registered investment adviser, misled investors with statements made on its website about hypothetical returns from August 2021 to October 2022, the SEC said in a statement. That included touting annualized crypto performance results as high 2,700% without telling investors they were extrapolated from a “purely” hypothetical three-week period, the SEC said in a charging document. The resolution marks the first violation under a recently-amended SEC rule that allows advisers to use such hypothetical metrics only if they meet certain requirements designed to prevent fraud.Titan, which did not admit to or deny the SEC’s findings, said in a statement it fully cooperated with the SEC’s inquiry and continues to make “significant investments to build and enhance its compliance program”. Regulators also found Titan made conflicting statements to clients about how it handled custody for crypto assets and failed to adopt policies for employees’ personal trading in crypto assets, among other violations, the agency said.Reuters previously reported the SEC was investigating investment advisers over whether they are meeting rules around custody of client crypto assets.Titan agreed to pay a $850,000 civil penalty that will be distributed to affected clients and give back ill-gotten gains and interest of over $192,000, the SEC said. More

NEW YORK (Reuters) – American workers’ expectations for pay surged in July, even as those same workers foresee a modestly less robust job market, said a survey released Monday by the Federal Reserve Bank of New York. Respondents told the bank that they’d expect an annual salary offer of $67,416 upon being offered a job, a record reading in a survey that started in 2014, up from the $60,310 reported a year ago. “The increase was broad-based across age, education, and income groups, but was most pronounced for respondents above age 45 and for college graduates,” the report said.Meanwhile, respondents to the bank’s Survey of Consumer Expectations said that the lowest wage they’d accept to take a job also jumped, hitting a record $78,645, from $72,873 a year ago. The pay workers are expecting was not from what they’re actually getting. The survey said that survey respondents said that in July the average wage offered for a full-time job was $69,475 versus $60,764 in July 2022. The jump in compensation, actual and expected, came even as poll respondents saw some softening around the edges of the job market. The survey found that relative to a year ago there’s been a small decline in those who said they’d changed jobs, as well as a reduction in the number of people who said they were searching for new work. Looking ahead, respondents said the probability of them moving to a new employer stood at 10.6%, down from 11% in the July 2022 survey. Respondents also said they see the chances of receiving a job offer in the next four months as lower.The New York Fed reports on labor market expectations quarterly as part of a data series best known for tracking the expected path of inflation and household financial situations. The latest data comes just days before Fed officials gather with other world top financial authorities at a research conference to be held in Jackson Hole, Wyoming. Fed officials are continuing to grapple with whether they need to press forward with interest rate increases at a time when inflation remains high but is falling. Even with a historically aggressive campaign of rate rises economic growth and labor markets remain strong. The New York Fed data suggests risks remain that wage gains and expectations of pay increases could keep some upward pressure on inflation, which could keep alive the prospect that the central bank may have to raise rates further That said, there’s been an active debate over how much rising wages are a driver of inflation in a time where many other parts of the economy have been working through disruptions caused by the coronavirus pandemic. A recent Cleveland Fed paper, noting the strong job gains, framed them as reactive to economic events, saying “ we find that the increase in wage growth largely reflects the pass-through of higher inflation and does not reflect labor market imbalances.” The paper’s authors expect wage gains to moderate. More