Aurelia Butler

In the minutes of its Jan.31 – Feb.1 meeting, when the rate-setting committee kept the benchmark rate at 13.75%, some committee members noted that the fiscal package presented by the Finance Ministry should mitigate the fiscal risks.Nonetheless, “it will be important to monitor the challenges for its implementation,” the minutes added.The central bank said inflation expectations drifting further from official targets over longer horizons was noted “with concern,” highlighting the existence of two fiscal risks that may push inflation upwards.The first relates to the country’s fiscal framework revision, which “reduces the visibility on public accounts for the coming years, introduces premia on asset prices, and impacts inflation expectations”.In an environment of a narrowed output gap, the impact on inflation of government fiscal stimuli tends to outweigh the desired impact on economic activity, they added. The messages come amid intense criticism from President Luiz Inacio Lula da Silva, who has repeatedly portrayed the level of basic interest rates as a villain for the economy. The central bank, which paused its aggressive monetary policy cycle in September after 12 consecutive hikes, had already stated that it was considering holding interest rates at a six-year high, longer than markets expect, due to fiscal risks under Lula.Finance Minister Fernando Haddad has adopted a more conciliatory tone, but has expressed hope for a “more generous” communication from the central bank regarding the government’s fiscal measures.Despite Haddad’s measures to reduce this year’s primary budget deficit, markets remain skeptical of their viability as they await a new fiscal rule to prevent rampant growth in public debt after leftist Lula secured Congress approval for a strong spending package that bypasses the constitutional spending cap to meet campaign promises. More

Investing.com — The AI race heats up, with Alphabet and Baidu both nearing launches of tools to compete with Microsoft-backed ChatGPT. CVS is closing in on its second big health acquisition in five months. Stocks are steady after slipping on Monday over fears of higher interest rates. The Winklevoss twins will dip into their pockets for $100 million as part of a deal to unlock the assets trapped on crypto lending platform Genesis, and oil rises as Saudi Arabia raises its official selling prices. Here’s what you need to know in financial markets on Tuesday, 7th February.1. AI race heats up with Google launch, Microsoft event The AI wars are heating up. Google owner Alphabet (NASDAQ:GOOGL) is set to roll out a new AI tool called Bard in the coming weeks, responding to the competitive threat from the Microsoft-based ChatGPT.Alphabet CEO Sundar Pichai said in a blog post that Bard will be powered by a slimmed-down version of the LamDA technology, which one Google engineer famously claimed last year to be ‘sentient’.Microsoft (NASDAQ:MSFT), meanwhile, is set to hold an event of its own later Tuesday that will be attended by Sam Altman, CEO of ChatGPT developer OpenAI.Overnight in Hong Kong, Baidu (HK:9888) stock rose 13% after the Chinese search giant – which is protected from competition in its domestic market by Beijing’s Great Firewall – also aims to finish testing of a new AI product by March.2. CVS nears $10 billion deal for Oak StreetActivity in the M&A market is picking up, after months of logjam caused by rising interest rates and mountains of unsold buyout debt.CVS (NYSE:CVS) is set to announce a deal to buy Oak Street Health (NYSE:OSH) for $10.5 billion, according to The Wall Street Journal, building out a growing presence in the primary healthcare market as its traditional retail business comes under pressure from new entrants such as Amazon (NASDAQ:AMZN).The deal would represent CVS’s second big deal in the space in less than six months, after it agreed to buy Signify Health for $8B in September.On Monday, gold miner Newmont Goldcorp (NYSE:NEM) had made a $17B approach for Australian rival Newcrest (ASX:NCM), in what would be the biggest M&A deal of the year so far.3. Stocks flat ahead of Redbook, trade data U.S. stock markets are set to open mixed later, still weighed down by concerns from Atlanta Fed President Raphael Bostic on Monday that the Federal Reserve may still have to raise interest rates further to tame inflation. His comments followed a stronger-than-expected labor market report for January on Friday that showed the economy is still some way from falling into recession.Economic data for Tuesday is limited, with only January’s trade figures and the latest snapshot of the retail sector from Redbook. Earnings season is also continuing in a lower gear, with Dupont (NYSE:DD) and Centene (NYSE:CNC) heading a list of early reporters and Chipotle (NYSE:CMG) and Vertex (NASDAQ:VRTX) heading the late lineup.By 06:30 ET (11:30 GMT), Dow Jones futures were down 30 points, or 0.1%, while S&P 500 futures were up by a similar amount and Nasdaq 100 futures were up 0.2%. The main cash indices lost between 0.1% and 1.0% on Monday.4. DCG strikes deal with Winklevoss twins and other creditors on Genesis recapitalizationBarry Silbert and the Winklevoss twins moved a step closer to ending their bust-up over the collapse of crypto lender Genesis, which left customers of the Winklevosses’ Gemini project short of some $900M.Under the terms of a deal announced late on Monday, Silbert’s Digital Currencies Group will exchange a $1.1B promissory note due in 2032 for convertible preferred stock, and will also refinance $500M of loans to Genesis that were due this year. DCG will also contribute its equity interest in Genesis Global Trading to a new holding company, bringing all Genesis entities under the same roof as it restructures under Chapter 11 bankruptcy regulations.The deal will also see Gemini contribute up to $100M, which will unlock at least some of the funds owed to by Genesis to Gemini’s Earn lending platform.5. Oil rises after Saudi move; API inventories dueCrude oil prices rose after Saudi Arabia raised its official selling prices for export cargoes loading in March, a move attributed by some to higher Chinese demand.By 06:50 ET, U.S. crude futures were up 1.7% at $75.34 a barrel, while Brent crude was up 1.5% at $82.22 a barrel.Elsewhere, Turkish authorities restarted the flow of Azerbaijani oil to the export terminal of Ceyhan, after stopping it as a precautionary measure in the wake of Monday’s earthquakes.In the U.K. meanwhile, BP (LON:BP) said it will slow its planned exit from the fossil fuel business, seeing more demand for conventional energy over through the end of this decade.The American Petroleum Institute reports weekly inventory data at 16:30 ET.  More

WASHINGTON (Reuters) – Joe Biden speaks to the nation tonight at a time of record low unemployment, rising wages, and diminishing fears of recession – facts the U.S. president is likely to trumpet as a sign his economic plans are working in the wake of the COVID-19 pandemic.But there are pressing economic issues, most notably the need to lift a statutory debt limit that, in the extreme, could cause the U.S. government to stop paying its bills.And simmering in the background: A still unresolved Federal Reserve fight to control inflation that may pose the largest outstanding risk to the Biden economy, and over which the White House has little influence.Biden will deliver the annual State of the Union address to a joint session of Congress on Tuesday night, his second such speech as president and the first since the Republican party narrowly took control of the House of Representatives after November’s mid-term elections.The overall mood is still mixed, economists and pollsters report, with Biden’s approval ratings hovering at around 40%. Consumers are “reconciling layoff announcements with record job numbers, inflation that is rolling over yet prices remain elevated. It is not black and white,” said John Leer, chief economist with Morning Consult.In his speech, Biden “has to thread a bit of a needle,” said Brian Gardner, Washington strategist for investment firm Stifel. Despite positive employment and other trends, “people are still anxious and you cannot be tone deaf to that,” after a year in which prices rose at the fastest pace in 40 years and the Federal Reserve’s aggressive rate hikes put home mortgage and other credit out of reach for some families. GASOLINE AND INFLATION DROP On the whole, economic data in recent months has moved in the president’s favor, particularly after inflation spiked to a 40-year high last summer and government reports showed the U.S. economy could be heading into a recession.The consumer price index dipped from a nearly 9% annual rate in June to under 6.5% as of December.Gasoline prices that hit $5 a gallon over the summer were below $3.50 this week. Consumer confidence and the household inflation outlook have improved.Graphic: Inflation eases- https://www.reuters.com/graphics/USA-BIDEN/INFLATION/znvnbklyzvl/chart.pngGDP AND JOBS RISE After a tepid start to 2022, the U.S. economy ultimately grew by more than 2% for the year after a stronger than expected second half, prompting firms like Goldman Sachs (NYSE:GS) to lower the perceived risk of a downturn.The progress on inflation, meanwhile, has come so far without any corresponding hit to job growth or the unemployment rate.The economy added an average of a half million jobs a month in the first two years of the Biden presidency, nearly triple the pace seen before the health crisis – and 4.8 million in 2022 alone. The 571,000 added in January showed unexpected ongoing strength and put the economy within a few months of potentially returning the employment level to its pre-Covid trend.Graphic: The jobs hole facing Biden and the Fed – https://www.reuters.com/graphics/USA-ECONOMY/JOBS/jbyprzlrqpe/chart.pngSTRONG LABOR MARKET The gains have been spread across industries and demographic groups.High profile tech firms may be laying off employees, but other businesses have picked up the slack thanks to still booming demand at restaurants and for other services.The unemployment rates for Black and Hispanic people are near the lows seen before the pandemic hit the U.S. economy in March of 2020.Graphic: Unemployment by race and ethnicity- https://www.reuters.com/graphics/USA-FED/JOBS/gdvzqqznapw/chart.pngWhat’s still to be determined, and what could shape the landscape Biden and his Democratic Party ultimately face in 2024, is whether inflation continues to steadily decline, and, if not, what the Fed chooses to do about it.Fed officials see the current levels of job and wage growth as unsustainable. If inflation does not continue to slow they have pledged to raise interest rates as high as necessary to win that particular fight – even at the cost of rising unemployment.Biden’s message Tuesday night, however, will be focused on what the administration sees as the progress that is continuing, and the sense that the economic impact of the pandemic has waned. “On average, American households are in a better position than they were before the pandemic hit,” National Economic Council director Brian Deese said on Monday. “We find ourselves today in an economy where we have real resilience.” More