Aurelia Butler

(Reuters) – A look at the day ahead in markets from Stephen Culp, New York stock market reporter.Asian markets are set for an upbeat Thursday as U.S. stocks whipsawed to a higher close after the Federal Reserve delivered an expected 25 basis point interest rate hike and warned it still expects ‘ongoing increases’ as it battles inflation.All three major U.S. stock indexes reversed earlier losses to sail across the finish line in positive territory, under assurances from Fed Chairman Jerome Powell that he believes price growth can be tamed “without a significant economic decline.”In his remarks and Q&A session following the policy decision, Powell said “there’s more work to do,” before its goals are met, but acknowledged data shows inflation is beginning to cool.”The door is cracking open to end rate hikes, but they still have a chance for one more rate hike at the next meeting,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “Inflation data continues to show major improvements, which is exactly what the Fed needs to take their foot off the pedal.”The European Central Bank and the Bank of England are expected to hike their key interest rates by 50 basis points on Thursday.On the economic front, restrictive central bank policies appear to be dampening factory activity, with purchasing managers’ indexes around the world either in contraction or struggling to expand.Fourth-quarter earnings season is running on all cylinders, with 190 of the companies in the S&P 500 having reported already. Of those, 69% have delivered consensus-beating profits, according to Refinitiv.Shares of Meta Platforms Inc (NASDAQ:META) jumped more than 18% in extended trading after the social media bellwether forecast first-quarter revenue above Wall Street estimates, signaling a rebound in demand for digital ads after months of weak sales.Healthcare companies BristolMeyers-Squibb Co, Eli Lilly (NYSE:LLY) and Co and Merck & Co are due to report before trading commences on Wall Street on Thursday, with the heavy-hitting triple play of Apple Inc (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) Inc expected after the session ends.Elsewhere, the U.S. dollar lost ground against a basket of world currencies, while crude prices settled sharply lower due to a buildup of U.S. oil stocks.Here are some key developments that could provide more direction to markets on Thursday:- South Korea releases CPI inflation data (Jan)- Australia posts building approvals (Dec)- U.S. planned layoffs (Jan), weekly jobless claims land before the opening bell, factory orders (Dec) shortly after More

CREATION OF THE DEBT CEILINGCongress has always placed restrictions on federal debt as part of its U.S. Constitutional authority over tax and spending matters. Before World War One, Congress often handled debt sales directly, but that became impractical as federal borrowing increased in the years that followed. Congress opted in 1939 to impose an overall limit of $45 billion on government borrowing activity. Because spending has often outrun tax revenue, Congress has had to raise that limit 102 times since the end of World War Two. Big spending increases – such as the $6 trillion in COVID-19 relief Congress approved in 2020 and 2021 – lead to more debt and more frequent debt-ceiling increases.Most other developed countries do not impose such limits on government borrowing. TERMS APPLYCongress has often imposed conditions on these debt-ceiling hikes, or paired them with other tax and spending activity.Congress delayed a debt-ceiling hike in 1957 to pressure the Pentagon to operate more efficiently, and linked increases to expanded Social Security benefits in the early 1970s. Lawmakers in that era also tried unsuccessfully to use the debt as leverage to stop U.S. bombing of Cambodia.Since 1978, only 26 of 60 debt-ceiling hikes have been passed on their own. Often they have passed with other budget and spending measures – a practice that allows lawmakers to negotiate on several fiscal matters at once and shields them somewhat from the political pain of approving an increase in debt.Congress paired a debt-ceiling hike with broader bipartisan spending packages in 2018 and 2019, for example. The recession-fighting stimulus package of 2009 also included a debt-ceiling hike. The House of Representatives automatically raised the debt ceiling 10 times between 1980 and 2010 when it passed its annual budget plan, under a rule named after Democratic leader Dick Gephardt.This process does not always go smoothly.Republicans unsuccessfully tried to pair a debt-ceiling hike with spending cuts in 1995 and 1996, leading to two partial government shutdowns. A similar showdown in 2011 brought the United States to the brink of default and prompted a first-ever downgrade of the United States’ top-notch credit rating.SUSPENDING ITCongress voted seven times between 2013 and 2019 to suspend the debt ceiling for a set amount of time, rather than raising it. This reduced political pain by allowing lawmakers to avoid signing off on a specific amount of additional debt, and provided some certainty by letting them know when they would have to tackle the problem again.2011 SPENDING RESTRAINTSThe 2011 showdown ended with the Budget Control Act, which imposed spending caps for the following 10 years that Congress eventually diluted. That deal also reversed the usual calculus by allowing the president to raise the debt ceiling unless a majority of Congress voted against it, which they conveniently failed to do.Source: Congressional Research Service More

US stocks closed at their highest level since last summer and government bonds swung higher on Wednesday after the Federal Reserve announced a further slowdown in the pace of interest rate rises.The US central bank lifted its benchmark interest rate 0.25 percentage points to a range of 4.5 per cent to 4.75 per cent. The widely expected move in the federal funds rate was less than previous increases of 0.5 or 0.75 percentage points undertaken at recent meetings.The Fed’s smaller rate increase after its first monetary policy meeting of the year reflects growing confidence that inflation is on a downward trajectory after several months of encouraging data. Wall Street’s benchmark S&P 500 index, which had slipped earlier in the day, rebounded after Fed chair Jay Powell spoke to reporters and closed 1.1 per cent higher for the day. The tech-heavy Nasdaq Composite jumped 2 per cent. The S&P closed at its highest level since August, while the Nasdaq reached the highest level since September.Powell continued to stress the need for further rate rises to bring inflation firmly under control, and said policymakers would not become “complacent” despite encouraging recent data.However, Michael de Pass, head of linear rates trading at Citadel Securities, said investors were encouraged by Powell’s relaxed comments about a recent rally in stock and bond prices.The S&P 500 rose 6 per cent in January while bond yields fell, making it easier for companies to raise cash. Powell had warned about the need for caution during similar rallies last year, but when asked about the trend on Wednesday, he said “our focus is not on short-term moves”, stressing that conditions had “tightened significantly over the past year”.“There was some consensus prior to the meeting that the one area he’d try to push back on was the easing of financial conditions, but that was not the path he took,” de Pass said.Bond markets rallied, with the yield on the benchmark 10-year Treasury dropping 0.13 percentage points to 3.40 per cent. Bond yields fall when prices rise.The dollar index, which tracks the US currency against a basket of peers, fell 0.9 per cent. The dollar has devalued significantly in recent months as the pace of interest rate rises has slowed.The Bank of England and European Central Bank are due to implement their own interest rate increases on Thursday, with both expected to opt for half percentage-point adjustments upwards. The regional Stoxx Europe 600 traded flat after eurozone inflation fell more than expected to 8.5 per cent in January, down from 9.2 per cent in December. Economists polled by Reuters had forecast a decline to 9 per cent. Core inflation, which omits relatively volatile food and energy prices, remained at 5.2 per cent, with investors having expected a decline to 5.1 per cent. London’s FTSE 100 slipped 0.1 per cent.In Asia, Hong Kong’s Hang Seng index added 1 per cent, China’s CSI 300 rose 0.9 per cent and South Korea’s Kospi gained 1.2 per cent. Japan’s Nikkei was steady. More

Brussels has warned that leaks of sensitive UK-EU talks on reforming Northern Ireland’s post-Brexit trading arrangements could endanger a compromise deal between the two sides.The intervention comes as British prime minister Rishi Sunak considers whether he can sell a potential deal on the Northern Ireland protocol, part of the Brexit agreement, to his MPs and pro-UK parties in the region.Sunak will have a big task promoting any compromise with Brussels to Conservative MPs and Northern Ireland’s Democratic Unionist party and media reports about a putative deal have complicated that task.In a sign of potential trouble ahead, Lord David Frost, the former Brexit minister and a leading Eurosceptic Conservative, accused Sunak of giving Brussels the upper hand in negotiations on the protocol.The European Commission urged the bloc’s member states not to leak details of the UK-EU talks, saying they could “endanger the whole process”, according to a summary of a meeting on Wednesday of EU ambassadors.The commission briefed the national representatives that negotiations needed “sufficient space, time and discretion because of the high sensitivities on both sides and the current situation within the UK government”, said the summary, in an apparent reference to the pressure on Sunak. Commission officials reassured EU member states that any compromise deal would be based on the Northern Ireland protocol and the need to “make it work in practice” rather than radically reshape it.Downing Street on Wednesday denied a report in The Times that a deal with Brussels had been agreed on the protocol, saying there was much work remaining regarding post-Brexit trading arrangements for the region.“There is still lots of work to do on all areas, with significant gaps remaining between the UK and EU positions,” said Sunak’s spokesman.Ursula von der Leyen, commission president, struck an upbeat note on the UK-EU talks, which are focused on reducing friction on trade between Great Britain and Northern Ireland. The region remains part of the EU single market for goods.Von der Leyen said the talks were “very constructive” but were ongoing, adding that she had a “very trusted and excellent relationship” with Sunak.Eurosceptic Tory MPs in the European Research Group and the DUP want to remove the internal trade border within the UK at Irish Sea ports. Eurosceptic Conservatives also want to end the jurisdiction of the European Court of Justice in Northern Ireland.Frost claimed Sunak was negotiating with the EU “with a weaker hand” than necessary. In a foreword to a report by Policy Exchange, a think-tank, Frost said Sunak had removed a negotiating tool with Brussels by “effectively abandoning” the government’s Northern Ireland protocol bill, which would unilaterally rewrite that part of the Brexit deal.Several people close to the UK-EU negotiations said the bloc had agreed in principle to a system of “red and green lanes” to reduce checks on goods moving from Great Britain to Northern Ireland, but that talks were continuing regarding the scope of the arrangements. Goods crossing the Irish Sea and intended for sale on UK territory in Northern Ireland would pass through a green lane with reduced physical checks, backed by real-time customs data. Goods destined for the Republic of Ireland and the EU would enter via a red lane and face full customs and regulatory checks. Some British officials have indicated the UK could be prepared to accept a continuing but reduced role for the ECJ in Northern Ireland. But Downing Street rejected reports that disputes could be heard in Northern Ireland courts first, before possibly being referred up to Luxembourg.In its push for a major overhaul of Northern Ireland’s post-Brexit trading arrangements, the DUP has blocked a resumption of the region’s devolved government since elections in May last year.Sir Jeffrey Donaldson, DUP leader, stuck to his demand for “arrangements that reinstate NI’s place in the UK internal market and respect our constitutional position”, writing on Twitter that London and Brussels “know that political progress” needed unionist support.Just as Sunak has to contend with demands from Eurosceptic Tories, the DUP is under pressure from its hardline rival, the Traditional Unionist Voice.Additional reporting by Jasmine Cameron-Chileshe in London More