Aurelia Butler

Investing.com — The Fed is set to raise interest rates by another 25 basis points, with all eyes on how chair Jerome Powell responds later to speculation on a cut later this year. Inflation in the euro zone slows sharply in January, but the ECB is still expected to hike by 50 basis points on Thursday. Snap slumps after predicting its first-ever drop in quarterly revenue, while Facebook owner Meta – another social media company under pressure from weaker sales growth in recent quarters – reports after the bell. OPEC is expected to leave its output quotas for March unchanged when it meets with Russia and other partners, but there’s another big rise in U.S. inventories. Here’s what you need to know in financial markets on Wednesday, February 1st.1. Fed decision dayThe Federal Reserve is set to raise the target range for Fed Funds by 25 basis points to 4.50%-4.75% when its two-day policy meeting ends. The statement is due at 14:00 ET (19:00 GMT), with Chair Jerome Powell’s press conference starting half an hour later.Powell is expected to stress that the central bank is still tightening policy, in contrast to some market participants who have already decided that it will have to reverse course and start cutting rates later this year as the economy stalls.The dollar, which hasn’t made a new low in two weeks after pricing a dovish pivot by the Fed over the turn of the year, is seen by many as at risk of a snapback if Powell talks too bluntly about the need to keep rates high until inflation is dead.2. ISM manufacturing, JOLTS, and ADPIt’s a busy day for U.S. economic data too, with the Institute for Supply Management’s manufacturing index and the Labor Department’s Job Openings and Labor Turnover Survey for December both due at 10:00 ET.Regional surveys from the Philadelphia and New York Federal Reserve banks this month were both pretty dismal, while the Chicago Fed’s index fell by the most in nearly two years, so it will be a surprise if the ISM index avoids falling further into contraction territory.On the other hand, the JOLTS survey has repeatedly shown vacancies running high at historical levels, making it easier for the swelling ranks of those laid off by tech companies (PayPal (NASDAQ:PYPL) added 2,000 job cuts to the list on Tuesday) to find new work and limiting the risk of a recession.ADP will also release its monthly hiring survey for January at 08:15 ET, while weekly data for mortgage applications and rates are due at 07:00 ET.3. Stocks set to drift ahead of Fed decision; Snap, Meta in spotlight U.S. stock markets are set to open lower, giving up some of the gains made after a mixed round of earnings on Tuesday. The appetite for big bets ahead of the Fed is likely to be subdued, to say the least.By 07:20 ET, Dow Jones futures were down 114 points, or 0.3%, while S&P 500 futures were down 0.2%, and Nasdaq 100 futures were flat.The early focus is likely to be on Snap (NYSE:SNAP), which slumped 14% in after-hours trading after predicting its first quarterly drop in revenue. That also weighed in premarket on Pinterest (NYSE:PINS) and Meta Platforms (NASDAQ:META), the latter of which reports after the close. T-Mobile (NASDAQ:TMUS), Thermo Fisher (NYSE:TMO), and Altria (NYSE:MO) head the list of early reporters.Mondelez (NASDAQ:MDLZ) and Advanced Micro Devices (NASDAQ:AMD) are set for stronger openings after more encouraging updates late on Tuesday. Earnings from Big Pharma in Europe overnight have failed to move the dial, with neither Novo Nordisk (NYSE:NVO), Novartis (NYSE:NVS), nor GlaxoSmithKline (NYSE:GSK) ADRs moving much in premarket.4. Euro zone inflation falls faster than expected – or does it?Inflation in the euro zone is on the retreat too. Or maybe not. Eurostat announced earlier that consumer prices fell 0.4% in January, bringing the headline CPI rate down to 8.5%, its lowest since May. There was an even bigger 0.8% decline in core consumer prices.However, figures from Germany – the region’s largest economy – weren’t included due to technical issues at the country’s statistics office, Destatis.The figures haven’t changed expectations for a 50 basis point hike in the ECB’s key rates at Thursday’s policy meeting, but may make President Christine Lagarde’s guidance a little more nuanced than in December, where she surprised many by signaling a shift upwards in the ECB’s rate path.5. OPEC+ set to leave quotas unchanged as U.S. production dropsThe Organization of Petroleum Exporting Countries meets with Russia and other exporters to announce its production targets for March, and it’s set to be a snooze. Newswire reports indicate that there’s no willingness to change course given that most OPEC members’ budgets will balance at current prices (although Russia’s won’t). The U.S. government said on Tuesday that U.S. production fell in November as upstream companies focused on generating cash and paying down debt rather than investing in more drilling. However, more up-to-date information suggests that demand is weakening too: the American Petroleum Institute said crude inventories rose over 6 million barrels last week, taking the cumulative rise over the last five weeks to 35 million barrels. Government inventory data are due at 10:30 ET.By 07:20 ET, U.S. crude futures were up 0.7% at $79.41 a barrel, while Brent was up 0.4% at $85.80. More

NEW DELHI (Reuters) – India’s government on Wednesday unveiled a $550 billion budget for the next fiscal year that starts on April 1, with a plan for record capital spending while reining in the fiscal deficit.Prime Minister Narendra Modi’s party, which faces elections in key states this year and a national vote in 2024, has been under pressure to create jobs in the country of 1.4 billion where many have struggled to gain employment and a decent wage.Below are some key figures in graphics from the budget presented by Finance Minister Nirmala Sitharaman.WHERE WILL THE MONEY COME FROM TO FUND SPENDING?The government is targeting revenue receipts growth of 12% to 26.32 trillion rupees.Graphic: Where will the money come from? – https://www.reuters.com/graphics/INDIA-BUDGET/zjpqjweqwvx/chart.pngTAX REVENUEFor the year, the government is targeting 11.4% growth in net tax revenue to 23.3 trillion rupees. Graphic: India’s tax revenue- https://www.reuters.com/graphics/INDIA-BUDGET/akveqmqdkvr/chart.pngMARKET BORROWINGGross market borrowing is estimated at 15.43 trillion rupees ($189 billion), while net borrowing is seen at 11.81 trillion rupees.The net borrowing excludes 781 billion rupees of bonds given to states on account of compensation for a shortfall in goods and services tax, reducing the repayments due next year.New Delhi also aims to switch bonds worth 1 trillion rupees next year, after switching bonds worth 1.03 trillion rupees this year. Graphic: India’s gross market borrowings India’s gross market borrowings- https://www.reuters.com/graphics/INDIA-BUDGET/zjpqjwjgnvx/chart.pngDIVESTMENT RECEIPTSThe government expects to raise 510 billion rupees from stake sales in various state-run companies.Graphic: India disinvestment receipt- https://www.reuters.com/graphics/INDIA-BUDGET/lgvdknkdmpo/chart.pngSPENDING SURGESThe government raised its spending target by 7.5% to 45.03 trillion rupees for 2023/24. Graphic: Where the money will go?- https://www.reuters.com/graphics/INDIA-BUDGET/znvnbkbwmvl/chart.pngCAPITAL EXPENDITUREThe government will spend 10 trillion rupees on longer-term capital expenditure in 2023/24, extending a strategy adopted to revive growth in the aftermath of the COVID-19 pandemic.The allocation is higher than the 7.5 trillion rupees budgeted for the current year. The year-on-year increase of 33% follows last year’s 35% jump. Graphic: India’s capital expenditure to increase by 33%- https://www.reuters.com/graphics/INDIA-BUDGET/akveqmqydvr/chart.pngMAJOR SUBSIDIESThe government cut major subsidies by 28% to 3.75 trillion rupees for the next fiscal year. Graphic: India budget cuts expenditure on major subsidies- https://www.reuters.com/graphics/INDIA-BUDGET/klvygdgxgvg/chart.pngFISCAL DEFICITThe government will target a budget deficit of 5.9% of GDP for 2023/24, down from this year’s 6.4%. A Reuters poll had pegged the budget gap at 6% of GDP. Graphic: India’s fiscal deficit India’s fiscal deficit- https://www.reuters.com/graphics/INDIA-BUDGET/zdpxdndwwpx/chart.png ($1 = 81.8150 Indian rupees) More

WASHINGTON (Reuters) – Republicans who control the U.S. House of Representatives say any increase in the United States’ $31.4 trillion debt ceiling should be paired with spending cuts, but so far are not unified on any specific demands.Here are a few proposals Republicans have floated ahead of House Speaker Kevin McCarthy’s Wednesday meeting with Democratic President Joe Biden:NO CUTS TO SOCIAL SECURITY AND MEDICARE McCarthy has said that Republicans will not try to scale back the two largest benefit programs: Social Security, which provides payments to retirees and the disabled; and Medicare, the health insurance program for seniors. That is a shift from previous budget negotiations, when Republicans suggested raising the retirement age and partially privatizing Medicare. It also places almost one-third of the budget off limits. Social Security accounted for 17% of federal spending in the 2021 fiscal year, while Medicare accounted for 13%, according to the nonpartisan Congressional Budget Office.DO NOT CUT DEFENSERepublicans have traditionally supported robust military spending, and some House lawmakers including Kay Granger and Tom Cole, the heads of the powerful Appropriations and Rules committees, have said that defense cuts should be off the table. That would leave another 11% of the federal budget off limits.ROLL BACK SPENDING TO 2022McCarthy has proposed capping annual “discretionary” spending on agencies such as the Defense Department and the Food and Drug Administration at the levels that were in place in the fiscal year that ended Sept. 30, 2022: $782 billion for defense, and $689 billion for domestic programs.That would amount to a cut of 9% for defense and 7% percent for non-defense programs from the levels in place now, according to CBO estimates. Those cuts would broaden in the years to come as spending would not keep pace with inflation, population growth or the size of the economy.These cuts would not apply to benefit programs, like federal workers’ pensions and unemployment insurance.DEEPER CUTS FOR DOMESTIC SPENDINGChip Roy, a leader of the far-right House Freedom Caucus, has called for keeping defense spending at current levels and cutting non-defense spending to $661 billion, the level in place in the 2019 fiscal year. As with McCarthy’s proposal, that would effectively amount to deeper cuts in the years to come.HOLD SPENDING IN LINE WITH INFLATIONDon Bacon, a moderate Republican, has called for keeping spending growth in line with inflation, rather than pushing for cuts that likely will not win support in the Democratic-controlled Senate.TIE IT TO THE ECONOMYBrian Fitzpatrick, another moderate, advocates a bipartisan proposal that would change the debt ceiling from a fixed dollar amount to a percentage of national output. That would force budget cuts if federal borrowing exceeded a set share of the economy, but he has not said what that limit should be. Washington’s debts are currently equivalent to about 125% of one year of production across the U.S. economy.ANNUAL REDUCTIONSNancy Mace, another moderate, has called for the government to reduce its spending by a certain percentage every year, though she has not provided details.PAY SOME DEBTS, BUT NOT OTHERSSome conservatives have said that the Treasury Department could “prioritize” some payments over others when the debt limit is reached. Under this idea, Treasury would make interest payments to bondholders to avoid roiling financial markets, and perhaps pay the salaries of the military but not civilian federal workers. Treasury Secretary Janet Yellen has said her department does not have the technical capacity to pull this off.RAISE THE DEBT CEILING WITH NO CUTSThis option, favored by Biden and his Democrats, has received backing from some Republicans, notably Patrick McHenry, who chairs the Financial Services Committee. In December, he said he believes that serious discussions about cutting spending are needed but he opposed having those talks in the context of the debt limit debate.NO DEBT CEILING INCREASE AT ALLSome hardliners, such as Tim Burchett and Andy Biggs, have said they will vote against raising the debt ceiling, no matter what provisions are attached. That could make it difficult for McCarthy to round up support for any compromise that can win support from Biden and the Democratic-controlled Senate. More

The battle lines have been drawn ahead of the first meeting today between President Joe Biden and House Speaker Kevin McCarthy to discuss raising the US debt ceiling and a looming default deadline.Republicans have painted Biden as a refusenik who has no interest in negotiations while Democrats demand that McCarthy and his party lay out the spending cuts they want to make to bring down the deficit.A memo released yesterday by Biden’s economic advisers said the president would pose two questions to McCarthy at today’s meeting. First, according to the memo, the president will ask the Speaker to “commit to the bedrock principle that the United States will never default on its financial obligations”. Second, Biden will call on Republicans to publish a budget blueprint laying out their plans to reduce the federal deficit. The Speaker responded on Twitter by saying: “Mr. President: I received your staff’s memo. I’m not interested in political games. I’m coming to negotiate for the American people.”Janet Yellen warned last month that the Treasury had begun to take “extraordinary measures” to cut spending after the US hit its $31.4tn borrow limit. Yellen also said the US ran the risk of a damaging debt default starting in early June if the dispute between the White House and Congress was not resolved.Explainer: The US hit the debt ceiling. What happens next?Five more stories in the news1. Eurozone inflation slows Annual inflation in countries that use the euro slowed to 8.5 per cent, its lowest level since May, in the latest sign that price rises are slowing in most advanced economies. The fall in consumer prices, down from 9.2 per cent in December, comes a day before the European Central Bank is widely expected to increase its deposit interest rate by 50 basis points to 2.5 per cent.2. US says Russia is not complying with nuclear arms treaty The US has determined Russia is not complying with its obligations under the last remaining nuclear arms control treaty between the two countries, officials at the US state department said yesterday. A report sent to Congress stated that Russia violated the New Start treaty by failing to allow required inspections and refusing to participate in compliance meetings. 3. Sunak faces crunch decision on N Ireland UK prime minister Rishi Sunak is facing a big test of his authority as a deal to resolve the post-Brexit trade dispute in Northern Ireland is “getting close”, according to one person briefed on the talks. Sunak will have to sell the deal to pro-UK unionist politicians in the region and Eurosceptic MPs in his own party.4. Universal Music in talks to overhaul streaming model The world’s largest music company is in talks with big streaming platforms to overhaul the industry’s economics and direct more money towards artists, according to people familiar with the matter. The shake-up, which stands to revolutionise the way musicians make money, comes amid a rise in online bots and Spotify’s success.5. US and India launch new tech and defence initiatives New technology, space and defence initiatives between the two countries reflect an effort to counter China in the Indo-Pacific, wean New Delhi off its reliance on Russia for weapons and boost India’s homegrown technology capacity. The day ahead Investors await outcome of Fed meeting European stocks and US futures were steady with the US central bank poised to lift borrowing costs by a quarter percentage point to a range of 4.5-4.75 per cent — the highest level since the start of the financial crisis in September 2007.Opinion: With the entire credibility of central banking on the line, the Fed’s focus needs to be on fighting inflation, argues Richard Bernstein.Economic data Labor department data is expected to show that the number of job openings slipped in December compared with the previous month. The Institute for Supply Management will also publish its manufacturing report. Corporate results Facebook-owner Meta reports its latest company results. There are also earnings from the maker of Marlboro cigarettes in the US, Altria, as well as Peloton and T-Mobile.What else we’re readingCan the EU keep up with the US on green subsidies? The huge incentives in the Inflation Reduction Act are provoking a debate in Europe with ramifications for the entire single market. As the US and China pour hundreds of billions of dollars into green industries through state funding, some say the EU should go the same way. Others argue more fundamental problems need to be addressed.

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McDonald’s court ruling turns up heat on corporate executives Last week’s court decision involving the former global chief people officer at McDonald’s, who was fired following allegations of sexual misconduct in 2019, could become a cautionary tale for companies across the US. Hindenburg vs Adani: claim and counterclaim Gautam Adani, one of the world’s richest men, has faced scrutiny since short seller Hindenburg Research accused his conglomerate of engaging in stock price manipulation and accounting fraud. The Financial Times details the allegations and the response.Debt woes mount for US healthcare sector A fifth of America’s distressed bonds were issued by healthcare companies, according to an Ice Data Services index. The indications of financial trouble highlight how the sprawling healthcare industry in the US is under pressure from rising interest rates and a slowing economy after a frenzy of private equity deals.Is the IMF right about the UK economy? The fund consigned Britain to the economic doghouse this week when it singled out the UK as the only leading economy likely to contract this year. Is the forecast correct? And if so, why is the UK economy growing so slowly, and what can be done about it?Saudi Arabia’s ambitious tourist push Saudi Arabia wants to lure 100mn visitors annually by the end of the decade. Despite its ambitions, there are doubts about whether the deeply conservative kingdom, where alcohol is forbidden and unmarried couples theoretically face prosecution, can compete with the party vibe of Dubai or the mix of beaches and history in Egypt.Take a break from the newsMercedes-Benz opened the doors to the world’s most extraordinary car collection and allowed Peter Aspden an extremely rare peak inside. “I was once allowed five minutes on my own in the Sistine Chapel, and this room recalls a similar sensation of wanting to look in detail at everything around me,” Peter writes.

© Felix Brüggemann More