Aurelia Butler

Data from Refinitiv Lipper showed U.S. equity funds’ net assets shrank by $2.1 trillion to $9.2 trillion in the quarter ended June, the biggest quarterly drop ever. GRAPHIC: U.S. equity funds’ net assets declined by over $2 trillion in the second quarter https://graphics.reuters.com/GLOBAL-MARKETS/gdvzylmnypw/chart.png The decliners were led by Vanguard Total Stock Market Index Fund;Inst + and SPDR S&P 500 ETF Trust (ASX:SPY) which lost $77.5 billion and $70.5 billion of their net assets respectively, while Vanguard 500 Index Fund;Admiral gave up $69.3 billion. GRAPHIC: Top 10 U.S. equity funds which faced biggest decline in net assets in the second quarter of 2022- https://graphics.reuters.com/GLOBAL-MARKETS/lgpdwzogovo/chart.png The tech-heavy Nasdaq Composite and the broader S&P 500 Composite index declined 22.4% and 16.45% respectively in the second quarter, marking their biggest January-June percentage drop since the financial crisis. U.S. equity mutual funds also registered an average fall of 15.3% in their net assets values between April and June this year.The Federal Reserve has already lifted interest rates three times this year, and is expected to do another 75 basis points later this month.Those expectations of aggressive rate hikes have given rise to fears of a global recession as corporates are hit by higher borrowing costs and lower profit margins.Goldman Sachs (NYSE:GS) said in a note a recession could cause the S&P 500 index to fall by 19% to 3,150 by the end of 2022, and a sharp contraction in the price-earnings ratio. “This peak to trough price decline of 34% would be slightly more severe than the historical average recession decline of 30%.”The weekly data from Lipper showed U.S. equity funds witnessed outflows for the third week in a row in the week ended July 13. More

JERUSALEM (Reuters) – All six rate setters at the Bank of Israel supported raising the benchmark interest rate by 0.5 point to 1.25% at their July 4 meeting in a move that escalated a battle against rising inflation, the central bank’s minutes showed on Monday.The hike, which had been expected, was the third straight rate rise since April and the tightening cycle is expected to last into next year, aimed at curbing increasing price pressures.”The Committee members’ assessment was that the Israeli economy is recording strong growth, accompanied by a tight labour market and an increase in the inflation environment in Israel and worldwide,” the minutes said.It said that the Monetary Policy Committee (MPC) decided that “conditions support a continued process of increasing the interest rate”, with its pace dependent on future economic and inflation data.At the same time, the bank cited sharp U.S. rate hikes and the start of tightening in Europe.The next rate decision is slated for Aug. 22. Economists project another half-point rise and at least a 2.75% interest rate by next year.Inflation at the time of the decision had reached a 4.1% annual rate. In June, it gained to a 14-year high of 4.4% — above an official 1-3% target but half the level of the United States and Euro bloc.Policymakers blamed much of the inflation spike on supply chain disruptions, gains in oil and other commodities prices and a weaker shekel, as well as rising domestic demand and a full-employment economy with wage pressures in most private sector industries. The jobless rate stood at 3.4% in June, official data showed on Monday.The central bank expects a 4.5% inflation rate in 2022, easing to 2.4% in 2023.”Committee members were of the view that at the current time, the risks of inflation are contingent on global developments, particularly in Eastern Europe, and on domestic factors such as increases in wages,” the minutes said.After an 8.2% spurt in 2021, Israel’s economy is forecast to grow 5% this year. The central bank expressed some concern of an adverse impact to Israel’s high-tech sector, a main growth driver, but said that unlike the crash in 2000, “today’s high tech industry is more dispersed, entrenched, and has access to sources of financing.” More

Michael Saunders, one of nine members of the interest rate-setting Monetary Policy Committee, said the foundations of Britain’s monetary policy framework were best left untouched by candidates to lead the Conservative Party.Foreign Secretary Liz Truss, one of the front-runners to succeed Boris Johnson, at the weekend said she would “set a clear direction of travel” on monetary policy.”The government very clearly does not set the direction of travel for monetary policy. That’s set by the independent MPC in order to achieve the 2% inflation target…and that’s fundamental to the UK’s framework,” Saunders told the audience at a Resolution Foundation event in London.”There’s a debate always about will interest rates go up or down. But the foundations of the UK monetary policy framework, I think, are really important and best left untouched.”Saunders said Britain’s monetary policy credibility was at stake.”The MPC’s ability to loosen monetary policy promptly and effectively during the recession of 2008-09 and during the pandemic… rests on the credibility of that policy framework.”Without that credibility, the BoE’s attempts to stimulate the economy would have been less effective, Saunders said in a question-and-answer session after a speech in which he said interest rates could top 2% in a year.It is rare for rate-setters to criticise politicians although in 2016, then-governor Mark Carney said he would not “take instruction” from politicians after the prime minister at the time, Theresa May, said the BoE’s policies had “bad side-effects” and would have to change. More

Investing.com — The global relief rally continues on rising hopes that the Fed won’t get even more aggressive when it meets next week. China’s regulators tell banks to open the credit taps to developers to head off the damage from a homebuyers’ payment boycott. Bank of America, Goldman Sachs and IBM all report earnings. Europe’s misery is compounded by wildfires and a debilitating heatwave, and oil prices rise as President Joe Biden’s visit to Saudi Arabia fails to generate an immediate response. Here’s what you need to know in financial markets on Monday, July 18.1. Relief rally continues on conviction Fed will lift only 75 bps next weekThe global risk rally continued after Friday’s economic data and a Wall Street Journal report strengthened belief that the Federal Reserve won’t tighten monetary policy any more aggressively than it already has.U.S. markets had triggered a global rally on Friday after the University of Michigan’s consumer sentiment index suggested that the Fed is winning the battle to stop expectations of continued high inflation becoming entrenched. The WSJ, meanwhile, reported that Fed officials are leaning toward a rate hike of only 75 basis points next week, rather than 100 basis points that markets had started to price in after the shock of the June inflation report.That improvement in risk sentiment is being felt both in world equity and bond markets and in cryptocurrency, where Bitcoin leaped back above $22,000 for the first time in nearly two weeks.2. China orders banks to lend to developersChina’s authorities took measures to head off a revolt by homebuyers, who are refusing to pay their mortgages in protest of developers’ failure to deliver presold apartments.China’s bank regulator ordered lenders to give credit to eligible property developers for the completion of unfinished homes, the biggest relaxation of lending restrictions that were imposed nearly a year ago. The central bank’s cap on real estate loans last year had been a major factor behind the ensuing wave of defaults in a sector that counts for 20% of Chinese GDP.The mortgage boycott, which had spread like wildfire last week, threatens to dry up one of the last remaining sources of liquidity for the sector, with potentially severe consequences for banks that are heavily exposed to it.3. Stocks set to open higher; bank earnings in focus again, IBM due lateU.S. stock markets are set to open higher, with the focus firmly on an earnings season that will gather momentum this week.By 06:20 AM ET (1020 GMT), Dow Jones futures were up 261 points or 0.8%, while S&P 500 Futures were up 0.9%, and Nasdaq 100 futures were up 1.1%.The big earnings numbers today will come from Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), and Charles Schwab (NYSE:SCHW) before the opening, while IBM (NYSE:IBM) headlines after the bell.Elsewhere, the National Association of Homebuilders’ survey of the real estate market is due. The NAHB’s main index of activity fell to its lowest in nearly two years last month, a sign that one of the sectors that have caused the Fed most concern in recent months is cooling.4. Heatwave adds to Europe’s miseryEurope’s many crises show no sign of improving, and tempers aren’t likely to be improved by record temperatures around the continent. The U.K. will register 40 degrees Celsius for the first time ever, while wildfires have ravaged Portugal, Spain, France, and Greece over the weekend.The extreme heat and the lack of water for hydroelectricity are adding fresh strains to electricity grids, while energy security more broadly remains in question as Russian gas supplies remain severely and artificially restricted.German energy giant Uniper (ETR:UN01) said it had drawn down the last 2 billion euros of its emergency credit facility with state-backed development bank KfW, exhausting one of the sources of liquidity left to it as its talks over a full bailout continue. In Italy meanwhile, Prime Minister Mario Draghi appears no closer to resolving the standoff with the country’s political parties that led him to offer his resignation last week.5. Oil rises as Saudi Arabia snubs BidenCrude oil prices rose after President Joe Biden’s visit to Saudi Arabia failed to bring about any immediate increase in oil supply from the Desert Kingdom – even though Saudi officials had flagged that this would be the case in advance.The market was disappointed by comments from Saudi Arabia’s foreign minister, Prince Faisal bin Farhan Al Saud, who said a U.S.-Arab summit on Saturday hadn’t discussed oil and that the OPEC+ forum was still the vehicle through which the kingdom carried out its oil output policy.By 06:30 AM ET, U.S. crude prices were up 1.9% at $96.39 a barrel, while Brent was up 2.0% at $103.17 a barrel. More