Economy

NEW YORK (Reuters) – Wall Street’s major indexes closed lower on Friday while U.S. Treasury prices climbed as investors’ fears about the prospects for a global recession intensified while they also prepared for a massive U.S. interest rate hike from the Federal Reserve.Economic fears were amped up by a FedEx Corp (NYSE:FDX) revelation late on Thursday that a global demand slowdown had accelerated at the end of August and was on pace to worsen in the November quarter, prompting the delivery company to withdraw its financial forecasts.The warning came at a time when investors were already jittery ahead of a Fed meeting after which the central bank is widely expected to raise rates by 75 basis points. Some traders are betting on a 100 basis points increase, according to CME Group’s (NASDAQ:CME) FedWatch tool. The Bank of Japan and Bank of England are also due to meet next week.”Today is a continuation of what we’ve seen this week, the volatility around the expectations for what the Federal Reserve may do, with 75 basis points baked in and 100 basis points a possibility,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Then you have the dismal report out of FedEx, which some people consider a bellwether not only for consumer spending but also the broad economy.” The stock market is down on a “growing concern that’s really starting to escalate that the Fed is going to make a mistake and oveovertightensaid Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.Paulsen said the FedEx warning had led investors to ask, “what if the Fed’s going to tighten right into a recession.”But Treasury yields retreated after the FedEx warning revived the notion that slower growth will help the Federal Reserve tame inflation.After increasing to 3.924%, its highest level since 2007, earlier in the day, the two-year U.S. Treasury yield, a bellwether for interest rate expectations, fell. The yield curve inversion between the two-year and 10-year notes – seen as a recession harbinger – widened further before returning to Thursday’s closing level.The two-year’s yield last fell 0.4 basis points to 3.869% and the 10-year yield slid 0.6 basis points to 3.453%. “The Fed will view the FedEx report as an indication that they are on the right path, rather than a warning that the Fed may be moving too aggressively,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey. [.N]In equities, the Dow Jones Industrial Average fell 139.4 points, or 0.45%, to 30,822.42; the S&P 500 lost 28.02 points, or 0.72%, to 3,873.33; and the Nasdaq Composite dropped 103.95 points, or 0.9%, to 11,448.40.The pan-European STOXX 600 index had lost 1.58% and MSCI’s gauge of stocks across the globe shed 0.96%.Earlier in the day, the European Central Bank’s vice president said an economic slowdown in the euro zone would not be enough to control inflation and the bank will have to keep raising rates.The dollar index fell 0.1%, with the euro up 0.09% to $1.0008.The Japanese yen strengthened 0.40% versus the greenback at 142.94 per dollar, while Sterling was last trading at $1.142, down 0.38% on the day.Analysts and fund managers said the yen could hurtle toward three-decade lows before year-end.Oil prices rose slightly on Friday as a spill at Iraq’s Basra terminal appeared likely to constrain crude supply, but the commodity remained down for the week on fears rate increases would curb global economic growth and fuel demand.[O/R]U.S. crude settled up 1 cent at $85.11 per barrel while Brent crude settled up 51 cents at $91.35. Gold prices rose on Friday as the dollar stalled, but gains in the greenback over the week and expectations of a sizeable U.S. rate hike kept bullion well below the key $1,700 mark and en route to its weakest week in four. Spot gold added 0.6% to $1,674.17 an ounce. U.S. gold futures gained 0.34% to $1,671.70 an ounce. More

TORONTO (Reuters) -The Canadian dollar weakened to its lowest level in nearly two years against the greenback on Friday and Canada’s stock market fell as investors grew cautious ahead of domestic inflation data and a Federal Reserve interest rate decision next week.The Canadian dollar was trading 0.3% lower at 1.3270 per U.S. dollar, or 75.36 U.S. cents, after touching its weakest since November 2020 at 1.3307. For the week, the loonie was down 1.8%, its biggest weekly decline since June.It follows hotter-than-expected U.S. inflation data on Tuesday that spooked financial markets globally and pushed the U.S. dollar sharply higher against a basket of major currencies.”The dollar is an unstoppable juggernaut right now, with higher-than-expected inflation and an ever-more-hawkish Federal Reserve sucking capital into the United States and inflicting damage on the rest of the world economy,” said Karl Schamotta, chief market strategist at Corpay.Money markets expect the Fed to hike interest rates by three-quarters of a percentage point next Wednesday.The World Bank said on Thursday that the global economy might be inching toward a recession.Canada is a major exporter of commodities, including oil, so the loonie tends to be particularly sensitive to the global economic outlook.In a possible signal that investors expect a recession, the inversion of Canada’s yield curve grew larger.The 10-year yield fell 68 basis points below the 2-year yield after the latter touched its highest intraday level since December 2007 at 3.870%.Canada’s inflation data for August is due next Tuesday, with all eyes on measures of underlying price pressures.”Market participants, burnt by Tuesday’s U.S. (data)surprise … are bracing themselves for a range of outcomes,” Schamotta said.The cautious mood spilled over to the stock market, with both Wall Street and the Toronto stock market trading lower.”The markets are in a bit of a risk-off mode,” said Greg Taylor, a portfolio manager at Purpose Investments. “The really big fear is that we’re going to start to see some earnings warnings from companies as the economy starts to slow down.”The Toronto Stock Exchange’s S&P/TSX composite index ended down 0.9% at 19,385.88, its lowest closing level since Sept. 7, including declines for technology, energy and financial shares.For the week, the index lost 2%. More

It was, as one economist put it, “a brutal day across risky markets” when on September 15 the S&P 500 shed a massive 4.7 per cent — its biggest one-day decline in seven years. “An ugly day in stocks,” he added. “Locusts” were picking off victims across global stocks, another market watcher agreed.The verdict on the front page of this newspaper was blunt. “Day of reckoning on Wall Street”, the headline declared, complete with a large picture of despondent-looking bankers in Canary Wharf.If you think something feels slightly off here, you are right. That September 15 shock to markets was in 2008, not 2022. Those despondent bankers were standing outside Lehman Brothers’ European headquarters and Bank of America had just swallowed Merrill Lynch as the global financial system frayed at the seams.Fast forward almost exactly 14 years and history is not repeating, but it is certainly rhyming.This time around, on September 13 the S&P 500 benchmark index of US stocks dropped by more than 4 per cent — a fall on a scale not seen since the Covid crisis began more than two years ago. The Nasdaq Composite fared even worse, losing 5.2 per cent. Bizarre as it seems, the post-Covid recovery phase of 2022 is churning out moments in the market as ugly as in the week Lehman Brothers told shocked staff “it’s over”. Even more bizarre: somehow, we have become accustomed to the blows.Perhaps that is because the investors have suffered a fainting fit every time this year that US inflation data has turned out to be surprisingly strong. This week was no exception. US consumer price inflation rocked in at 8.3 per cent for August, according to figures released by the Bureau of Labor Statistics on Tuesday. That is a little better than the 8.5 per cent figure for July. The problem is that analysts and investors had been expecting a tamer 8.1 per cent pace, particularly given the rapid pullback in petrol prices. The rate also picked up 0.1 per cent in August from the previous month.Yet again, this has torpedoed the long wished-for pivot from the US Federal Reserve — the mythical moment when it decides to dial down the interest rate rises that have been pummeling asset prices this year. Yet again, the hopeful pundits are disappointed and the beatings will continue until morale improves.Traders now see a reasonable chance that the Fed will lift rates by a blockbuster full percentage point at next week’s meeting. Anything less than three-quarters of a point would be a huge surprise.BlackRock rather gnomically compares this situation to Knut, the polar bear. For those who had forgotten the story of Knut (myself included), the investment house reminds us that the newborn cub was rejected by his mother at Berlin Zoo in 2006.“A zookeeper stepped in to raise him by bottle. But some argued it would be better for the bear to be killed than raised by humans,” wrote Jean Boivin and Alex Brazier. “A media frenzy and widespread protests followed, ultimately saving Knut’s life. To our mind, central bankers seem to have a bit of a ‘let the bear die’ mentality right now (for bear, read the economy). It seems they would rather just let the economy die to avoid any risk of inflation expectations de-anchoring.”Crudely, where the economy goes, your portfolio probably follows. It might be time to find a friendly zookeeper, or some sympathetic protesters.The thing is, as all but the very youngest polar bears are surely aware, this is not new. So why does the market convulse every time it receives a reminder? “It’s the attempted triumph of hope over experience,” says Trevor Greetham, head of multi-asset at Royal London Asset Management. “If you’d said to any of us three years ago that we would be looking at 22 per cent inflation in the UK if it wasn’t for government action on energy prices, we would not have believed you. It’s a massive regime change. People still want inflation to be transitory and temporary.” It is not.In addition to 2008-style lurches lower in stocks, this all generates huge swings in the dollar and in the typically more sober government bond market. Some analysts fret that longstanding structural flaws in the debt market are becoming dangerous. The BofA has described cracks in US Treasuries as “one of the greatest threats to global financial stability today, potentially worse than the housing bubble of 2004-2007”. If ripples are left unchecked, quantitative tightening — the process of the Fed cutting back its crisis-era balance sheet — could prove to be the factor that tips this market over the edge.We should all hope not and a lot of these technicalities are white noise to non-specialists. But Greetham puts it delightfully simply: “Whether it’s QT or just an almighty wrongfooting of central banks by the Covid crisis, it’s the same thing.” Hindsight is a beautiful thing, but it is clearer by the day that markets were overly lavishly supported by central banks for too long. Correcting this imbalance will keep on sparking the ugly declines and head-fake bear market rallies that characterised the crisis of 2008-2009. [email protected] More

LONDON (Reuters) – JPMorgan Chase & Co (NYSE:JPM) has reduced lending to China’s Tsingshan, one of the world’s top nickel producers, while also paring back credit to other customers in Europe and Asia after a review of risk, sources close to the situation said.Tsingshan Holding Group was at the centre of a crisis on the London Metal Exchange in March when nickel prices more than doubled in a matter of hours, forcing the LME to halt trading and cancel billions of dollars in deals. Tsingshan has approached at least two LME brokers to become a client or increase credit lines after JPMorgan’s actions, two sources with knowledge of the matter said. JPMorgan is one of the biggest banks in metals and its paring back of finance is sending a chill throughout the sector, two of the sources said.JPMorgan has curtailed credit to several customers in Asia and Europe or given them notice that it will do so by the end of the year, said five sources, who declined to be named because they were not authorised to speak to the media.JPMorgan declined to comment and Tsingshan was not immediately available for comment via phone or email.In March, JPMorgan had the largest exposure of about 10 banks and brokers to large short positions, or bets on prices falling, held by Tsingshan.Those positions, much of them in over the counter (OTC) derivatives, were blamed for the wild spike in LME prices on March 8 that were already climbing in the wake of Russia’s invasion of Ukraine. Tsingshan’s short positions spurred billions of dollars of margin calls that threatened to push some banks and brokers into default.During a suspension of trading on the LME, the Chinese company agreed a stand-still deal with its financiers allow it to gradually reduce its positions. In April, JPMorgan made a provision of $120 million for a loss from the nickel crisis, but has not provided an update since then on its losses.RISING INTEREST RATESAggressive interest rate hikes by central banks and fears of a global recession have also weighed on the metals sector more widely, dampening activity and causing participants to reduce risk.“There’s been a general tightening in finance for the metals sector,” said Marc Bailey, chief executive of LME broker Sucden Financial, who declined to comment about JPMorgan and Tsingshan.In the past low interest rates had given rise to cheap credit that was offered by many banks to attract commodities clients, he said.“And now those clients that have been reliant are finding that the cost of credit and access to liquidity is difficult post the war,” he said. “Clients looking for market access are not finding it as easy as before, we’ve definitely been tighter on client terms.”  More

Cardi B gets it! Interest rate is going up in two weeks ,rent is over the top high ,and there’s no inventory on homes …WTF-_-— Cardi B (@iamcardib) September 16, 2022
To be clear, the US interest rate is going up next week, not two weeks from now. Besides that we don’t have too much to add, frankly. We learned this week that rents on primary residences climbed 0.8 per cent from July to August (0.7 per cent with seasonal adjustments). It’s not clear what rising interest rates will do to help that! Or, as Belcalis Marlenis Almánzar Cephus put it in an Instagram Live video last week: “There’s not even inventory!” Mortgage rates did rise above 6 per cent for the first time since 2008 this week, so maybe some Airbnb hustlers will have a tougher time paying financing costs for investment properties in cities.Still, there isn’t much sign the US housing shortage will ease up any time soon, as we wrote Aug 31. And the August rise in primary-residence rents outpaced the increase in owners’ equivalent rent, and the cost of lodging away from home. So Cardi asks: “How are people surviving? I want to know! You know, my family and my friends, they’re so grateful to have me, but it’s just like, yo what happens with people that don’t have a me?!”Cardi Instagram speaking about worldwide inflation and its a effects on working class people pic.twitter.com/88Armyd0t0— GENFKU Kawaii Chitsu (@GEN27FKU) September 10, 2022
She also correctly points out in the video that costs are rising “all over the world, bitch!” She continued: “I get it, I care, but I can’t do shit about it, bitch.” Like we said: She gets it. More

SAO PAULO (Reuters) – Investment banks in Brazil are focusing on debt issuance through the third quarter, an area that kept strong activity even with higher interest rates.Felipe Thut, director at Bradesco BBI, the investment bank controlled by Banco Bradesco SA, expects total local debt issuance to reach around 430 billion reais ($83 billion) this year. Between January and August, issuance rose 30% over the same period last year. “The current volume of debt issued in reais is around double of 2020 levels, even with much higher interest rates than we had at the time”, Thut added.Local fixed income issues represented 96% of capital markets activity in Brazil in August, according to industry group Anbima, even as benchmark interest rate Selic reached 13.75%, up from a record low of 2% in 2020.Equity issuance volume is down 53.5% in dollars this year and M&A deals volume is also 31% lower than the same period a year ago, according to Refinitiv data. Uncertainties related to the presidential election are weighing on deals, as well as volatility in global interest rates.Large local inflows into fixed exchange portfolios are fueling demand for private debt, Thut added. Fixed income funds received net inflows of 309 billion reais ($59 billion) in the 18 months through July.Another factor is this year’s growth higher than expected, making companies issue debt to finance expansion, Thut said. Tax-exempt bonds for infrastructure, real estate or agriculture businesses have lower costs and have been the first choice for companies, approaching 20 billion reais in the first five months of 2022. The executive believes the volume of equity issues, specially initial public offerings, may rise again once it becomes clear when the Brazilian central bank may begin to reduce interest rates. Brazil posted deflation last month as fuel prices fell.So far this year, there were no IPOs in Brazil, but 18 follow-on offerings. Last year there were 78 transactions, including 46 IPOs, according to Refinitiv data. Thut said Bradesco BBI will not make any changes in the team this year, as the bank expects a recovery on equity capital markets on the medium term. ($1 = 5.2037 reais) More

The central bank now expects 2022 growth of 3.0%, compared with 3.1% previously, and 2023 growth of 3.0%, compared with 3.2% previously. It also predicted that annual inflation would rise to 7.8% this year and 3.0% in 2023.This comes after Finance Minister Kurt Burneo last week launched an economic package aimed at lifting the economy at times of a global slowdown and falling copper prices, which are key to the country’s economy.Burneo had earlier in September said Peru could achieve economic growth of 3.9% in 2022, rising to 4.3% in 2023, thanks to the stimulus package, although many of its measures are still awaiting approval from Congress.”There are no magic wands”, central bank chief Julio Velarde told a press conference, saying the bank was still examining the impacts of the government’s stimulus measures.Velarde said the bank was maintaining its 2022 fiscal deficit projection at 1.9% of gross domestic product (GDP) and at 1.8% of GDP next year. Regarding Peru’s key mining sector, Velarde said investment should decline by 3.7% in 2022 and in 2023 this decline should deepen to 16.2%, following the completion of Anglo American (LON:AAL)’s Quellaveco copper project in the south of the country. Peru is the world’s second largest copper producer and its mining exports total around 60% of the South American country’s overall exports. More

The sanctions on Boeing Defense, Space, and Security CEO Ted Colbert and Raytheon Technologies (NYSE:RTX) Corp boss Gregory Hayes are in response to the U.S. State Department approval on Sept. 2 of the sale of military equipment to Taiwan.Those sales include 60 anti-ship missiles and 100 air-to-air missiles, of which the respective principal contractors are Boeing Defense, a division of Boeing Co , and Raytheon. Colbert and Hayes will be sanctioned “in order to protect China’s sovereignty and security interests” said foreign ministry spokesperson Mao Ning citing “their involvement in these arms sales.”Mao did not elaborate on what the sanctions would entail or on how they would be enforced. Neither company sells defense products to China, but both have robust commercial aviation businesses there.U.S. defense procurement rules generally prohibit Chinese-origin content, so sanctions have had no impact on the U.S. military.”The Chinese side once again urges the U.S. government and relevant entities to… stop selling arms to Taiwan and U.S.-Taiwan military contacts.”The Pentagon announced the package in the wake of China’s aggressive military drills around Taiwan following a visit last month by U.S. House of Representatives Speaker Nancy Pelosi, the highest-ranking U.S. official to travel to Taipei in years.China has previously sanctioned Raytheon, Boeing Defense, and unspecified individuals involved in arms sales to Taiwan.A Raytheon spokesman declined to comment. Boeing declined to comment immediately, but on Thursday said it plans to remarket some airplanes that it had earmarked for Chinese airlines as geopolitical tensions have delayed deliveries.In December 2021, China approved the return of Boeing’s 737 MAX to service after it had been grounded following two accidents involving the airliner that killed 346 people.Despite the approval, Chinese airlines have not resumed flying the MAX and have not accepted deliveries of new MAX aircraft. The U.S. government has previously accused the Chinese government of blocking tens of billions of dollars of MAX deliveries to China. Before the MAX was grounded, Boeing was selling a quarter of the planes it built annually to Chinese buyers, its largest customers.Raytheon sells to China through its United Technologies engine business.Friday’s announcement marks the first time Beijing identified and imposed sanctions against individuals from these companies. Beijing considers the self-ruled island of Taiwan a wayward province it has vowed to bring under control, by force if necessary. Taiwan rejects China’s sovereignty claims, saying only its people can decide their future, and vows to defend itself if attacked. More