Economy

NEW YORK (Reuters) – The U.S. dollar extended its gains on Friday, after data showed U.S. employment increased more than expected in May, while the unemployment rate held steady at 3.6%, signs of a tight labor market that could keep the Federal Reserve going with rate hikes.The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was up 0.4%. More

I am allowed to say this because I come from farming stock myself: farmers complain constantly, about everything. Too wet, too dry, too hot, too cold, etc etc. Investors are not so different.The opening months of this year brought an inflation panic. Bonds dropped hard because they are allergic to inflation, which eats in to their (rather skimpy) fixed payouts. Stocks dropped because fund managers decided that the US Federal Reserve would dish out half-point rate rises like sweets at every meeting to try and pull inflation down. The “everything rally” unravelled and left many fund managers with nowhere to hide. The horror!Now, the inflation panic appears to be abating. The new worry in town is of the potential for a serious slowdown in growth or even, in the worst-case scenario, a full-blown global recession. Kindly adjust your grand market narratives accordingly.The thrust here is that monetary policy is a pretty blunt tool. Inflation has soared well above key central banks’ mandated targets, cornering policymakers in to aggressive tightening, with rate rises and with cuts to the huge balance sheets they have racked up with asset purchases since the 2008 crisis, topped up of course in 2020.The problem is that central banks are limited in their ability to tame the type of inflation we are suffering. They cannot end China’s Covid lockdowns, produce microchips or manufacture peace in Ukraine. Unless they can fix that third issue in particular, they are likely unable to pull down energy prices and, by extension, temper workers’ (perfectly reasonable) requests for higher pay.“They want to get inflation down but they know they can’t do anything about the energy part,” says Gareth Colesmith, head of macro research at Insight Investment. “If they are serious about bringing it under control, then they need to do something about the demand for labour, since they can’t do anything about the supply. So you induce a slowdown, and that does bring a risk of tipping into a recession.”A policy error is one way to induce a recession, but not the only one. In any case, economic data releases in the US are now frequently undershooting market expectations. Citi’s US economic surprise index has plunged to its lowest level since September. A “proper” recession — not another quarter of tame contraction driven by technicalities, but a deep and enduring decline — is far from a certainty. It is clearly not what businesses and households want to see after an already testing couple of years, nor is it what policymakers want to engineer.But you can tell the idea is taking root with investors from several angles. The key one is that government bond prices have levelled off after a steep decline, suggesting that not only are inflation expectations coming off the boil, but that investors are bracing for slower growth and even for a slower pace of central bank tightening. The benchmark US 10-year Treasury note was yielding 2.91 per cent on Thursday — high by the standards of the past few years but well down from the peak above 3 per cent seen in early May. Similarly, the dollar has pulled back. But of course, Wall St and Main St are very different beasts. A cooling dollar and lower bond yields are, all things being equal, good for equities. Already, the bounce is pronounced — the S&P 500 benchmark index of US blue-chip stocks has climbed by as much as 9 per cent since its low point on May 20. The MSCI World index is up by a more modest but still impressive 6 per cent. Corporate bonds have also sprung back.The big question, though, is whether the simmering growth scare will be enough to throw the Fed’s tightening off track. Barclays, for one, doubts it. “The Fed is unlikely to blink until inflation expectations are re-anchored for good,” the bank’s analysts wrote in a note to clients. “We think the Fed will want to see evidence of much lower inflation, and/or much tighter financial conditions” before tearing up its plans, it said. “Until then, expect choppy markets to continue.” It added that while hedge funds were big sellers of equities in May, mutual funds, which have pumped some $1.3tn in to the asset class since 2020, have only just started to withdraw. If recession fears stick, “there could be another $350bn of selling equities down the road” from these funds, the Barclays analysts said. David Riley, chief investment strategist at BlueBay Asset Management, also thinks the latest recovery in stocks and other risky assets is most likely to be a blip. “Don’t fight the Fed,” he says. Policymakers actively want to see higher borrowing costs that help to cool some elements of inflation without the central bank having to rush rate rises, he adds. Instead, if markets do keep sailing higher, it might be wise to anticipate rather more hawkish commentary from rate setters. “I’m sceptical how sustained this mini rally can be,” he says. For now, we are back in the zone where bad news on economic growth is good news for riskier markets as it means less upward pressure on rates. If you can stomach the volatility, and secretly love to complain, this is a perfect [email protected] More

WASHINGTON (Reuters) – U.S. employment increased more than expected in May, while the unemployment rate held steady at 3.6%, signs of a tight labor market that could keep the Federal Reserve’s foot on the brake pedal to cool demand.Nonfarm payrolls increased by 390,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated.Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs last month. Estimates ranged from as low as 250,000 jobs added to as high as 477,000. The report also showed solid wage gains last month, sketching a picture of an economy that continues to expand, although at a moderate pace. The Fed is trying to dampen labor demand to tame inflation, without driving the unemployment rate too high. The U.S. central bank’s hawkish monetary posture and the accompanying tightening of financial conditions have left investors fearful of a recession next year.Economists are split on whether the moderation in the pace of job growth is because of cooling labor demand or worker shortages. They urge investors to focus on the unemployment rate and wage growth to gauge the tightness of the jobs market. There were 11.4 million job openings at the end of April, with nearly two positions for every unemployed person.The U.S. central bank has increased its policy interest rate by 75 basis points since March. It is expected to hike the overnight rate by half a percentage point at each of its next meetings this month and in July. Fed Vice Chair Lael Brainard said on Thursday she saw little case for pausing in September.Though the cries of a recession are growing louder, most economists believe the economic expansion will persist through next year. They acknowledged that high inflation was eroding consumers’ purchasing power and business investment, but argued that the economy’s fundamentals were strong and that any downturn would likely be mild. The economy’s outlook has also been dimmed by a weakening global environment in part because of Russia’s war against Ukraine and China’s zero-COVID policy. More

The US economy registered another month of solid jobs growth in May, despite employers grappling with a historically tight labour market.Employers in the world’s largest economy added 390,000 jobs during the month, less than the upwardly revised 436,000 positions created during the previous period but more than economists had expected.The jobless rate steadied at 3.6 per cent, just 0.1 percentage point above the level it stood at in February 2020 before the coronavirus pandemic spread globally.According to the Bureau of Labor Statistics, leisure and hospitality was among the sectors to see “notable” gains. More than 80,000 positions were added in May, with an additional 75,000 professional and business services jobs created as well. Transportation and warehousing employment rose by 47,000. The only sector to see losses was retail, with the number of jobs declining by 61,000.Despite these gains, the rapid recovery of the US labour market — which has far outpaced the sluggish bounceback that characterised the post-global financial crisis period — has been overshadowed in large part by the highest inflation in four decades.With roughly 1.9 vacant positions for every unemployed worker, there are also broad concerns that a prolonged shortfall of people willing to join the labour force will keep upward pressure on prices as employers are forced to continue raising wages and improving benefits in order to attract new hires and keep those already on payroll.The data, which was released by the Bureau of Labor Statistics on Friday, did not show a significant improvement in the share of Americans either employed or looking for work — otherwise known as the labour-force participation rate — but featured another pick-up in monthly wage growth. Average hourly earnings in May rose 0.3 per cent, in line with last month’s increase. On an annual basis, that translates to 5.2 per cent, slightly slower than the 5.5 per cent pace registered in April.President Joe Biden has said tackling high inflation is his administration’s top priority, a message he has sought to fortify in recent days. Earlier this week, he met with Jay Powell, chair of the Federal Reserve, and reiterated his support for the US central bank to do what it takes to contain inflation. The Fed has already raised interest rates by 0.75 percentage points since March from the near-zero levels that had been in place since the start of the pandemic. That included the first half-point rate rise since May 2000, a tool top officials have indicated will be used repeatedly in quick succession until there is “clear and convincing” evidence that inflation is coming down.Powell and other policymakers have surmised the Fed will be able to tame price pressures without causing a sharp recession, especially given the strength of the labour market and the sheer magnitude of the demand for workers. As the Fed lifts borrowing costs by raising rates and shrinking its $9tn balance sheet, the hope is that the number of vacancies falls rather than outright job losses mount.According to an analysis by the Financial Times, the variation in labour market tightness between states and across industries is substantial, however, potentially complicating the Fed’s efforts to pull off a “soft landing”.US government bonds sold off after the report, with the benchmark 10-year note trading 0.06 percentage points higher at 2.97 per cent. Two-year Treasury yields, which are most sensitive to changes in monetary policy, rose by a smaller amount, up 0.03 percentage points to 2.66 per cent. More

The billionaire said he has a “super bad feeling” about the economy and that the electric carmaker needs to axe about 10% of its workforce, according to an internal email seen by Reuters.Following is a list of some other U.S. companies that have announced layoffs or frozen hiring to rein in costs:COMPANIES COMMENTS Meta Facebook (NASDAQ:FB) parent Meta said in May it will slow the growth of its workforce Platforms Inc Coinbase (NASDAQ:COIN) Coinbase will extend its hiring freeze for the foreseeable future and rescind Global Inc a number of accepted offers to deal with current macroeconomic conditions Twitter Inc (NYSE:TWTR) CEO Parag Agrawal said in a memo that the social media company will pause hiring and review existing job offers to determine whether any “should be pulled back” Peloton (NASDAQ:PTON) Peloton in February said it will cut about 2,800 corporate jobs as it looks to Interactive revitalize sagging sales Inc Snap Inc (NYSE:SNAP) CEO Evan Spiegel in May told employees the company will slow hiring for this year Netflix (NASDAQ:NFLX) Netflix in May said it has laid off about 150 people, mostly in the U.S., as the streaming service company faces slowing growth Carvana Co (NYSE:CVNA) Carvana said it will lay off about 2,500 employees, or 12% of its workforce Robinhood (NASDAQ:HOOD) The retail trading platform said in April it is laying off about 9% of its Markets Inc full-time employees Uber (NYSE:UBER) Uber will scale back hiring and reduce expenditure on its marketing and Technologies incentive activities, Reuters reported in May, citing a letter from the CEO Inc Lyft Inc (NASDAQ:LYFT) The company said in May it will slow down hiring and assess budget cuts in some departments Source:- Regulatory filings, Reuters stories, company websites More

ISTANBUL (Reuters) – Turkey’s annual inflation rate jumped to a 24-year high of 73.5% in May, fuelled by the war in Ukraine, rising energy prices and a tumbling lira — though the figure was slightly lower than economists had feared. Inflation has surged since last autumn, when the lira slumped after the central bank launched a 500 basis-point easing cycle sought by President Tayyip Erdogan. The latest figure surpassed the 73.2% touched in 2002 and is the highest since October 1998, when annual inflation was 76.6% and Turkey was battling to end a decade of chronically high inflation. Nevertheless, the consensus forecast was for annual inflation to rise to 76.55%.Month-on-month consumer prices rose 2.98%, the Turkish Statistical Institute (TUIK) said on Friday, compared to a Reuters poll forecast of 4.8%. Transport and food costs have soared by 108% and 92% respectively over the last year, reflecting a deepening economic crisis for Turks struggling to afford basic goods. The domestic producer price index climbed 8.76% month-on-month in May for an annual rise of 132.16%. GRAPHIC: Turkey’s inflation jumps to highest since 1998 (https://graphics.reuters.com/TURKEY-ECONOMY/INFLATION/gdvzyeezkpw/chart.png) SINGLE DIGITS?The lira weakened 0.25% to 16.5050 against the dollar touching its weakest since December. The local currency tumbled 44% in 2021 and another 20% this year.Despite the highest annual rate in Erdogan’s two decades in power, Finance Minister Nureddin Nebati said on Twitter (NYSE:TWTR) monthly inflation readings are trending lower in a positive sign.Nebati has previously said inflation will fall to single digits in time for next year’s election under an economic programme that prioritises low interest rates, high production and exports, and a current account surplus. However the trade deficit widened 157% year-on-year in May to $10.7 billion, mainly due to energy imports. The central bank forecasts single digit inflation by end-2024. Economists see inflation remaining high for the rest of 2022 and ending the year at 63%, based on a median estimate, up from 52% in last month’s poll. “It is not possible for Turkey, which has gone beyond the rules of the economic doctrine, to solve its key problem of high inflation with its current policies,” said economist Arda Tunca, a columnist at PolitikYol.DATA CREDIBILITYOpposition lawmakers and economists have questioned the reliability of TUIK’s figures, claims TUIK has dismissed. Polls show Turks believe inflation is far higher than official data. In a surprise, TUIK said it stopped publishing average prices of individual items in the inflation basket, which had been listed in a monthly table since 2003.The institute said it will publish an index table showing changes in item groups, as part of Eurostat compliance.”Establishing TUIK’s structure independent from government is as important as the central bank’s independence,” said Mahfi Egilmez, another Turkey-based economist said on Twitter. “Accurate and reliable data production is the first and foremost prerequisite to implementing correct policies.” More

According to Refinitiv Lipper data, investors purchased U.S. bond funds worth a net $7.09 billion in their first week of net buying since Jan. 5. Graphic: Fund flows: US equities, bonds and money market funds – https://fingfx.thomsonreuters.com/gfx/mkt/myvmnwrnnpr/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg U.S. benchmark 10-year yield hit a six-week low last week after minutes from the U.S. central bank’s most recent policy meeting hinted at the potential for a pause in interest rate hikes later in the year, which was also supported by weaker economic data and a slower inflation growth. Investors hope that U.S. jobs data – due on Friday – might sway the Federal Reserve to slow its aggressive pace of interest rate hikes in the coming months. Investors purchased U.S. taxable bond funds worth $4.16 billion and municipal funds worth $2.24 billion. U.S. high yield bond funds obtained $5.61 billion, marking the biggest weekly inflow since June 2020, while inflation protected funds saw outflows of $246 million, which compared with inflows of $1.04 billion a week earlier. Graphic: Fund flows: US bond funds – https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoweonpx/Fund%20flows%20US%20bond%20funds.jpg Meanwhile, U.S. equity funds secured $7.22 billion, marking the biggest weekly inflow since March 23. U.S. large-, small- and mid-cap equity funds, all obtained inflows, amounting $3.01 billion, $0.98 billion and $363 million, respectively. Value funds secured inflows for second week in a row, worth $1.41 billion, while growth funds faced outflows of $3.95 billion. Graphic: Fund flows: US growth and value funds – https://fingfx.thomsonreuters.com/gfx/mkt/movanzrnjpa/Fund%20flows%20US%20growth%20and%20value%20funds.jpg Healthcare and, metals & mining attracted $959 million and $482 million in net buying, while financials saw capital outgo of $1.08 billion. Graphic: Fund flows: US equity sector funds – https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgzegwpb/Fund%20flows%20US%20equity%20sector%20funds.jpg Meanwhile, U.S. money market funds posted outflows of $8.73 billion after purchases of $43.7 billion in the previous week. More

LONDON (Reuters) – Wall Street was tipped for a weaker open on Friday, bucking share price gains in Europe and Asia after warnings on the economic outlook from Tesla (NASDAQ:TSLA) Chief Executive Elon Musk who outlined plans to lay off 10% of his staff.Markets are on edge ahead of crucial monthly jobs data in the United States and signs that a combination of high oil prices and higher interest rates are starting to tighten conditions in the global economy and the United States. But while world stocks are clinging to a slender gain, Wall Street futures turned lower on the day after Musk said he had a “super bad feeling” about the economy. In an email to executives seen by Reuters, he said he wanted to cut about 10% of jobs at the electric carmaker.Musk’s message came shortly after Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase (NYSE:JPM), described the challenges facing the U.S. economy as akin to a “hurricane”. Shares in the electric carmaker were down 4.2% in pre-market trade, while futures in the tech-heavy Nasdaq turned negative after the Reuters report, to slide 1.1%. S&P 500 futures were down 0.7%.A pan-European equity index was little changed while MSCI’s global equity benchmark rose by 0.1%, still headed for a second week of gains.”(Markets) will clearly read this message negatively at first blush; Tesla is trying to be ahead of a slower delivery ramp this year and preserve margins ahead of economic slowdown,” said Dan Ives, managing director for equity research at Wedbush Securities, said on Twitter (NYSE:TWTR). GRAPHIC: Tesla (https://fingfx.thomsonreuters.com/gfx/mkt/znpneogexvl/Pasted%20image%201654253286602.png) Musk’s comments came just before the 1230 GMT release of the U.S. Labor Department’s employment report, which investors will scan for hints of a slowdown in the jobs market. A Reuters poll of analysts expects 325,000 nonfarm payrolls were added in May, with average earnings slowing to 5.2% on a yearly basis, from 5.5% in April and any figures worse than that could fan hopes the Fed will slow or even pause interest rate hikes in the second half of the year.Many investors are inclined to wait and see. “There is a risk of recession yes, and people need to prepare but then, you need to see numbers heading in that direction and so far there are none,” said Francois Savary, chief investment officer of Swiss wealth manager Prime Partners.”If we have a significant deterioration of U.S. labour markets over the summer, then I would say there is a risk of recession next year but for the time being we don’t see this.”Private sector payrolls undershot expectations, data from payrolls processor ADP showed on Thursday, however other data show job openings still near record highs and falling jobless claims. Balancing the growth and inflation outlook is the task central banks are juggling, with inflation at multi-decade or record highs.There was little relief from oil prices, with Brent crude declining less than 1% in response to an offer from OPEC+ producers to raise output by more than previously agreed, as the volume is considered insufficient to offset the global energy supply shortfall.Brent futures were lower by 0.6% at $116.87 per barrel, while U.S. West Texas Intermediate crude fell 0.7% to $116.01.In Europe, a rise in inflation to another record high in May is being viewed as a challenge to the European Central Bank’s view that gradual rate rises can tame prices.The ECB is expected to start raising interest rates in July for the first time in eleven years.”The eurozone inflation number was one confirmation that even the ECB is now forced, even though they are facing a probable recession, to hike rates, perhaps faster or more aggressively than previously expected,” said Jeroen Blokland, Head of Research at investment research platform True Insights. European government bonds were marginally higher with thinner trading volumes than usual given public holidays in Britain and parts of Asia.Germany’s 10-year government bond yield was up 3 basis points at 1.259% after briefly hitting a new eight-year high of 1.281% earlier in the session.The U.S. dollar was flat to mostly firmer against a basket of currencies while the yuan rose to a one-month high against the greenback in offshore trade amid recent positive signals for a domestic economy battered by COVID restrictions. GRAPHIC: US GDP (https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyegykpw/Pasted%20image%201654254070477.png) More