Economy

Investing.com — The Federal Reserve begins a two-day meeting which is expected to end in half-point rise in U.S. interest rates. Australia’s central bank jumped the gun overnight, with a 25 basis point hike of its own. The Labor Department publishes the monthly Job Openings survey, while there’s another slew of earnings from the likes of Pfizer, DuPont and, after the bell, AMD and Airbnb. Beijing tightens its lockdown and oil prices give up some of Monday’s gains while oil companies take it in turns to release the best earnings in years, at least in underlying terms. Here’s what you need to know in financial markets on Tuesday, 3rd May. 1. RBA jumps the gun as Fed starts two-day huddleThe dollar and U.S. bond yields eased slightly as the market settled down to wait for the outcome of the Federal Reserve’s two-day meeting, which starts later Tuesday.Expectations for a half-point rise in the fed funds target range to 0.75-1.00% are all but universal, which means that the key variable coming out of the meeting will be the unwinding of two years of bond purchases. Various Fed officials have called for an early start to active sales from the Fed’s bond portfolio to keep the yield curve slope positive.It’s a busy week for central banks in the Anglosphere, with the Bank of England expected to give its own signal on quantitative tightening on Thursday. The Reserve Bank of Australia, meanwhile, unexpectedly raised its key rate by 25 basis points overnight, pushing the Australian dollar up 0.7%. The Aussie is still down some 6% in the last month.2. JOLTS survey, factory orders dueThe Labor Department will publish the first of three key labor market indicators due this week at 10 AM, with the monthly Job Openings and Labor Turnover Survey. Recent surveys have shown vacancies trending near record high levels amid widespread complaints of skills shortages by companies. High job turnover is also associated with higher earnings, given that many people take advantage of such shifts to make a step change in their income.Factory orders and durable goods orders excluding defense for March are also due at 10 AM.Data releases from the Eurozone overnight showed producer prices running at a record high of nearly 37% year-on-year in March, while the improvement in the German labor market slowed in April.3. Stocks steady ahead of earnings flood; AMD, Starbucks, and Airbnb to report lateAnother slew of earnings will be released into a still jittery market that only recouped half of its Friday losses on Monday. Stocks are set to open flat to lower later, despite some impressive performances by Monday’s late reporters.NXP (NASDAQ:NXPI), Avis (NASDAQ:CAR), and Clorox (NYSE:CLX) both beat earnings forecasts handsomely, as did pipeline company Williams (NYSE:WMB). Both conspicuously ruled big increases in production in the short term, choosing instead to use their improved cash flow to strengthen their balance sheets.By 6:20 AM ET, Dow Jones futures were down 26 points, or less than 0.1%, while S&P 500 futures were down 0.1%, and Nasdaq 100 futures were down 0.2%.Early reporters on Tuesday include pharma giants Pfizer (NYSE:PFE) and Biogen (NASDAQ:BIIB), industry facing bellwethers Rockwell (NYSE:ROK) and DuPont (NYSE:DD), and financial giant S&P Global (NYSE:SPGI) (for the first time after consolidating IHS Markit). AMD (NASDAQ:AMD), Starbucks (NASDAQ:SBUX), and Airbnb (NASDAQ:ABNB) lead the roster of late reporters, along with AIG (NYSE:AIG) and Caesars (NASDAQ:CZR).4. Beijing lockdown tightens; Ma scare hits Alibaba The lockdown in China’s capital is getting gradually tighter. Beijing asked residents not to leave the city unless necessary and delayed the reopening of schools that was due on Thursday after the three-day holiday.The South China Morning Post reported incidents of the authorities in neighboring Hebei province bolting doors to prevent people leaving their homes, in fresh evidence of the human strains caused by the official Zero Covid policy (reaffirmed last week by President Xi Jinping personally).In other Chinese news overnight, Alibaba (NYSE:BABA) shares in Hong Kong slumped 9% on reports that police in Hangzhou, home to the e-commerce giant, had arrested an Internet executive named Ma. The stock rebounded when it transpired that it wasn’t Alibaba founder Jack Ma, but the incident illustrates the fragility of market sentiment.5. Oil gives up gains ahead of API; BP posts big loss on Russia exit but expands buybackCrude oil consolidated after rising on Monday in anticipation of another meeting of largely empty promises by OPEC and its allies to raise output.BP (NYSE:BP) CEO Bernard Looney said he expected the shortfall of Russian crude to double to 2 million barrels a day as a result of the cumulative impact of western sanctions, which are set to be tightened later this week. Those hoping for a big increase in U.S. shale output to compensate were disappointed late on Monday by shale oil producers Diamondback (NASDAQ:FANG) and Devon Energy (NYSE:DVN), which repeated their commitment to balance sheet repair.BP, meanwhile, posted a $25 billon loss on writing down its Russian business, but increased its buyback as underlying cash flow improved sharply.By 6:30 AM ET, U.S. crude futures were down 1.1% at $104.06 a barrel, while Brent was down 1.1% at $106.41 a barrel. The American Petroleum Institute’s weekly inventory data are due at 4:30 PM ET. More

Anti-abortion activists and pro-abortion rights supporters took to the streets of Washington after a leaked draft ruling indicated the US Supreme Court was preparing to overturn the landmark Roe vs Wade ruling that has guaranteed abortion rights across the US for almost five decades.The 98-page draft opinion, dated February 10 and signed by conservative Justice Samuel Alito, relates to the constitutionality of a Mississippi law that bans abortions after 15 weeks. According to a Politico report, Justice Alito was joined by at least four other conservative justices — Clarence Thomas, Amy Coney Barrett, Brett Kavanaugh and Neil Gorsuch — in siding with Mississippi and upholding the ban. It was unclear from the report which side the court’s Chief Justice John Roberts would side with.“It is time to heed the constitution and return the issue of abortion to the people’s elected representatives,” Alito wrote in the draft opinion.The unprecedented leak triggered immediate outrage among Democratic politicians and groups dedicated to the protection of abortion rights in the US. The two top Democrats in Congress — Nancy Pelosi, Speaker of the House, and Senate majority leader Chuck Schumer — expressed fury in a statement while some progressive lawmakers called for quick legislative remedies. Bernie Sanders, the Vermont senator, said it was time to codify the protections of Roe vs Wade into law, while Mondaire Jones, a Democratic representative from the northern suburbs of New York City, said the Supreme Court should bring in new members.If the Roe precedent is thrown out, nearly half of US states would be poised to outlaw abortion thanks to statutes that include so-called trigger laws, which automatically come into force if the decision is overturned, according to the Center for Reproductive Rights.Should Roe vs Wade be overturned? Send your thoughts to [email protected]. Here’s the rest of the day’s news — GordonFive more stories in the news1. Exclusive: Johnson joins bid to win Arm listing for London Boris Johnson has joined a push to convince British chip designer Arm to list in London, as government officials grow concerned over lasting damage if the country’s best-known tech company chooses New York for its IPO. 2. US 10-year Treasury yield reaches 3% The yield on the US 10-year Treasury note touched 3 per cent for the first time since 2018, pushing up the cost of borrowing for homeowners and businesses. Yields have risen this year as the Fed takes action to try to stem US inflation, which hit 8.5 per cent on an annual basis in March — its fastest rate of increase in 40 years.3. Amazon union dealt a setback Amazon workers at a second facility in New York have rejected efforts to form a union, dealing a blow to a grassroots labour movement that hoped to capitalise on momentum from its surprise victory at a larger warehouse last month. Employees at a sorting facility in Staten Island voted by 618 to 380 against joining the Amazon Labor Union.4. Germany warns consumers to expect higher costs from Russian oil embargo The warning came as Berlin said it was willing to back an embargo of Russian oil to punish Moscow for its invasion of Ukraine. EU energy ministers met yesterday to discuss an expected sixth package of sanctions against the Kremlin that diplomats say it will include a phased-in oil embargo to take full effect by the end of the year.5. Citi acknowledges trading error There will be some red faces at Citi this morning after the US bank acknowledged an error by one of its traders that led to “a flash crash” in the share prices of many European companies. Nordic stocks were particularly hard hit, with Sweden’s benchmark OMX 30 tumbling as much as 7.9 per cent before recovering most of the losses. The day aheadUS elections: JD Vance, the venture capitalist and author of Hillbilly Elegy, squares off against a clutch of rivals to replace outgoing Ohio senator Rob Portman, a former George W Bush administration official.Go deeper: Vance represents a growing class of Republicans who have unabashedly embraced Trump — and are in many ways beholden to him.Monetary policy The Federal Reserve starts a two-day policy meeting that is expected to result in its first half percentage point rise in interest rates since 2000 and signal more aggressive action to bring decades-high inflation under control. Economic data Figures from the US Bureau of Labor Statistics are expected to show job openings decreased slightly to 11mn in March from 11.26mn the previous month. That data will also report the number of employees who quit their jobs in March.Company earnings The US pharmaceutical company and Covid-19 vaccine maker Pfizer is expected to report first-quarter revenue increased 64 per cent to about $23.9bn, according to analysts polled by Refinitiv. KKR, Starbucks, Lyft, Airbnb, AIG, Advanced Micro Devices, and Match Group also report results.War in Ukraine UK prime minister Boris Johnson will become the first western leader to address lawmakers in the Ukrainian parliament since Russia’s invasion. The UK will commit an additional £300mn of military aid. Separately, Narendra Modi has been invited to attend the G7 leaders’ summit next month in Germany as western powers attempt to woo New Delhi away from its longstanding alliance with Russia.What else we’re readingTriumphalism returns to haunt Xi Jinping China’s leader faces the nightmarish prospect that the months running up to the Communist Party Congress in November will be marred by an economic crunch and social tensions caused by repeated lockdowns, writes Gideon Rachman.EU fires starting gun in fightback against Big Tech The EU’s Digital Services Act is not just more procedural drudgery on the EU’s conveyor belt of words. It is the first comprehensive declaration of a digital future founded on the legitimate authority of democratic rights and the rule of law, argues Shoshana Zuboff, professor emeritus at Harvard Business School.Related: EU regulators have charged Apple with breaking competition law by abusing its dominant position in mobile payments. FT ranking: Africa’s Fastest Growing Companies 2022 The inaugural FT ranking of Africa’s Fastest Growing Companies provides a snapshot of the corporate landscape on a continent where technology, fintech and support-service businesses have had to adapt to a radically altered environment. US-China Tech Race: The great decoupling Some in the US want to see Chinese companies cut off from American investment, while hawkish factions in China have been fighting for a more self-sufficient and nationalistic tech sector. But is decoupling even possible? James Kynge asks in the season finale of our Tech Tonic podcast.Would a Sinn Féin win open door to a united Ireland? Almost a quarter of a century after the 1998 Good Friday Agreement ended the Troubles — three decades of violence in which more than 3,500 people died — polls predict Sinn Féin, the political wing of the paramilitary IRA, will after Thursday’s election become the biggest party in Northern Ireland for the first time.Deconstructing ‘dogfooding’ Executives testing a company’s product or service has been dubbed “dogfooding”: Airbnb co-founder Brian Chesky plans to stay in the company’s properties every few weeks; Lyft boss John Zimmer does a driving shift on New Year’s Eve. Such practices are spreading beyond the tech sector.TravelFloating 500 miles west of Senegal, Santo Antão is Africa’s most western outpost and remains one of the least visited of Cape Verde’s nine inhabited islands. There is no airport and only two main roads. The mountainous isle is heaven for hikers.

A door-to-door salesman treads the mountain path in the valley of Cha de Morte © Mark Rammers More

The fund owned Russian stocks worth some 27 billion Norwegian crowns ($2.86 billion) at the end of 2021, equivalent to 0.2% of its total value, but has since said the value of those assets has fallen by at least 90%. ($1 = 9.4451 Norwegian crowns) More

Investing.com — Eurozone bond yields hit multiyear highs on Tuesday as the prospect of higher interest rates from the Federal Reserve and European Central Bank was compounded by fresh signs of unprecedented inflationary pressure.The 10-Year German benchmark bond yield touched 1% for the first time since 2015, while its Spanish counterpart broke through 2% for the first time in as many years.Italian benchmark yields likewise hit 2.88%, its highest since late 2018, pushing the Spread between them and German yields to its widest since 2020, when the first wave of the pandemic tested the Eurozone’s commitment to joint action to support the economy.The latest moves come a day ahead of an expected 50 basis point increase in U.S. official interest rates aimed at taming inflation that is running at a 40-year high.Eurozone yields have been pulled higher by those on U.S. Treasuries in recent weeks as the market has priced in an aggressive tightening cycle from the Federal Reserve. That has also strengthened the dollar, while the euro again dipped below $1.05 in European morning trading, as traders priced in a widening interest rate differential between the two major currency blocs.The European Central Bank is still reluctant to raise interest rates, despite widespread evidence of the worst inflation in over 30 years. According to Eurostat data released on Tuesday, Eurozone producer prices rose an eye-watering 5.3% in March, even more than the 5.0% expected, bringing the year-on-year rate to 36.8%. That development is down largely to soaring energy prices, which are set to rise even higher if, as expected, the EU announces plans to boycott Russian oil by the end of the year later this week. EU energy ministers discussed such a measure at a meeting on Monday. The ECB argues that monetary policy is the wrong weapon with which to fight an energy supply shock.The impact of high inflation on the labor market has, however, been relatively moderate so far. The ECB says it has seen no sign of a wage-price spiral, while companies continue to hire. Seasonally adjusted German unemployment fell for the 12th month in a row in April, albeit by a less-than-expected 13,000. The Eurozone jobless rate edged down 0.1 point to 6.8% in March, extending its slow recovery from the pandemic. More

The central bank’s international reserves fell to $26.8 billion as of beginning of May from $28.1 billion a month earlier.”We have an adequate stock of international reserves, despite the … government’s fulfilments of all its foreign debt obligations,” Shevchenko wrote on the NV Business media portal.”With sufficient international financial assistance, we will be able to maintain reserves at the proper level and even increase them.”Russia’s invasion on Ukraine, now in its third month, has displaced millions, sent food and oil prices soaring, shut many businesses and slashed exports. Inflation in annual terms may increase to 15.9% at the end of April, compared to 13.7% a month earlier, Shevchenko said. By the end of the year it may exceed 20%.”In times of war, it is impossible to avoid rising prices,” Shevchenko wrote, adding, that the central bank will keep its fixed exchange rate as one of the measures to control consumer price inflation.To manage through the war, the country will need more international financial support, he added. So far, Ukraine has received more than $4.3 billion in international aid.Gross domestic product is expected to shrink by at least a third, he said. “The economy will recover, but the losses from the war will be significant,” Shevchenko wrote. (Reporting in Melbourne by Lidia Kelly; Editing by Sam Holmes) More

The benchmark yield rose four basis points to touch 1%, a level not seen since the bloc was in the middle of grappling with the Greek debt crisis. It’s a sharp turnaround from March when demand for havens after Russia’s invasion of Ukraine sent the rate into negative territory.“The market looks in poor shape with few investors willing to take the other side given the entrenched bearish dynamics,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG. “Inflation risks are not getting any smaller, while risk sentiment is recovering.”Money markets are wagering on almost four 25 basis-point hikes from the ECB this year, ratcheting up bets as euro-area inflation continues to break records and a growing number of ECB officials acknowledge the possibility of greater policy tightening. Vice President Luis de Guindos said an ECB rate increase in July is possible but not “likely,” in an interview published Sunday. U.K. bonds were also caught up in the rush to offload debt, with 10-year yields surging above 2% for the first time in more than a week as domestic markets reopened after being closed Monday for a holiday. Money markets are betting on a quarter-point Bank of England rate hike this Thursday and are rapidly raising wagers on a half-point increase at any of its next four meetings.(Updates throughout.)©2022 Bloomberg L.P. More

Supplies of goods are coming up short in the pandemic, and prices have jumped. Some economists warn that the changes could linger.For the past three decades, companies and consumers benefited from cross-border connections that kept a steady supply of electronics, clothes, toys and other goods so abundant it helped prices stay low.But as the pandemic and the war in Ukraine continue to weigh on trade and business ties, that period of plenty appears to be undergoing a partial reversal. Companies are rethinking where to source their products and stocking up on inventory, even if that means lower efficiency and higher costs. If it lasts, such a shift away from fine-tuned globalization could have important implications for inflation and the world’s economy.Economists are debating whether recent supply chain turmoil and geopolitical conflicts will result in a reversal or reconfiguration of global production, in which factories that were sent offshore move back to the United States and other countries that pose less of a political risk.If that happens, a decades-long decline in the prices of many goods could come to an end or even begin to go in the other direction, potentially boosting overall inflation. Since around 1995, durable goods like cars and equipment have tamped down inflation, and prices for nondurable goods like clothing and toys have often grown only slowly.Those trends began to change in late 2020 after the onset of the pandemic, as shipping costs soared and shortages collided with strong demand to push car, furniture and equipment prices higher. While few economists expect the past year’s breakneck price increases to continue, the question is whether the trend toward at least slightly pricier goods will last.The answer could hinge on whether a shift away from globalization takes hold.“It would certainly be a different world — it might be a world of perhaps higher inflation, perhaps lower productivity, but more resilient, more robust supply chains,” Jerome H. Powell, the Fed chair, said at an event last month when asked about a possible move away from globalization.Still, Mr. Powell said, it’s not obvious how drastically conditions will change. “It’s not clear that we’re seeing a reversal of globalization,” he said. “It’s clear that it’s slowed down.”Prices Have Shot UpPrices for durable goods had been falling for decades. Lately, though, they’ve been a major factor pushing inflation higher.

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Annual Change in the Personal Consumption Expenditure Index by Category
Source: Commerce DepartmentBy The New York TimesThe period of global integration that prevailed before the pandemic made many of the things Americans buy cheaper. Computers and other technology made factories more efficient, and they chugged out sneakers, kitchen tables and electronics at a pace unmatched in history. Companies slashed their production cost by moving factories offshore, where wages were lower. The adoption of steel shipping containers, and ever larger cargo ships, allowed products to be whisked from Bangladesh and China to Seattle and Tupelo and everywhere in between for astonishingly low prices.But those changes also had consequences for American factory workers, who saw many jobs disappear. The political backlash to globalization helped carry former President Donald J. Trump into office, as he promised to bring factories back to the United States. His trade wars and rising tariffs encouraged some companies to move operations out of China, although typically to other low-cost countries like Vietnam and Mexico.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The pandemic also exposed the snowball effect of highly optimized supply chains: Factory shutdowns and transportation delays made it difficult to secure some goods and parts, including semiconductors that are crucial for electronics, appliances and cars. Shipping costs have soared by a factor of 10 in just two years, erasing the cost savings of making some products overseas.Starting late in 2020, prices for washing machines, couches and other big products jumped sharply as production limitations collided with high demand.Inflation has only accelerated since. Russia’s invasion of Ukraine has further snarled supply chains, raising the prices of gas and other commodities in recent months and helping to push the Fed’s closely watched inflation index up 6.6 percent over the year through March.That is the fastest pace of inflation since 1982, and price gains are touching the highest level in decades across many advanced economies, including the eurozone and Britain.Many economists expect price increases for durable goods to cool substantially in the months ahead, which should help calm overall price gains. Data from March suggested that they were beginning to moderate. Rising Fed interest rates could help temper buying, as borrowing to buy cars, machines or home improvement supplies becomes more expensive.But there are still questions about whether — in light of what companies and countries have learned — major products will return to the steady price declines that were the norm before the coronavirus.It’s not clear yet to what extent factories are moving closer to home. A “reshoring index” published by Kearney, a management consulting firm, was negative in 2020 and 2021, indicating that the United States was importing more manufactured goods from low-cost countries.But more firms reported moving their supply chains out of China to other countries, and American executives were more positive about bringing more manufacturing to the United States.Duke Realty, which rents warehouse and industrial facilities in the United States, expects the change to be a source of demand in years to come, though the reworking may take a while. Customers are “now future-proofing their supply chains,” Steve Schnur, the firm’s chief operating officer, said on an earnings call last week.“Some reshoring is occurring — let’s make no mistake about that,” Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said in an interview. But the data show that most businesses are mitigating risk by building up their inventories and finding additional suppliers in low-cost countries, Dr. Okonjo-Iweala said. That process could end up integrating poorer countries in Africa and other parts of the world more deeply into global value chains, she said.Janet L. Yellen, the Treasury secretary, said last month that supply chains had proved too vulnerable given the pandemic and the war in Ukraine, and urged a reorientation around “a large group of trusted partners,” an approach she called “friendshoring.”The approach might result in some higher costs, she said, but it would be more resilient, and a large enough group would allow countries to maintain efficiencies from the global division of labor.Inflation F.A.Q.Card 1 of 6What is inflation? More

Elisabeth Stheeman, a member of the BoE’s Financial Policy Committee (FPC), said the impact on the transition to net zero of the increase in energy prices, as a result of Russia’s invasion of Ukraine, was yet to be determined.”Recent events have highlighted the transition risks that businesses face,” Stheeman said in a speech.”In light of this situation, the role for central banks and supervisors is to continue to help build resilience to climate-related financial risks, and in doing so they can also help support the transition,” she added.The Bank has conducted a “climate scenario” exercise to assess the resiliency of banks, insurers and the wider financial system to different climate-related risks.Aggregated results will be published on May 24.”The exercise is not intended to inform the setting of capital requirements,” Stheeman said.”The FPC will also use it to understand risk management capabilities in the financial sector, and how banks and insurers may adapt their business models in the face of different climate pathways,” she added. More