News review 14.09.2022
Updated: Sep 15, 2022
U.S. inflation declines, but slower than the market had hoped
This has nullified the chances of a 0.5% Fed interest rate hike in the week of September 21 and made the chances of a 1% hike all at once to a meaningful 36%. And the rate futures market has no doubt that the Fed will raise it by at least 0.75%.
And the baseline scenario is that they will raise it again in November by 0.75%.
And now the futures are pointing to that rate peaking next year at 4.25-4.5%.
The Fed is not afraid of a recession - the labor market and consumer economy do remain strong. So it will continue to pursue tight monetary policy, the tightest in the modern era since the 1980s.
And very tight monetary policy makes a recession in the U.S. an almost inevitable scenario.
And 72% of global fund managers, according to a BofA survey, expect the U.S. economy to weaken in 2023.
The most popular position is buying the U.S. dollar.
The survey was conducted even before yesterday's inflation data.
A possible railroad workers strike in the U.S. on September 16, is estimated to be a $2 billion loss to the economy in a day
This is an additional pro-inflationary factor.
Unemployment in the U.K. has fallen to its lowest level since 1974 at 3.6%
At the same time, the inactivity rate has risen. That is, Britons are hoping for government support and are not running to work.
Blinken: Nuclear deal with Iran unlikely
And the U.S. is thinking of imposing preventive sanctions against China so it won't want to attack Taiwan. Apparently, the White House has smelled fear and decided to crush the Kremlin's coalition.
Scholz: Hydrogen is the gas of the future, we will create a huge boom
Well, in the meantime, the ZEW index of investor confidence in the German economy has fallen to minus 62 - a fall that is getting deeper and deeper. Businesses see a decline in orders, production and exports, including to China.
German inflation accelerated from 7.5% y/y in July to 7.9% in August
Pope Francis arrives in Kazakhstan for Congress of Leaders of World and Traditional Religions
Putin and Xi Jinping will be there at the same time for the SCO summit.
Biden announces willingness to buy oil for reserves at $80 a barrel
It looks like they decided to play along with Saudi Arabia or really assess the situation. In principle, this is good news for oil stocks.
Two Peloton (PTON) co-founders, the executive chairman and chief legal officer, are leaving the company
T-Mobile (TMUS) places bonds
$1.25 billion with a 5.2% coupon and maturity in 2033
$1 billion at 5.65% and maturing in 2053.
$750 million at 5.8% and maturing in 2062.
What would you rather buy? - A solid U.S. telecom bond at 5-6% per annum or a stock. No dividends yet, but they will certainly be after the completion of the 5G network. For example, AT&T and Verizon now have dividends of the same 6% per annum.
Twitter (TWTR) shareholders approved Musk's takeover bid for $44 billion.
Of course, shareholders benefit from this.
But not so much for Musk anymore.
Patreon is laying off 17% of its workforce (80 people).
The company's CEO attributed the layoffs to changes in the technology industry and economy over the past nine months that have reversed the company's growth plans.
"As the world begins to recover from the pandemic and experiences a broader economic slowdown, this plan is no longer the right path for Patreon."
Last year, the San Francisco-based company raised $155 million, bringing its valuation to $4 billion, more than triple its September 2020 value.
Bad inflation data ripped through the stock market yesterday, with stock indexes down 4-5%. All sectors were falling. There was virtually no protection anywhere. It looks like the market is finally starting to take the threat of a recession in the U.S. seriously.
U.S. government bonds rose slightly yesterday amid a flight from risk to protection.
Of course the US dollar rose - the euro is back below parity and bitcoin is near $20k.
Commodities markets are down, but not much. Much less than the stock market.
Stock index futures are up 0.3%, a very small consolation to the bulls. And there will be a big expiration of derivatives on Friday, so it may be time to buy on Monday. But it's a question of levels and market sentiment. If it smells the long-awaited capitulation of retail investors, it will change the character of market behavior.