Investors Expecting Fed Rate Cuts; RBA Governor Strikes Hawkish Tone By James Christie
Good day. Recent U.S. data is fueling bets that interest-rate cuts could come under a variety of circumstances. Interest-rate futures are indicating a roughly 60% chance the Federal Reserve will lower rates by a quarter-of-a-percentage point by its May 2024 policy meeting, up from 29% at the end of October, according to CME Group data. At the same time, this month's rally in stocks signals many investors hope inflation falls back to the Fed's 2% target and growth remains steady, while the central bank cuts rates a modest amount as insurance against an unnecessary slowdown. Elsewhere, the Reserve Bank of Australia is now indicating that policy decisions will be driven by the data flow, but it increasingly it feels as if its tolerance for any persistence in the inflation data will see it hike further, James Glynn writes. He notes that last week RBA Governor Michele Bullock suggested the war on inflation is still in front of the central bank as policy makers prepare to battle stubborn "homegrown" price pressures.
Correction: Zambia is Africa's second biggest producer of copper and cobalt. A Basis Points item in Wednesday's newsletter incorrectly said the country is the top producer.
Now on to today's news and analysis.
Top News Investors See Interest-Rate Cuts Coming Soon, Recession or Not
Wall Street is gearing up for rate cuts .
Twenty months after the Federal Reserve began a historic campaign against inflation, investors now believe there is a much greater chance that the central bank will cut rates in just four months than raise them again in the foreseeable future.
Glynn's Take: RBA Is More Hawkish Under Bullock By James Glynn
SYDNEY-Australian financial markets should now be waking to the realization that the Reserve Bank of Australia's management change has ushered in a new era of hawkishness that could fuel a series of rate hikes next year.
RBA Governor Michele Bullock took the reins of the RBA in September replacing the outgoing Philip Lowe, and in the space of just over two months has moved to signal quite forcefully that the risks around inflation going forward are still considerable. Read more .
U.S. Economy How People Pay for Gifts Is Upending Retailers
Retailers aren't just having trouble getting shoppers to buy sweaters and other holiday items this season. Store credit cards , which have been a lucrative source of revenue for retailers, are also a tougher sell.
Hot Healthcare Hiring Bolsters Cooling U.S. Labor Market
Healthcare providers-including hospitals, clinics, pharmacies and doctors' offices-accounted for 30% of U.S. job gains in the six months through October, though less than 11% of the country's total employment.
Investors Are Hungry for Risk-and Holding Record Cash Sums
Some analysts see investor balances in money-market funds as a bullish signal and a potential tailwind for stocks and bonds if the inflation outlook continues to improve. Others question whether money is ready to enter the market .
Key Developments Around the World Beijing Pledges More Financial Support to Aid Private Economy
Chinese authorities rolled out a new set of measures to pump more financial resources to help the country's struggling private sector , the latest effort by Beijing to revive weakening business confidence amid economic headwinds.
China Tried Using Economic Ties to Bring Taiwan Closer. It Isn't Working. China Industrial Profit Continued to Improve in October Australia's Chalmers Appoints BOE Official as RBA Deputy Governor
Australian Treasurer Jim Chalmers has moved again to shake-up the corporate culture and practices of the Reserve Bank of Australia, naming a Bank of England official as the central bank's new deputy governor.
Putin Has Staked Russia's Resources on Victory in Ukraine
President Vladimir Putin is militarizing the Russian economy , using strong oil revenues to pay for rising weapons production. Meanwhile, political paralysis in the West is threatening the supply of arms and money to Ukraine.
Brazil Charts $100 Billion Path to Be Global Oil Power
Brazil's state-controlled oil company, Petrobras, announced it would invest $102 billion before the end of 2028 as Latin America's biggest nation positions itself to become one of the world's major oil powers.
Financial Regulation Roundup First Republic Crashed. This Bank Wants to Copy Its Business.
Regional lender Citizens Financial Group opened a new private bank for wealthy customers last month. Its inspiration: First Republic Bank, which collapsed earlier this year in the second-largest bank failure in history.
Behind Credit Suisse's Fall: A Chairman's Lasting Mark on the Culture
In the immediate aftermath of Credit Suisse's demise, blame focused on external forces for causing the bank's rich clients to flee. But insiders and investors say its board, headed by Urs Rohner , was ultimately responsible.
How the $1.8 Billion Real-Estate Commissions Lawsuit Came to Be
A telephone call five years ago from a Minnesota consumer advocate and lawyer with a one-person firm led to litigation that could end up changing how millions of Americans buy and sell homes .
China Scrambles to Contain a Looming Shadow-Bank Meltdown
Chinese authorities are taking more forceful action to contain the growing financial troubles of one of the country's biggest shadow lenders, with "criminal coercive measures" being taken against some employees of Zhongzhi Enterprise.
Singapore Looks Well-Equipped to Weather Financial Shocks
Singapore's corporate, household and financial sectors are in good shape to withstand shocks , but still face risks that could test their resilience, a review by the country's central bank showed.
Forward Guidance Monday (all times ET)
10 a.m.: U.S. new home sales for October; Richmond Fed Survey of Manufacturing Activity for November
10:30 a.m.: Dallas Fed Texas Manufacturing Outlook Survey for November
Tuesday
4 a.m.: Euro area money supply for October
9 a.m.: S&P CoreLogic Case-Shiller Home Price Index for September
10 a.m.: Chicago Fed's Goolsbee speaks at Midwest Agriculture Conference in Chicago; The Conference Board Consumer Confidence Index for November
10:30 a.m.: Dallas Fed Texas Service Sector Outlook Survey for November
9 p.m.: Reserve Bank of New Zealand interest rate decision
Research Resilient Mexican Economy Could Temper Central Bank's Dovish Turn
An upward revision from 0.9% to 1.1% in Mexico's third-quarter gross domestic product, led by a higher estimate of services growth, and a continued boost to industrial activity from construction, suggest the country's economy is likely to remain resilient in the near term, Morgan Stanley economists Fernando Sedano and Teo Lotito write in a note. But that could limit the Bank of Mexico's "dovish pivot" with several central bank members supporting a start to interest-rate cuts in the first quarter of 2024, they add. "Our concern is about persistence in core services metrics associated with a strong economy, tight labor markets, and a boost to fiscal spending at a time when we have a positive output gap," they write.
-Anthony Harrup
New Zealand Central Bank Tipped to Stand Pat
New Zealand's central bank is expected to keep the official cash rate at 5.5% at its November meeting, Moody's Analytics says in its weekly Asia-Pacific economic preview. The Monetary Policy Committee will have the benefit of September quarter CPI and labor force data, it says. Inflation cooled to 5.6% on year in the September quarter--falling 0.4 percentage point more than the RBNZ had anticipated--while the unemployment rate rose to 3.9% from the prior quarter, it notes. Although wage growth of 4.3% year-over-year for the last three quarters is a risk factor that may nudge the RBNZ toward tightening, that should be countered by the weak housing market, it adds. The RBNZ policy decision is due Wednesday.
-Monica Gupta
Commentary The World's Largest Buyer of U.S. Debt Isn't Going Away
Could the largest foreign buyer of American debt suddenly stop buying? Here is a comforting thought: This problem is probably already behind us . Japan isn't about to stop financing the U.S. government, Jon Sindreu writes
American Borrowers Are Getting Closer to Maxing Out
Card loans are still growing, on average rising 1.6% in October over September across five big U.S. card lenders, but as far as people paying back those loans, the data so far is less compelling , Telis Demos writes.
Basis Points The U.S. economy expanded at a relatively subdued pace in early November, the latest data from S&P Global show. The S&P Global "flash" U.S. services index rose to 50.8 from 50.6 in October [https://www.marketwatch.com/story/u-s-economy-growing-only-at-a-subdued-rate-in-early-november-s-p-global-says-a4081dd6#::text=The%20numbers%3A%20The%20U.S.%20economy, highest%20level%20in%20four%20months.], the highest level in four months. On the other hand, the S&P Global "flash" U.S. manufacturing index, slipped from 50 to a three-month low of 49.4. Readings above 50 signify expansion; below that, contraction. (MarketWatch) Veteran banker Zhu Hexin has been named as the new Communist Party chief of China's foreign-exchange regulator, succeeding Pan Gongsheng, who heads the country's central bank. Zhu was also named as a member of the Communist Party committee at the People's Bank of China, according to a statement from the State Administration of Foreign Exchange. (Dow Jones Newswires) Germany's economy contracted 0.1% from July to September, confirming prior estimates, as the country languishes in a likely recession, according to data from statistics office Destatis released Friday. (DJN) Business sentiment in Germany improved for the third month in a row in November, according to a survey of companies, a signal that headwinds holding back the economy, such as high inflation, may be easing even if the country is likely in the midst of a recession. The Ifo business-climate index rose slightly to 87.3 in
(MORE TO FOLLOW) Dow Jones Newswires
11-27-23 0715ET
