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Data showed the U.S. trade deficit in goods increased moderately in January, with both imports and exports rising solidly. FEDWATCHBofA Global Research warned the Fed could even hike interest rates to nearly 6%. "We're talking about stickier inflation in the economy and higher interest rates for longer. ET, Dow e-minis were up 43 points, or 0.13%, S&P 500 e-minis were up 3.5 points, or 0.09%, and Nasdaq 100 e-minis were down 2.25 points, or 0.02%. The three main indexes are headed for monthly declines, with the blue-chip Dow (.DJI) in the red for the year.
The continent-wide STOXX 600 index (.STOXX) slipped 0.3% in the first hour of trading, after closing sharply higher in the previous session. Higher food prices pushed the 12-month inflation rate in France to 7.2% in February from 7.0% in the preceding month. In Spain, consumer prices rose 6.1% year-on-year in February, over a 5.9% rise in the 12 months to January. Ocado (OCDO.L) sank 9.6%, to the bottom of the STOXX 600, after the online supermarket and technology group reported a worse-than-expected full-year loss. Travis Perkins (TPK.L) fell 3.7% after Britain's biggest supplier of building materials posted a 16% decline in annual profits.
EUROPE Market mood downbeat ahead of raft of data
  + stars: | 2023-02-28 | by ( ) www.reuters.com   time to read: +2 min
A look at the day ahead in European and global markets from Anshuman DagaThe overarching downbeat mood among investors shows no signs of improving as markets become increasingly wary of a further rise in borrowing costs. Although U.S. markets took a breather and rose on Monday, they ended well below the day's highs and Asian markets were back in the red on Tuesday after gaining in early trade. Tuesday's U.S. consumer confidence data will be especially scrutinised for households' views on economic prospects and inflation expectations. European markets will deal with CPI data due from France and Spain. While inflation has eased a bit, providing some support to markets, a barrage of economic data suggests that inflation is stickier than expected, reinforcing the "higher-for-longer" rates view.
Morning Bid: Market mood downbeat ahead of raft of data
  + stars: | 2023-02-28 | by ( ) www.reuters.com   time to read: +2 min
Tuesday's U.S. consumer confidence data will be especially scrutinised for households' views on economic prospects and inflation expectations. Economists polled by Reuters expect a median reading of 109.5 on the index, which unexpectedly fell in January. European markets will deal with CPI data due from France and Spain. While inflation has eased a bit, providing some support to markets, a barrage of economic data suggests that inflation is stickier than expected, reinforcing the "higher-for-longer" rates view. British Prime Minister Rishi Sunak struck a deal with the European Union on post-Brexit trade rules for Northern Ireland.
Futures slip as yields rise on bets of higher rates
  + stars: | 2023-02-28 | by ( ) www.reuters.com   time to read: +3 min
The gains, however, were not enough to reverse monthly losses for the three main indexes, with the blue-chip Dow (.DJI) in the red for the year after strong economic data suggested the Federal Reserve could keep interest rates higher for longer. FEDWATCHThe yield on two-year Treasury notes , which track investors' expectations of the path of interest rates, rose to 4.8%, trading just below a near four-month high hit in the previous session. Yields are climbing higher in the U.S. and that's pushing down equity markets," said Michael Hewson, chief market analyst at CMC Markets. "We're talking about stickier inflation in the economy and higher interest rates for longer. ET, Dow e-minis were down 25 points, or 0.08%, S&P 500 e-minis were down 4 points, or 0.1%, and Nasdaq 100 e-minis were down 18.25 points, or 0.15%.
"We've been talking about impending recession for several quarters now," said Malone, whose Virginia Beach-based company has a national footprint. So has unexpectedly strong consumer spending and, for the world outlook, the reopening of China's economy from strict COVID lockdowns. That poured cold water on the idea that the Fed would "pivot" on a dime to lower rates. "Government bond yields are up" since the last Fed policy meeting, Durham wrote. "It kind of seems the U.S. economy might be more resilient than markets thought six or eight weeks ago."
The yield on the benchmark 10-year Treasury note was down under a basis point at 3.9453%, and the yield on the 30-year Treasury bond also slipped by less than a basis point to 3.9328%. U.S. Treasury yields were marginally lower on Monday morning as investors continue to monitor the outlook for inflation and the economy. Stocks sank Friday and Treasury yields jumped following a bigger-than-expected increase in the latest reading for personal consumption expenditures, the Fed's preferred inflation gauge. Economic data and earnings reports from high profile retailers such as Target, Costco, Lowe's and Macy's will be grabbing investors' attention this week. Durable goods orders are due out Monday morning, while consumer confidence and the ISM manufacturing survey are on the slate later in the week.
Barclays has an 2023 S&P 500 target of 3,724, more than 6% lower than current levels. The base case at Barclays is for the S&P 500 to land at 3,724 in a shallow-recession scenario in 2023. The S&P 500 last week dropped by 2.6%, the worst weekly selloff of 2023 and the third consecutive weekly decline. Stocks started 2023 with a rally after last year's plunge but have recently suffered alongside a jump in bond yields. The S&P 500 pushed higher during Monday's session after stocks last week notched their worst weekly performance of the year.
The blue-chip index (.STOXX) added 0.9%. It fell 1.4% last week after hotter-than-expected U.S. inflation data fuelled bets that the Federal Reserve would continue to raise rates. European retailers (.SXRP) rose 1.1%, led by a 3.1% increase in shares of Hennes & Mauritz (HMb.ST). Mould highlighted that consumer spending has been buttressed by gas prices coming down and help from government-support schemes across the single-currency bloc. Dechra Pharmaceuticals (DPH.L) tumbled 15.5%, to the bottom of the STOXX 600, as the veterinary drugs maker warned its full-year operating profit would be at the lower end of analysts' expectations.
LONDON, Feb 23 (Reuters) - Bank of England interest rate-setter Catherine Mann said on Thursday that it was too soon to say the risks posed by the surge in inflation last year had eased and that the central bank should continue to raise borrowing costs. The BoE raised interest rates to 4% earlier this month but signalled it was close to ending a run of increases which began in December 2021. She has previously argued in favour of raising borrowing costs sharply in the face of an inflation rate that remains above 10%, even though the BoE has forecast that it will fall sharply this year. Two other members of the Monetary Policy Committee - Swati Dhingra and Silvana Tenreyro - voted to pause the rate hikes at this month's meeting. Mann also said that she believed that in normal times, interest rate changes took their full effect faster than the 18-24 months which economists have previously estimated.
SYDNEY, Feb 21 (Reuters) - Australia's central bank, startled by the risk that inflation could prove stickier than previously thought, abandoned all thought of pausing at its February policy meeting and signalled more rate hikes would be needed in the months ahead. Minutes of the Feb. 7 policy meeting out on Tuesday showed the Reserve Bank of Australia's (RBA) Board only discussed two options - hiking by 50 basis points or 25 bps. A pattern of upward surprises on inflation and wages had argued for the larger move, the minutes showed. In particular, underlying inflation surprised to the upside in the December quarter. The RBA expects wage growth to top 4.2% by the end of this year.
The U.S. dollar index , which measures the dollar against six other major currencies, slipped 0.2% to 103.81. Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to rise to quash inflation. The euro fell 1.1% against the Swedish crown to 11.05 crowns while the dollar was down 1% to 10.3405. The euro was little changed against the dollar at $1.0690, just above Friday's six-week low of $1.06125. The Australian dollar rose 0.6% to $0.6918 ahead of minutes from the Reserve Bank of Australia's latest policy meeting on Tuesday.
The U.S. dollar index , which measures the dollar against six other major currencies, slipped 0.1% to 103.91. Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to rise to quash inflation. The euro fell 1.1% against the Swedish crown to 11.059 crowns while the dollar was down 0.8% to 10.3604. The euro was little changed against the dollar at $1.0687, just above Friday's six-week low of $1.06125. "Euro rates are probably likely to stay at higher levels, whereas we think dollar rates will more easily turn lower," Turner added, which he said could support the euro in the first half of the year.
It hit a six-week high of 104.67 on Friday. Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to go higher in order to successfully quash inflation. The RBNZ is expected to scale down its tightening campaign only slightly, with a half-point interest rate increase to 4.75%. "With inflation so high ... not staying the course could mean even higher interest rates are required down the track," said analysts at ANZ. The offshore yuan was last marginally higher at 6.8643 per dollar, while the onshore yuan last bought 6.8580 per dollar.
But for CRV general partner Anna Khan, pitches boil down to five key elements and one to avoid. Here's Insider's exclusive chat with the investor about what she looks for in a startup pitch. The CRV general partner recently tweeted about a founder who thanked her for being engaged during his startup pitch, saying, "Most people just stare at me for 30 minutes and then pass a week later." The investor shared with Insider what she considers the five elements of a successful startup pitch — and one popular rule of thumb that founders should avoid. Interestingly enough, having a large legacy competitor isn't necessarily a bad thing for vertical-software startups, Khan said.
On an annual basis, services inflation was up 7.2%, the worst year-over-year increase since 1982, he noted. "To get services inflation down, you really actually need to create demand destruction. But Johnson believes central bank policies will further impact the stock market heading into the rest of the year. This will put more pressure on the stock market throughout the year, creating a steeper-than-anticipated decline. He believes the stock market will repeat the pattern witnessed in 2000 and 2001.
How big hedge funds would trade sticky inflation
  + stars: | 2023-02-16 | by ( Nell Mackenzie | ) www.reuters.com   time to read: +5 min
LONDON, Feb 16 (Reuters) - Hedge funds, pinning little hope on central banks' attempts to cool inflation, are spotting ways to profit from climbing interest rates. Five prominent hedge funds shared five ideas using five different asset classes to profit from inflation so pugnacious it might force the Federal Reserve to keep interest rates higher for longer. Lancaster favours a trade selling long-term borrowing costs against shorter-term ones, on the view that the spread between them will decline. "Concern now for markets is that reacceleration of the economy will lead to higher terminal rates," said Lancaster. Buying U.S. long-dated natural gas futures for these reasons and also, he added, "in an inflationary cost/wage environment looks compelling."
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailInflation in the U.S. will be 'far stickier and longer lasting,' says portfolio managerBill Smead of Smead Capital Management says the U.S. Federal Reserve is going to have a hard time controlling inflation.
U.S. inflation is likely to be "far stickier" and could last a decade, according to Bill Smead, chief investment officer at Smead Capital Management. Wall Street is gearing up for key inflation data later Tuesday, when the Labor Department releases its January consumer price index. It is a widely followed inflation gauge that measures the cost for dozens of goods and services spanning the economy. "The enthusiasm … right now is the hope that we'll get a friendly Fed out of a soft landing, and we do not believe that is going to be the case," Smead told CNBC's "Streets Sign Asia." "We think the inflation is going to be far stickier and longer lasting — in fact, a decade because in the United States, we have incredibly favorable demographics."
Expectations for U.S. earnings to decline in the first and second quarter come amid weaker-than-expected fourth-quarter results for 2022, which Credit Suisse estimates will be the worst earnings season outside of a recession in 24 years. With fourth-quarter 2022 earnings estimated to have fallen from a year ago, a subsequent decline in the first quarter of 2023 would put the S&P 500 into a so-called earnings recession, a back-to-back decline in earnings that hasn't occurred since COVID-19 blasted corporate results in 2020. Fourth-quarter results are in already from 344 of the S&P 500 companies, and the quarter's earnings are estimated at this point to have fallen 2.8% from the year-ago period, according to IBES data from Refinitiv. Most strategists expect little improvement for the season, and analysts now forecast S&P 500 earnings falling 3.7% year-over-year in the first quarter of 2023 and 3.1% for the second quarter. The S&P 500 notched its biggest percentage weekly decline since mid-December last week, though the index is up about 7% for the year to date.
According to two separate indices existing home prices rose to the highest level in 6 years. Joe Raedle | Getty ImagesThe U.S. housing market cooled off pretty dramatically last year, after mortgage rates more than doubled from historic lows. Now, as demand appears to be coming back into the market, due to a slight drop in mortgage rates, prices are pushing back. But mortgage rates began to fall in December, and prices reacted immediately. Lower mortgage rates are driving the new demand.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailSupply-driven inflation will be stickier than expected, says Federated Hermes' DeNichiloWilliam Lee, chief economist at the Milken Institute, and Stephen DeNichilo, Federated Hermes portfolio manager, join ‘Power Lunch’ to react to Fed Chair Jerome Powell’s question-and-answer session at The Economic Club of Washington, D.C., this afternoon.
"It's going to take some time" for disinflation to spread through the economy, Powell said in a news conference following the Fed's latest quarter-point interest rate increase. He said he expects a couple more rate hikes still to go, and, "given our outlook, I just I don't see us cutting rates this year." Rate cuts, they expect, will start in September - a view Powell said Wednesday is driven by the expectation of fast-receding inflation. Since the 1990s, the interlude between rate hikes and rate cuts has varied from as long as 18 months in 1997-1998 to as short as five months in 1995. The Fed, Powell said Wednesday, cannot risk doing too little.
A screen displays the Fed rate announcement as a trader works on the floor of the New York Stock Exchange (NYSE), November 2, 2022. Brendan McDermid | ReutersThe U.S. Federal Reserve, European Central Bank and Bank of England are all expected to hike interest rates once again this week, as they make their first policy announcements of 2023. Economists will be watching policymakers' rhetoric closely for clues on the path of future rate hikes this year, as the three major central banks try to engineer a soft landing for their respective economies without allowing inflation to regain momentum. The market is now pricing in this eventuality, but the key question is what the FOMC will indicate about further rate hikes in 2023. "Fewer hikes might be needed if the recent weakening in business confidence captured by the survey data depresses hiring and investment more than we think, substituting for additional rate hikes," Mericle said.
Morning Bid: A quart and two halves
  + stars: | 2023-02-01 | by ( ) www.reuters.com   time to read: +5 min
A look at the day ahead in U.S. and global markets from Mike Dolan. February kicked off on Wednesday without too much trepidation about how all that will pan out. Before the Fed announcement, ADP releases its January private sector employment readout for last month and markets will also scan the December JOLTS job openings report. While markets await the 'Triple-A' of Big Tech releases on Thursday, Meta (META.O) is due to report later today and the dour news from elsewhere in the tech sector kept coming. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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