Good news for global markets! Yesterday’s impressive rally in U.S. stocks and bonds has spread worldwide this morning as investors observe central banks making progress in their battle against inflation. Additionally, a breakthrough in the House last night suggests that a government shutdown may be avoided. S&P 500 futures indicate further gains at the opening bell. The question now is whether this is a temporary relief from inflation or the beginning of a sustained decline in rising costs and interest rates.
What’s exciting investors is the shift in market discussion from potential interest rate hikes to cuts following yesterday’s Consumer Price Index data, which was lower than expected. This has led to speculation about the implications for stocks. President Biden, whose poll ratings have been affected by inflation, also expressed satisfaction with the numbers.
Other positive data points have emerged today. Inflation in the UK has dropped to its lowest level in two years, and consumer spending and industrial output in China have rebounded, signaling hope for the world’s second-largest economy.
Optimistic market participants are adjusting their expectations for rate cuts. Futures markets this morning indicate that the Federal Reserve may start reducing borrowing costs as early as May, which is sooner than previous estimates of closer to the end of 2024.
However, some experts are more cautious. Mohit Kumar, the chief financial economist at Jefferies, believes that significant rate cuts will begin after next year’s presidential election. Jefferies predicts that the Fed’s prime lending rate will drop to 3 percent by the end of 2025 from its current level of 5.25 to 5.5 percent.
There are also pessimists who argue that yesterday’s “core” inflation data, which excludes volatile energy and food prices, was only slightly below estimates. Jamie Dimon of JPMorgan Chase expressed concern that inflation may not dissipate quickly.
In addition to positive market trends, the House’s passage of a stopgap spending bill has provided another reason for market optimism. This bill removes the risk of a government shutdown, which could have had a negative impact on the U.S. economy. However, caution is still advised due to political tensions in Congress and the potential for disruptive procedural votes.
Other news:
- The U.S. and China have reached a climate agreement, pledging to increase their use of renewable energy sources.
- The chair of the FDIC, Martin Gruenberg, faced tough questions from senators regarding the agency’s culture and handling of harassment and discrimination accusations.
- A profile of David Zaslav, the CEO of Warner Bros. Discovery, and his oversight of CNN has been published in The Times.
- Rory McIlroy has resigned from the PGA Tour’s board following the tour’s agreement with Saudi Arabia’s sovereign wealth fund.
- Evident, a data start-up, has ranked banks based on their adoption of artificial intelligence (AI), with JPMorgan and Capital One leading the way.
- Nikki Haley is gaining ground in the Republican presidential primary and may receive backing from prominent corporate donors such as Ken Griffin and Jamie Dimon.
- As Google faces an antitrust trial, comparisons are being drawn to Microsoft’s 1990s case, where the government accused the company of wielding monopolistic power.