Money
Brace, brace, brace: commodity prices surge
It was all meant to fall into place: The world gets vaccinated, and the recovery from the pandemic-doom begins. But soaring energy prices are about to put the crunch on China, and then the rest of the world.
The latest bout of commodity-price surge has taken markets by surprise just as major central banks were planning to find a path out of their stimulus measures.
But the price of commodities may put an end to that sort of wishful thinking on the part of federal treasurers and the Fed.
OIL, GAS RISE
Oil’s climbed to more than $80 a barrel for the first time in three years, natural gas for October delivery traded at the costliest in seven years and the Bloomberg Commodity Spot Index rose to the highest level in a decade.
The rising cost of power, as well as intermittent power cuts to Chinese factories as Beijing tries to force reduced emissions, could now lead to surging prices for Chinese goods.
Sharp cuts in production across a range of energy-intensive industries in China are now expected to drag growth lower this year, with economists from Goldman Sachs Group Inc. to Morgan Stanley cutting forecasts.
WALL STREET BRACES FOR IMPACT
Investors have been caught by surprise, having spend much of the year planning for a sudden recovery. Wall Street stocks ended sharply lower on Tuesday in a broad sell-off driven by rising U.S. Treasury yields.
It was the S&P 500 index’s biggest one-day percentage drop since May, and the Nasdaq’s largest since March.
The S&P 500 and the Nasdaq Composite index were on track for their largest monthly declines since September 2020.
“The big picture is the sudden surge in the past week of yields, which has led to a ‘sell first, ask questions later’ mentality.”
Ryan Detrick, senior market strategist at LPL Financial
In the US, rising costs for households and companies are hitting confidence while pushing inflation faster than economists had expected only a few months ago.
In the U.K., consumer confidence fell in September at its sharpest pace since almost a year ago as Britons brace for a looming income squeeze.
All three major U.S. stock indexes slid nearly 2%, with tech and tech-adjacent stocks weighing heaviest as investors lost their risk appetite.
“(But) there are multiple factors weighing on sentiment today,” Detrick added. “The back-and-forth in Washington with the debt ceiling and the spending bill and potential higher taxes have weighed on overall investor psyche and has led to a pretty good sized sell-off.”
THE SILVER LINING
Thankfully for advanced economies, they have been able to recover from the “COVID recession” better than anticipated a year ago.
Many officials around the world are still hopeful the current spike in prices will fade without the need for action.
European Central Bank President Christine Lagarde believes the key challenge for policy makers is that “we do not overreact to transitory supply shocks that have no bearing on the medium term.”
Money
U.S. jobs report, Fed decisions, and Japan’s economic risks explained
January US jobs report sparks uncertainty; analysts debate impact on Federal Reserve policy and market confidence.
January US jobs report sparks uncertainty; analysts debate impact on Federal Reserve policy and market confidence.
The January US jobs report shows a mixed picture for the economy, with payroll revisions and steady unemployment leaving analysts questioning the impact on Federal Reserve policy. We break down what the numbers mean for interest rates and market confidence.
US stock markets could face turbulence as investors digest the latest jobs data. David Scutt from StoneX explains how these figures may influence equities and what the outlook is for global markets.
Meanwhile, developments in Japan and a strengthening yen could spark new macroeconomic risks. From carry trades to unexpected shocks, we explore how these factors ripple across the global economy.
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#USJobsReport #FederalReserve #StockMarket #MacroRisks #JapanEconomy #GlobalMarkets #CurrencyTrading #EconomicUpdate
Money
Alphabet launches $20B bond to fund AI expansion
Alphabet’s $20B bond offering highlights investor confidence in AI growth, enabling funding without shareholder dilution.
Alphabet’s $20B bond offering highlights investor confidence in AI growth, enabling funding without shareholder dilution.
Alphabet has launched a record $20 billion bond offering to finance its massive AI infrastructure build-out, signalling strong investor confidence in the company’s growth strategy. The oversubscribed sale shows that investors are betting on Alphabet’s AI potential and long-term returns.
By using debt instead of equity, Alphabet can raise funds without diluting shareholders. The money will support AI research, advanced computing, and other strategic projects, cementing the company’s leadership in the sector.
Brad Gastwirth from Circular Technologies explains how corporate debt is reshaping tech financing and how investors perceive AI-linked bonds. This record issuance could set a trend for other tech companies looking to fund innovation.
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Money
AI tax tool sparks market turmoil for financial firms
Major financial firms’ stocks fell sharply after an AI tax tool launch, raising investor fears of disruption in advisory services.
Major financial firms’ stocks fell sharply after an AI tax tool launch, raising investor fears of disruption in advisory services.
Shares of major financial services firms tumbled after the launch of a new AI-powered tax planning tool. LPL Financial dropped nearly 11%, while Charles Schwab and Raymond James Financial fell more than 9%, signalling investor concern over AI disrupting traditional advisory services.
Morgan Stanley also saw a 4% decline as fears grow that AI could replace some of the most profitable offerings of established firms. Earlier this year, the introduction of other AI models already caused turbulence in software stocks, suggesting this could be a broader trend affecting multiple sectors.
The iShares U.S. Broker-Dealers and Securities ETF was down 4% on Tuesday, reflecting the market-wide uncertainty surrounding AI adoption in finance. Investors are closely watching whether AI will complement or cannibalise the industry’s core services.
#AIImpact #WallStreet #FinancialMarkets #InvestingNews #MorganStanley #CharlesSchwab #RaymondJames #FinTech
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