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By Joe Hoppe
Barclays PLC said Monday that Chief Executive Officer C.S. Venkatakrishnan has been diagnosed with non-Hodgkin lymphoma, with treatment expected to last 12 to 16 weeks.
The FTSE 100-listed bank said the cancer has been detected early and the prognosis is good. Mr. Venkatakrishnan will continue to actively manage the company during the treatment period.
Write to Joe Hoppe at joseph.hoppe@wsj.com
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BANGKOK — Shares skidded in Asia on Monday, with Hong Kong briefly dipping more than 4% following weekend protests in various cities over China’s strict zero-COVID lockdowns.
U.S. futures were lower after a mixed, shortened session Friday on Wall Street. Oil prices fell more than $2 a barrel.
The unrest in China is the boldest show of public dissent against the ruling Communist Party in years. It followed complaints that policies aimed at eradicating the coronavirus by isolating every case might have worsened the death toll in an apartment fire in Urumqi in the northwestern Xinjiang region.
China’s infection rate has been lower than in the United States and other countries, but the authorities are facing rising resentment over the economic and human costs of the approach known as “zero-COVID” as businesses close and families are isolated for weeks with limited access to food and medicine.
“For investors, when it comes to China, trying to predict with any degree the reopening certainty that has no certainty, basis, or track record to go by is looking like a dangerous game in the context of the disquietening protests and the colossal challenge China’s leaders now have on their hands,” Stephen Innes of SPI Asset Management said in a commentary.
By midday Monday, Hong Kong’s Hang Seng was 2% lower at 17,225.41 and the Shanghai Composite index had declined 1% to 3,069.66.
On Friday, China’s central bank sought to boost the economy by easing its reserve requirement ratio, the proportion of assets banks must hold in reserve, by a quarter percentage point to 7.8%.
“The cuts are a bid to support weakening economic growth dragged down not only by COVID restrictions but also a deeper property market rout,” Mizuho Bank noted in a report. However, it said, that news was overshadowed by rising numbers of virus cases and the protests.
Tokyo’s Nikkei 225 index shed 0.5% to 28,131.00 and the Kospi in Seoul lost 1.1% to 2,411.34. In Sydney, the S&P/ASX 200 shed 0.4% to 7,230.30 following the release of weaker than expected retail sales data.
Bangkok’s SET was 0.1% lower while the Sensex in Mumbai added 0.2%.
On Friday, when markets closed at 1 p.m. Eastern following the Thanksgiving day holiday on Thursday, the S&P 500 fell less than 0.1% to close at 4,026.12.
Nearly 70% of stocks in the benchmark index gained ground, but the broader market was dragged lower by technology companies, whose high valuations give them more heft in pushing the market higher or lower.
The Dow Jones Industrial Average rose 0.5% to 34,347.03. The Nasdaq fell 0.5% to 11,226.36.
Long-term bond yields were relatively stable but still hovered around multi-decade highs. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.70% from 3.69% late Wednesday.
Investors remain concerned about whether the Federal Reserve can tame the hottest inflation in decades by raising interest rates without going too far and causing a recession.
The central bank’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. It has warned it may have to ultimately raise rates to previously unanticipated levels to rein in high prices on everything from food to clothing.
Wall Street gets several big economic updates this week. The Conference Board business group will release its November report on consumer confidence and the U.S. government will release its closely watched monthly employment report.
In other trading Monday, U.S. benchmark crude oil lost $2.24 to $74.04 per barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.66 on Friday to $76.28 per barrel.
Brent crude, which is used to price oil for international trading, sank $2.37 to $81.34 per barrel.
The dollar fell to 138.57 Japanese yen from 139.28 yen. The euro slipped to $1.0358 from $1.0379.
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U.S. stock-index futures sank Sunday night, as Asian markets fell following widespread public demonstrations in China and as oil prices hit a 2022 low.
Dow Jones Industrial Average futures
YM00,
fell more than 150 points, or 0.5%, as of 10 p.m. Eastern, while S&P 500 futures
ES00,
and Nasdaq-100 futures
NQ00,
dropped even more sharply.
Wall Street finished mixed on Friday with the Dow notching its highest close since April 21. The S&P 500
SPX,
finished down 1.1 points, or less than 0.1%, at 4,026.12; the Dow Jones Industrial Average
DJIA,
closed 152.97 points, or 0.5%, higher at 34,347.03; and the Nasdaq Composite
COMP,
shed 58.96 points, or 0.5%, to 11,226.36.
Stocks in Asia declined Monday, led by a 2% fall by Hong Kong’s Hang Seng Index
HSI,
The Shanghai Composite
SHCOMP,
slid as well, as thousands of protesters in major Chinese cities, including Shanghai, called for President Xi Jinping to resign. The unprecedented protests were spurred by frustration with China’s strict lockdowns as part of its “zero-COVID” policy.
“Sentiment has turned sour as unrest across China grows,” Stephen Innes, managing partner at SPI Asset Management, said in a note Sunday night. “The risk of the situation escalating from here and short-term volatility remains high.”
Oil prices fell sharply Sunday as well, as investors worried about slipping demand in China. West Texas Intermediate crude futures
CL.1,
were last down more than 2%, at $74.27 a barrel, its lowest price year to date. Prices for Brent crude
BRNF23,
the international standard, sank as well.
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Several years before my father’s death, he offered me and my two siblings each an early “cash gift” from his estate in the amount of whatever the maximum non-taxable amount was at the time. He was an active investor and offered the gift in the form of the stock instead of cash. My siblings took the cash and I decided to take it in stock valued the same as the cash amount.
Fast forward five years: My father just passed away and my siblings bought expensive toys and luxury automobiles with their cash, while my stock is worth many times what it was when it was given to me. His will states that the three of us should share in equal parts of his estate, but my siblings are arguing that my now very valuable stock should be included as an asset to be split among the estate.
Legally, they have no leg to stand on, but both are insistent that I’m taking money that is morally theirs. There’s no changing their mind and I’m convinced that we’re headed for a family feud. I’m not sure what I should do. Had the stock value gone to zero in that time, they wouldn’t be arguing that I should get extra to compensate for my “bad gamble.”
The Other Brother
Them’s the breaks — in this case, the sudden screeching of car brakes.
Your siblings could have chosen stocks over cash, but they wanted immediate gratification. That was their decision, and they are going to have to take ownership of their choice and live with it. Buying stocks are more likely to pay off if you hold on to them over the long term. You did just that. Instead of buying a Ferrari or a Tesla
TSLA,
you effectively chose to invest your gift.
Show the same certainty now, and don’t cave to your siblings’ demands. Don’t allow them to bully you into selling.
Investing is all about delaying your gratification — the ability to live for today and save for a more comfortable tomorrow, as opposed to having everything today and to hell with tomorrow. The gamification of stock trading with apps such as Robinhood
HOOD,
which has extended its trading hours beyond the market’s official hours, is in part about getting that dopamine hit. (However, trading after hours comes with risks — chief among them warped stock prices.)
This dispute is about choice. If you had taken the cash, those stocks would still be part of your father’s estate, but you made the choice to take the stock. Your siblings had the same option and chose not to exercise it. Tell them, “I know it must be frustrating for you, but we all had the same opportunity. I took it. You took the cash.”
There is only one reason they missed out — and if they look in the rearview mirror of their respective luxury cars, they will see that reason staring right back at them.
You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
More from Quentin Fottrell:
• My girlfriend says I should tip in restaurants. I say waitstaff are just like construction and fast-food workers. Who’s right?
• ‘He was infatuated with her’: My brother had a drinking problem and took his own life. He left $6 million to his former girlfriend who used to buy him alcohol
• ‘She had a will, but it was null and void’: My friend and her sister are fighting over their mother’s life-insurance policy and bank account. Who should win out?
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With the S&P 500 holding above 4,000 and the CBOE Volatility Gauge, known as the “Vix” or Wall Street’s “fear gauge,”
VIX,
having fallen to one of its lowest levels of the year, many investors across Wall Street are beginning to wonder if the lows are finally in for stocks — especially now that the Federal Reserve has signaled a slower pace of interest rate hikes going forward.
But the fact remains: inflation is holding near four-decade highs and most economists expect the U.S. economy to slide into a recession next year.
The last six weeks have been kind to U.S. stocks. The S&P 500
SPX,
continued to climb after a stellar October for stocks, and as a result has been trading above its 200-day moving average for a couple of weeks now.
What’s more, after having led the market higher since mid-October, the Dow Jones Industrial Average
DJIA,
is on the cusp of exiting bear-market territory, having risen more than 19% from its late-September low.
Some analysts are worried that these recent successes could mean that U.S. stocks have become overbought. Independent analyst Helen Meisler made her case for this in a recent piece she wrote for CMC Markets.
“My estimation is that the market is slightly overbought on an intermediate-term basis, but could become fully overbought in early December,” Meisler said. And she’s hardly alone in anticipating that stocks might soon experience another pullback.
Morgan Stanley’s Mike Wilson, who has become one of Wall Street’s most closely followed analysts after anticipating this year’s bruising selloff, said earlier this week that he expects the S&P 500 will bottom around 3,000 during the first quarter of next year, resulting in a “terrific” buying opportunity.
With so much uncertainty plaguing the outlook for stocks, corporate profits, the economy and inflation, among other factors, here are a few things investors might want to parse before deciding whether an investable low in stocks has truly arrived, or not.
Earlier this month, equity strategists at Goldman Sachs Group
GS,
and Bank of America Merrill Lynch
BAC,
warned that they expect corporate earnings growth to stagnate next year. While analysts and corporations have cut their profit guidance, many on Wall Street expect more cuts to come heading into next year, as Wilson and others have said.
This could put more downward pressure on stocks as corporate earnings growth has slowed, but still limped along, so far this year, thanks in large part to surging profits for U.S. oil and gas companies.
One notable chart produced by analysts at Bank of America has made the rounds several times this year. It shows how over the past 70 years, U.S. stocks have tended not to bottom until after the Fed has cut interest-rates.
Typically, stocks don’t begin the long slog higher until after the Fed has squeezed in at least a few cuts, although during March 2020, the nadir of the COVID-19-inspired selloff coincided almost exactly with the Fed’s decision to slash rates back to zero and unleash massive monetary stimulus.
Then again, history is no guarantee of future performance, as market strategists are fond of saying.
Fed funds futures, which traders use to speculate on the path forward for the Fed funds rate, presently see interest-rates peaking in the middle of next year, with the first cut most likely arriving in the fourth quarter, according to the CME’s FedWatch tool.
However, with inflation still well above the Fed’s 2% target, it’s possible — perhaps even likely — that the central bank will need to keep interest rates higher for longer, inflicting more pain on stocks, said Mohannad Aama, a portfolio manager at Beam Capital.
“Everyone is expecting a cut in the second half of 2023,” Aama told MarketWatch. “However, ‘higher for longer’ will prove to be for the entire duration of 2023, which most folks haven’t modeled,” he said.
Higher interest rates for longer would be particularly bad news for growth stocks and the Nasdaq Composite
COMP,
which outperformed during the era of rock-bottom interest rates, market strategists say.
But if inflation doesn’t swiftly recede, the Fed might have little choice but to persevere, as several senior Fed officials — including Chairman Jerome Powell — have said in their public comments. While markets celebrated modestly softer-than-expected readings on October inflation, Aama believes wage growth hasn’t peaked yet, which could keep pressure on prices, among other factors.
Earlier this month, a team of analysts at Bank of America shared a model with clients which showed that inflation might not substantially dissipate until 2024. According to the most recent Fed “dot plot” of interest rate forecasts, senior Fed policy makers expect rates will peak next year.
But the Fed’s own forecasts rarely pan out. This has been especially true in recent years. For example, the Fed backed off the last time it tried to materially raise interest rates after President Donald Trump lashed out at the central bank and ructions rattled the repo market. Ultimately, the advent of the COVID-19 pandemic inspired the central bank to slash rates back to the zero bound.
Hopes that the U.S. economy might avoid a punishing recession have certainly helped to bolster stocks, market analysts said, but in the bond market, an increasingly inverted Treasury yield curve is sending the exact opposite message.
The yield on the 2-year Treasury note
TMUBMUSD02Y,
on Friday was trading more than 75 basis points higher than the 10-year note
TMUBMUSD10Y,
at around its most inverted level in more than 40 years.
At this point, both the 2s/10s yield curve and 3m/10s yield curve have become substantially inverted. Inverted yield curves are seen as reliable recession indicators, with historical data showing that a 3m/10s inversion is even more effective at predicting looming downturns than the 2s/10s inversion.
With markets sending mixed messages, market strategists said investors should pay more attention to the bond market.
“It’s not a perfect indicator, but when stock and bond markets differ I tend to believe the bond market,” said Steve Sosnick, chief strategist at Interactive Brokers.
To be sure, it’s possible that a swift resolution to the war in Ukraine could send global stocks higher, as the conflict has disrupted the flow of critical commodities including crude oil, natural gas and wheat, helping to stoke inflation around the world.
But some have also imagined how continued success on the part of the Ukrainians could provoke an escalation by Russia, which could be very, very bad for markets, not to mention humanity. As Clocktower Group’s Marko Papic said: “I actually think the biggest risk to the market is that Ukraine continues to illustrate to the world just how capable it is. Further successes by Ukraine could then prompt a reaction by Russia that is non-conventional. This would be the biggest risk [for U.S. stocks],” Papic said in emailed comments to MarketWatch.
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FRANKFURT, Germany — Western governments are aiming to cap the price of Russia’s oil exports in an attempt to limit the fossil fuel earnings that support Moscow’s budget, its military and the invasion of Ukraine.
The cap is set to take effect on Dec. 5, the same day the European Union will impose a boycott on most Russian oil — its crude that is shipped by sea. The EU was still negotiating what the price ceiling should be.
The twin measures could have an uncertain effect on the price of oil as worries over lost supply through the boycott compete with fears about lower demand from a slowing global economy.
Here are basic facts about the price cap, the EU embargo and what they could mean for consumers and the global economy:
WHAT IS THE PRICE CAP AND HOW WOULD IT WORK?
U.S. Treasury Secretary Janet Yellen has proposed the cap with other Group of 7 allies as a way to limit Russia’s earnings while keeping Russian oil flowing to the global economy. The aim is to hurt Moscow’s finances while avoiding a sharp oil price spike if Russia’s oil is suddenly taken off the global market.
Insurance companies and other firms needed to ship oil would only be able to deal with Russian crude if the oil is priced at or below the cap. Most of the insurers are located in the EU or the United Kingdom and could be required to participate in the cap. Without insurance, tanker owners may be reluctant to take on Russian oil and face obstacles in delivering it.
HOW WOULD OIL KEEP FLOWING TO THE GLOBAL ECONOMY?
Universal enforcement of the insurance ban, imposed by the EU and U.K. in earlier rounds of sanctions, could take so much Russian crude off the market that oil prices would spike, Western economies would suffer, and Russia would see increased earnings from whatever oil it can ship in defiance of the embargo.
Russia, the world’s No. 2 oil producer, has already rerouted much of its supply to India, China and other Asian countries at discounted prices after Western customers shunned it even before the EU ban.
One purpose of the cap is to provide a legal framework “to allow the flow of Russian oil to continue and to reduce the windfall revenue for Russia at the same time,” said Claudio Galimberti, a senior vice president of analysis at Rystad Energy.
“It is essential for the global crude markets that Russian oil still finds markets to be sold, after the EU ban is operative,” he added. “In the absence of that, global oil prices would skyrocket.”
WHAT EFFECT WOULD DIFFERENT CAP LEVELS HAVE?
A cap of between $65 and $70 per barrel could let Russia keep selling oil and while keeping its earnings to current levels. Russian oil is trading at around $63 per barrel, a considerable discount to international benchmark Brent.
A lower cap — at around $50 per barrel — would make it difficult for Russia to balance its state budget, with Moscow believed to require around $60 to $70 per barrel to do that, its so-called “fiscal break-even.”
However, that $50 cap would be still be above Russia’s cost of production of between $30 and $40 per barrel, giving Moscow an incentive to keep selling oil simply to avoid having to cap wells that can be hard to restart.
WHAT IF RUSSIA AND OTHER COUNTRIES WON’T GO ALONG?
Russian has said it will not observe a cap and will halt deliveries to countries that do. A lower cap of around $50 could be more likely to provoke that response, or Russia could halt the last of its remaining natural gas supplies to Europe.
China and India might not go along with the cap, while China could form its own insurance companies to replace those barred by U.S., U.K. and Europe.
Galimberti says China and India are already enjoying discounted oil and may not want to alienate Russia.
“China and India get Russia’s crude at a huge discount to Brent, therefore, they don’t necessarily need a price cap to continue to enjoy a discount,” he said. “By complying with the cap set by the G-7, they risk alienating Russia. As a result, we do believe that the compliance with the price cap would not be high.”
Russia could also turn to schemes such as transferring oil from ship to ship to disguise its origins and mixing its oil with other types to skirt the ban.
So it remains to be seen what effect the cap would have.
WHAT ABOUT THE EU EMBARGO?
The biggest impact from the EU embargo may come not on Dec. 5, as Europe finds new suppliers and Russian barrels are rerouted, but on Feb. 5, when Europe’s additional ban on refinery products made from oil — such as diesel fuel — come into effect.
Europe will have to turn to alternative supplies from the U.S., Middle East and India. “There is going to be a shortfall, and this will result in very high prices,” Galimberti said.
Europe still has many cars that run on diesel. The fuel also is used for truck transport to get a huge range of goods to consumers and to run agricultural machinery — so those higher costs will be spread throughout the economy.
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FRANKFURT, Germany — Western governments are aiming to cap the price of Russia’s oil exports in an attempt to limit the fossil fuel earnings that support Moscow’s budget, its military and the invasion of Ukraine.
The cap is set to take effect on Dec. 5, the same day the European Union will impose a boycott on most Russian oil — its crude that is shipped by sea. The EU was still negotiating what the price ceiling should be.
The twin measures could have an uncertain effect on the price of oil as worries over lost supply through the boycott compete with fears about lower demand from a slowing global economy.
Here are basic facts about the price cap, the EU embargo and what they could mean for consumers and the global economy:
WHAT IS THE PRICE CAP AND HOW WOULD IT WORK?
U.S. Treasury Secretary Janet Yellen has proposed the cap with other Group of 7 allies as a way to limit Russia’s earnings while keeping Russian oil flowing to the global economy. The aim is to hurt Moscow’s finances while avoiding a sharp oil price spike if Russia’s oil is suddenly taken off the global market.
Insurance companies and other firms needed to ship oil would only be able to deal with Russian crude if the oil is priced at or below the cap. Most of the insurers are located in the EU or the United Kingdom and could be required to participate in the cap. Without insurance, tanker owners may be reluctant to take on Russian oil and face obstacles in delivering it.
HOW WOULD OIL KEEP FLOWING TO THE GLOBAL ECONOMY?
Universal enforcement of the insurance ban, imposed by the EU and U.K. in earlier rounds of sanctions, could take so much Russian crude off the market that oil prices would spike, Western economies would suffer, and Russia would see increased earnings from whatever oil it can ship in defiance of the embargo.
Russia, the world’s No. 2 oil producer, has already rerouted much of its supply to India, China and other Asian countries at discounted prices after Western customers shunned it even before the EU ban.
One purpose of the cap is to provide a legal framework “to allow the flow of Russian oil to continue and to reduce the windfall revenue for Russia at the same time,” said Claudio Galimberti, a senior vice president of analysis at Rystad Energy.
“It is essential for the global crude markets that Russian oil still finds markets to be sold, after the EU ban is operative,” he added. “In the absence of that, global oil prices would skyrocket.”
WHAT EFFECT WOULD DIFFERENT CAP LEVELS HAVE?
A cap of between $65 and $70 per barrel could let Russia keep selling oil and while keeping its earnings to current levels. Russian oil is trading at around $63 per barrel, a considerable discount to international benchmark Brent.
A lower cap — at around $50 per barrel — would make it difficult for Russia to balance its state budget, with Moscow believed to require around $60 to $70 per barrel to do that, its so-called “fiscal break-even.”
However, that $50 cap would be still be above Russia’s cost of production of between $30 and $40 per barrel, giving Moscow an incentive to keep selling oil simply to avoid having to cap wells that can be hard to restart.
WHAT IF RUSSIA AND OTHER COUNTRIES WON’T GO ALONG?
Russian has said it will not observe a cap and will halt deliveries to countries that do. A lower cap of around $50 could be more likely to provoke that response, or Russia could halt the last of its remaining natural gas supplies to Europe.
China and India might not go along with the cap, while China could form its own insurance companies to replace those barred by U.S., U.K. and Europe.
Galimberti says China and India are already enjoying discounted oil and may not want to alienate Russia.
“China and India get Russia’s crude at a huge discount to Brent, therefore, they don’t necessarily need a price cap to continue to enjoy a discount,” he said. “By complying with the cap set by the G-7, they risk alienating Russia. As a result, we do believe that the compliance with the price cap would not be high.”
Russia could also turn to schemes such as transferring oil from ship to ship to disguise its origins and mixing its oil with other types to skirt the ban.
So it remains to be seen what effect the cap would have.
WHAT ABOUT THE EU EMBARGO?
The biggest impact from the EU embargo may come not on Dec. 5, as Europe finds new suppliers and Russian barrels are rerouted, but on Feb. 5, when Europe’s additional ban on refinery products made from oil — such as diesel fuel — come into effect.
Europe will have to turn to alternative supplies from the U.S., Middle East and India. “There is going to be a shortfall, and this will result in very high prices,” Galimberti said.
Europe still has many cars that run on diesel. The fuel also is used for truck transport to get a huge range of goods to consumers and to run agricultural machinery — so those higher costs will be spread throughout the economy.
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ANKARA, Turkey — Turkey’s central bank delivered another outsized interest rate cut Thursday despite inflation running at more than 85% and other countries moving the opposite way to ease the pain of soaring prices.
The central bank said its Monetary Policy Committee decided to lower the benchmark policy rate by 1.5 percentage points to 9%, following a series of similar jumbo cuts.
The move is in line with President Recep Tayyip Erdogan’s unorthodox economic views that high borrowing costs cause high inflation, even though traditional economic thinking says raising interest rates help tame inflation.
Erdogan had called for a single-digit interest rate by the end of the year. He is counting on lower borrowing costs to propel the economy as Turkey gears up for presidential and parliamentary elections next June.
The bank had similarly cut borrowing costs by 1.5 points last month and by 1 point each in August and September. The Monetary Policy Committee announced, however, that the easing cycle would now come to a halt.
“Considering the increasing risks regarding global demand, the Committee evaluated that the current policy rate is adequate and decided to end the rate cut cycle that started in August,” it said in a statement.
Inflation hit a raging 85.51% in October, according to official statistics, making even basic necessities unaffordable for many. Independent researchers estimated, however, that actual price increases are much higher than the official figures.
The European Central Bank, U.S. Federal Reserve and other central banks around the world have taken the reverse course of Turkey, rapidly raising interest rates to clamp down on soaring consumer prices. Sweden raised its key rate by three-quarters of a percentage point on Thursday.
Their inflation rates are far below Turkey’s, running at 10.6% in the 19 countries using the euro currency, 9.3% in Sweden and 7.7% in the U.S. last month.
The Turkish lira has lost some 28% of its value against the U.S. dollar since the beginning of the year — on top of taking an even worse battering in 2021.
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STOCKHOLM — Sweden’s central bank followed other central banks in undertaking a big increase to its key interest rate to combat inflation, saying Thursday that high prices are undermining people’s purchasing power and making it tough for households and companies to plan their finances.
Riksbanken said the hike of three-quarters of a percentage point pushes the key rate to 2.5% — the highest in 14 years, according to Swedish news agency TT — and is meant “to bring down inflation and safeguard the inflation target.”
Consumer prices rose 9.3% in October from a year earlier in the European Union country, lower than the 9.7% seen in September.
The big rate increase in Sweden, which does not use the euro currency so it is not part of the European Central Bank’s decision-making, builds on the jumbo full percentage point hike made in September.
It comes as the ECB, U.S. Federal Reserve and other central banks also have made large rate increases to fight inflation that has been squeezing people around the world.
In Sweden, the forecast “shows that the policy rate will probably be raised further at the beginning of next year and then be just below 3%,” the bank said.
“It is still difficult to assess how inflation will develop and the Riksbank will adapt monetary policy as necessary to ensure that inflation is brought back to the target within a reasonable time,” the bank said in a statement.
The decision on the policy rate will apply with effect from Nov. 30.
———
This story has been corrected to show that the rate of 2.5%, not the rate increase, is the highest in 14 years.
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WASHINGTON — Federal Reserve officials at their last meeting saw “very few signs that inflation pressures were abating” before raising their benchmark interest rate by a substantial three-quarters of a point for a fourth straight time.
Rising wages, the result of a strong job market, combined with weak productivity growth, were “inconsistent” with the Fed’s ability to meet its 2% target for annual inflation, the policymakers concluded, according to the minutes of their Nov. 1-2 meeting released Wednesday.
But they also agreed that smaller rate hikes “would likely soon be appropriate.″ The Fed is widely expected to slow its rate hikes to a half-point increase when it next meets in mid-December.
At their meeting early this month, the Fed officials also expressed uncertainty about how long it might take for their rate hikes to slow the economy enough to tame inflation. Chair Jerome Powell stressed at a news conference after this month’s meeting that that the Fed isn’t even close to declaring victory in its fight to curb high inflation.
Still, some of the policymakers expressed hope that falling commodity prices and the unsnarling of supply chain bottlenecks “should contribute to lower inflation in the medium term.’’ Earlier this month, the government reported that price increases moderated in October in a sign that the inflation pressures might be starting to ease. Consumer inflation reached 7.7% in October from a year earlier and 0.4% from September. The year-over-year increase was the smallest rise since January.
Wednesday’s minutes revealed that Fed officials expected ongoing rate increases to be “essential’’ to keep Americans from expecting inflation to continue indefinitely. When people expect further high inflation, they act in ways that can make those expectations self-fulfilling — by, for example, demanding higher wages and spending vigorously before prices can further accelerate.
The Fed officials noted that employers were resisting layoffs even as the economy slowed, apparently “keen” to hold onto workers after a year and a half of severe labor shortages. The U.S. unemployment rate is 3.7%, just above a half-century low.
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Credit Suisse Group AG shares tumbled in Wednesday morning trading after the bank said asset outflows at its wealth-management business would lead to a fifth consecutive quarterly loss.
Shares
CS,
CSGN,
at 0830 GMT were down 4.9% to CHF3.66.
The Swiss lender said it expects to post a loss before taxes of around 1.5 billion Swiss francs ($1.58 billion) in the fourth quarter, after lower deposits and assets under management led to reduced commissions and fees.
The bank, Switzerland’s second-largest by assets, said that it net-asset outflows in the quarter to Nov. 11 were around 6%, or $88.3 billion of its total $1.47 trillion assets under management.
At the bank’s wealth-management arm, its key business serving the world’s rich, customers removed $66.7 billion.
It came after the Zurich-based company experienced deposit and net-asset outflows in the first two weeks of October, it said, after social-media reports and a spike in credit-default swaps caused a frenzy over the bank’s financial position.
The bank said the outflows led its liquidity to fall below some local-level legal requirements, but it maintained its required group-level liquidity and funding ratios at all times.
Write to Ed Frankl at edward.frankl@dowjones.com
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WELLINGTON, New Zealand — New Zealand’s central bank hiked interest rates Wednesday by a record amount as it tries to get inflation under control.
The Reserve Bank of New Zealand increased its benchmark rate by three-quarters of a point to 4.25%.
It’s the first time the bank has raised rates by more than a half-point since introducing the Official Cash Rate in 1999. The new rate is the highest in New Zealand since early 2009.
New Zealand’s inflation rate is currently 7.2%, well above the bank’s target of 1% to 3%. The nation’s unemployment rate is 3.3%.
The bank also sharply revised upwards its projected peak for its benchmark rate, which it now expects it to reach 5.5% next year before it decreases. It predicted a sharp rise in unemployment next year and for the economy to dip briefly into a shallow recession.
The New Zealand dollar rose on the news and was trading at around 62 U.S. cents.
The U.S. Federal Reserve and other central banks around the world have been aggressively hiking interest rates to battle inflation. The Fed’s key short-term rate is now set at 3.75% to 4%, up from near zero as recently as last March.
New Zealand Reserve Bank Governor Adrian Orr had a message for consumers.
“Think harder about your spending. Think about saving rather than consuming, I know that’s a strange concept,” he said. “Just cool the jets.”
Orr said the bank’s monetary policy committee had agreed that interest rates needed to go higher, and sooner than previously indicated, to ensure inflation returned to its target level.
“Core consumer price inflation remains too high, employment is beyond its maximum sustainable level, and near-term inflation expectations have risen. So this is quite a heightened inflation environment,” Orr told reporters.
He said the committee had considered raising rates even more on Wednesday, by a full 1%, before settling on the 0.75% hike.
He said inflation was “no-one’s friend” and that a small recession might be needed to get it down.
“In order to rid the country of inflation we need to reduce spending levels. That means that we will have a period of negative GDP growth, we think to the tune of around 1 percent of GDP,” Orr said. “So in that sense it’s a shallow period and at the moment, we’re saying that’s around the second half of next year.”
Orr said he expects house prices to decrease by a total of 20% by the middle of next year from their peak last November. House prices are currently down by about 11% from their peak.
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Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.
That was the sobering forecast issued Tuesday by the Paris-based Organization for Economic Cooperation and Development. In the OECD’s estimation, the world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021.
Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2%.
“It is true we are not predicting a global recession,” OECD Secretary-General Mathias Cormann said at a news conference. “But this is a very, very challenging outlook, and I don’t think that anyone will take great comfort from the projection of 2.2% global growth.”
The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses. Figures from the organization showed fully 18% of economic output in member countries being spent on energy after Russia’s invasion of Ukraine helped drive up prices for oil and natural gas. That has confronted the world with an energy crisis on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.
Inflation — largely fueled by high energy prices — “has become broad-based and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support measures that many governments have been rolling out.”
In its latest forecast, OECD predicts that the U.S. Federal Reserve’s aggressive drive to tame inflation with higher interest rates — it’s raised its benchmark rate six times this year, in substantial increments — will grind the U.S. economy to a near-halt. It expects the United States, the world’s largest economy, to grow just 1.8% this year (down drastically from 5.9% in 2021), 0.5% in 2023 and 1% in 2024.
That grim outlook is widely shared. Most economists expect the United States to enter at least a mild recession next year, though the OECD did not specifically predict one.
The report foresees U.S. inflation, though decelerating, to remain well above the Fed’s 2% annual target next year and into 2024.
The OECD’s forecast for the 19 European countries that share the euro currency, which are enduring an energy crisis from Russia’s war, is hardly brighter. The organization expects the eurozone to collectively manage just 0.5% growth next year before accelerating slightly to 1.4% in 2024.
And it expects inflation to continue squeezing the continent: The OECD predicts that consumer prices, which rose just 2.6% in 2021, will jump 8.3% for all of 2022 and 6.8% in 2023.
Whatever growth the international economy produces next year, the OECD says, will come largely from the emerging market countries of Asia: Together, it estimates, they will account for three-quarters of world growth next year while the U.S. and European economies falter. India’s economy, for instance, is expected to grow 6.6% this year and 5.7% next year.
China’s economy, which not long ago boasted double-digit annual growth, will expand just 3.3% this year and 4.6% in 2023. The world’s second-biggest economy has been hobbled by weakness in its real estate markets, high debts and draconian zero-COVID policies that have disrupted commerce.
Fueled by vast government spending and record-low borrowing rates, the world economy soared out of the pandemic recession of early 2020. The recovery was so strong that it overwhelmed factories, ports and freight yards, causing shortages and higher prices. Moscow’s invasion of Ukraine in February disrupted trade in energy and food and further accelerated prices.
After decades of low prices and ultra-low interest rates, the consequences of chronically high inflation and interest rates are unpredictable.
“Financial strategies put in place during the long period of hyper-low interest rates may be exposed by rapidly rising rates and exert stress in unexpected ways,’’ the OECD said in Tuesday’s report.
The higher interest rates being engineered by the Fed and other central banks will make it difficult for heavily indebted governments, businesses and consumers to pay their bills. In particular, a stronger U.S. dollar, arising in part from higher U.S. rates, will imperil foreign companies that borrowed in the U.S. currency and may lack the means to repay their now-costlier debt.
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Tesla Inc. shares on Monday were poised to end at a fresh two-year low, with shares of other electric-vehicle makers also underperforming the broader equity market as worries about China’s COVID-19 lockdowns re-emerged and oil futures prices dropped to their lowest level since January.
Shares of Tesla
TSLA,
extended their losing streak to a fourth session and were on track for their lowest close since Nov. 20, 2020, when they closed at $163.20. The stock was the 10th worst performer in the S&P 500 index
SPX,
and fourth worst in the Nasdaq 100
COMP,
— and the most active stock on both exchanges.
American depositary shares of several China-based EV makers, including Nio Inc.
NIO,
and XPeng Inc.
XPEV,
also underperformed the broader market. In contrast, shares of General Motors Co.
GM,
and Ford Motor Co.
F,
merely edged lower.
The energy sector was taking a broad beating as well, with the SPDR Energy Select Sector ETF
XLE,
looking at a four-week low.
Related: GM’s EV roadmap is ‘ambitious,’ but Wall Street doesn’t give it full credit just yet
Tesla’s underperformance as compared with the broader indexes holds on a monthly and yearly basis as well. The stock is down more than 25% so far in November and 52% this year.
If the trend continues, this would be the worst yearly performance for the stock on record.
The S&P has lost about 17% year to date and has clawed back to a 2% gain so far in November.
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For the first time ever, rich nations, including a top-polluting U.S., will pay for the climate-change damage inflicted upon poorer nations.
These smaller economies are often the source of the fossil fuels
CL00,
minerals
PICK,
and other raw materials behind the developed world’s modern conveniences and technologicial advancement, including many practices responsible for the Earth-warming emisisons. And yet the developing world shoulders the worst of the droughts, deadly heat, ruined crops and eroding coastlines that take lives and eat into economic growth.
The deal, called “loss and damage” in summit shorthand, was struck as the U.N.’s Conference of Parties, or COP27, gaveled to a close near dawn Sunday in Egypt. Official talks ended Friday, but negotiations extended into the weekend.
Read: Historic compensation fund approved at U.N. climate talks
It was a big win for poorer nations which have long sought money — sometimes viewed as reparations — because they are often the victims of climate-worsened floods, famines and storms despite contributing little directly to the pollution that heats up the globe. It took last-minute, pre-summit negotiations to even get the topic on the official agenda.
“Three long decades and we have finally delivered climate justice,” said Seve Paeniu, the finance minister of island nation Tuvalu, according to the Associated Press. “We have finally responded to the call of hundreds of millions of people across the world to help them address loss and damage.”
“ ‘Three long decades and we have finally delivered climate justice.’ ”
Pakistan’s environment minister, Sherry Rehman, said the establishment of the fund “is not about dispensing charity.” Pakistan, hit by devastating drought and more, dominated climate-change headlines this year.
“It is clearly a down payment on the longer investment in our joint futures,” she said, speaking for a coalition of the world’s poorest nations.
According to many conference participants, the U.S. was a late-stage roadblock to establishing this official payout language, though it signed off in the end. U.S. participation was also impacted once chief climate negotiator John Kerry tested positive for COVID-19, although he continued to work from his hotel.
According to the agreement, the fund would initially draw on contributions from developed countries and other private and public sources such as international financial institutions, including the World Bank and the International Monetary Fund.
While major emerging economies such as China wouldn’t automatically have to contribute, that option remains on the table. This is a key demand by the European Union and the U.S., who argue that China and other large polluters currently classified as “developing” countries have the financial clout and responsibility to pay their way.
The fund would be largely aimed at the most vulnerable nations, though there would be room for middle-income countries that are severely battered by climate disasters to get aid.
Attention on methane, a more-potent but shorter-lasting greenhouse gas than carbon, was considered a major win at the summit. Some 150 countries have now signed on to the voluntary Global Methane Pledge, an official effort to cap the release of the GHG whose reduction presents perhaps the easiest way to reduce the global warming.
Read more: Natural gas-focused methane pact expands at climate summit, minus China
With the pledge, countries representing 45% of global methane emissions have vowed to reduce their emissions by 30% by 2030. If methane-reduction pledges are met, the result would be equivalent to eliminating the GHG emissions from all of the world’s cars, trucks, buses and all two- and three-wheeled vehicles, according to the International Energy Agency.
China, the world’s largest polluter by some measures, has not signed the deadline-based pledge, but has agreed to reduce methane emissions.
COP27 talks wrapped without concrete progress on the contentious issue of shifting an overall 1.5 degrees Celsius temperature limit from a voluntary marker to an established requirement of nations. Most voluntary pacts among nations and private entities, including a vow by Amazon.com
AMZN,
Ford Motor
F,
Apple
AAPL,
and others signing on to a “First Movers” pledge, loosly use the 1.5-degree limit set in 2015 when talks took place in Paris.
Private banks, insurers and institutional investors representing $130 trillion said they would align their investments with the goal of keeping global warming to 1.5 degrees Celsius, toward a pledge to net-zero emissions economy-wide by 2050. Advocacy groups cheer the pledge and its expanding roster but are also keeping up pressure on the signatories to speed up progress toward this goal and to stop undermining the pledge with fossil-fuel investment.
Read: Here’s where the big U.S. banks stand up and fall down on climate change
The Egypt pact was also void of firmer language on emissions cutting and the desire by some officials to target all fossil fuels
NG00,
for a phase-down.
Natural gas, which is relatively cheaper to produce than other fossil fuels, has been the major alternative to more-polluting coal in electricity generation. Still, it has its own emissions risk.
In the U.S., for example, electricity is the most common energy source used for cooking — electricity often powered by gas. Still, about 38% of U.S. households use natural gas directly for cooking, according to the U.S. Energy Information Administration.
Natural gas providers also own an established pipeline infrastructure that may serve alternative energy, and is pushed by the industry as a viable alternative alongside solar, wind
ICLN,
and other means. The industry also promotes its efforts to cap methane leaks.
Related: World’s richest nations stick to 1.5-degree climate pledge despite energy crunch
“ ‘It is more than frustrating to see overdue steps on mitigation and the phase-out of fossil energies being stonewalled by a number of large emitters and oil producers.’”
With fossil fuels in their sight, the European Union and other nations fought back at what they considered backsliding in the Egyptian presidency’s overarching cover agreement and threatened to scuttle the rest of the process, while advancing their own draft. The package was revised again, removing most of the elements Europeans had objected to but adding none of the heightened ambition they were hoping for, the AP said.
Egypt has played a unique role as host, representative of Africa, which sits at the front lines of those hurt by climate change and yet, remaining loyal to its own fossil-fuel ambitions and those of OPEC nations.
Germany’s Foreign Minister Annalena Baerbock voiced frustration.
“It is more than frustrating to see overdue steps on mitigation and the phase-out of fossil energies being stonewalled by a number of large emitters and oil producers
XOM,
BP,
” she said.
The agreement includes a veiled reference to the benefits of natural gas as low- emission energy, despite many nations calling for a phase down of natural gas, which does contribute to climate change.
At least 636 representatives of the fossil fuel industry registered to attend the summit, a 25% increase over the industry’s presence last year, according to an analysis released by three advocacy groups.
More fossil fuel lobbyists are on the roster than any single national delegation, besides the UAE who has registered 1,070 delegates compared to 176 last year, according to a report from Corporate Accountability, Corporate Europe Observatory (CEO) and Global Witness (GW).
Frances Colón, senior director for International Climate Policy at the Center for American Progress, found plenty of fault with this round of talks.
“The final text reflects the outsized and corrupting presence of fossil fuel and big agricultural lobbyists at COP27, compounded by a lack of ambition from key, high-emitting countries,” she said, in a statement. “The agreement makes only a passing reference to the 1.5-degree Celsius warming goal and does not include any new language on phasing down or phasing out all fossil fuels
RB00,
— the only way to reach emissions reduction goals and secure a livable future.”
Colón also worried that the official statement did not adequately advance efforts. World leaders failed to reference the twin, interlocking crises of nature loss and climate change, and declined to link COP27 to next month’s U.N. biodiversity summit in Montreal.
“ ‘The agreement makes only a passing reference to the 1.5-degree Celsius warming goal and does not include any new language on phasing down or phasing out all fossil fuels — the only way to reach emissions reduction goals and secure a livable future.’”
While the new agreement doesn’t ratchet up calls for reducing emissions, it does retain language to keep alive the voluntary global goal of limiting warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit). The Egyptian presidency kept offering proposals that harkened back to 2015 Paris language which also mentioned a looser goal of 2 degrees.
This year’s pact also neglected to toughen the main sticking point from the previous COP, in Glasgow last year. At that time, China and India united to dig in unless coal language was softened. Nations this year did not expand on last year’s call to phase down global use of “unabated coal” even though India and other countries pushed to include oil and natural gas in language from Glasgow.
“We joined with many parties to propose a number of measures that would have contributed to this emissions peaking before 2025, as the science tells us is necessary. Not in this text,” the United Kingdom’s Alok Sharma said.
Climate campaigners are concerned that pushing for strong action to end fossil fuel use will be even harder at next year’s meeting, which will be hosted in Dubai, located in the oil-rich United Arab Emirates.
The Associated Press contributed.
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ATLANTA — Todd and Julie Chrisley were driven by greed as they engaged in an extensive bank fraud scheme and then hid their wealth from tax authorities while flaunting their lavish lifestyle, federal prosecutors said, arguing the reality television stars should receive lengthy prison sentences.
The Chrisleys gained fame with their show “Chrisley Knows Best,” which follows their tight-knit, boisterous family. They were found guilty on federal charges in June and are set to be sentenced by U.S. District Judge Eleanor Ross in a hearing that begins Monday and is likely to extend into Tuesday.
Using a process to calculate a sentencing guideline range based on several factors, federal prosecutors determined the upper end of that range is nearly 22 years for Todd Chrisley and about 12 and a half years for Julie Chrisley. The couple should also be ordered to pay restitution, prosecutors wrote in a court filing.
“The Chrisleys have built an empire based on the lie that their wealth came from dedication and hard work,” prosecutors wrote. “The jury’s unanimous verdict sets the record straight: Todd and Julie Chrisley are career swindlers who have made a living by jumping from one fraud scheme to another, lying to banks, stiffing vendors, and evading taxes at every corner.”
The Chrisleys disagree with the government’s guideline calculations. Todd Chrisley’s lawyers wrote in a filing that he should not face more than nine years in prison and that the judge should sentence him below the lower end of the guidelines. Julie Chrisley’s lawyers wrote that a reasonable sentence for her would be probation with special conditions and no prison time.
The Chrisleys were convicted in June on charges of bank fraud, tax evasion and conspiring to defraud the IRS. Julie Chrisley was also convicted of wire fraud and obstruction of justice.
Peter Tarantino, an accountant hired by the couple, was found guilty of conspiracy to defraud the IRS and willfully filing false tax returns. He is set to be sentenced along with the Chrisleys.
Prosecutors have said the couple submitted fake documents to banks and managed to secure more than $30 million in fraudulent loans. Once that scheme fell apart, they walked away from their responsibility to repay the loans when Todd Chrisley declared bankruptcy. While in bankruptcy, they started their reality show and “flaunted their wealth and lifestyle to the American public,” prosecutors wrote. When they began making millions from their show, they hid the money from the IRS to avoid paying taxes.
The Chrisleys submitted a false document to a grand jury that was investigating their crimes and then convinced friends and family members to tell lies while testifying under oath during their trial, prosecutors wrote. Neither of them has shown any remorse and they have, instead, blamed others for their own criminal conduct, prosecutors wrote.
“The Chrisleys are unique given the varied and wide-ranging scope of their fraudulent conduct and the extent to which they engaged in fraud and obstructive behavior for a prolonged period of time,” prosecutors wrote.
Todd Chrisley’s lawyers wrote in a court filing that the government never produced any evidence that he meant to defraud any of the banks and that the loss amount calculated by the government is incorrect. They also noted that the offenses of which he was convicted were committed a long time ago. He has no serious criminal history and has medical conditions that “would make imprisonment disproportionately harsh,” they wrote.
His lawyers submitted letters from friends and business associates that show “a history of good deeds and striving to help others.” People who rely on Chrisley — including his mother and the “scores of people” employed by his television shows — will be harmed while he’s in prison, his lawyers wrote.
They urged the judge to give him a prison sentence below the guideline range followed by supervised release and restitution.
Julie Chrisley’s lawyers wrote in a filing that she had a minimal role in the conspiracy and was not involved when the loans discussed in sentencing documents were obtained. She has no prior convictions, is an asset to her community and has “extraordinary family obligations,” her lawyers wrote, as they asked for a sentence of probation, restitution and community service.
The Chrisleys have three children together, including one who is 16, and also have full custody of the 10-year-old daughter of Todd Chrisley’s son from a prior marriage. Julie Chrisley is the primary caregiver to her ailing mother-in-law, the filing says. Her lawyers submitted letters from family and friends that show she is “hard-working, unfailingly selfless, devoted to her family and friend, highly respected by all who know her, and strong of character.”
If the judge does sentence both Chrisleys to prison, Julie Chrisley’s lawyers asked that their prison terms be staggered so she can remain on supervised release until her husband is done serving his sentence or until their granddaughter turns 18.
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NASSAU, Bahamas—Sam Bankman-Fried’s $32 billion crypto-trading empire collapsed in an incandescent bankruptcy last week, prompting irate customers, crypto acolytes and Silicon Valley bigwigs to ask how something that seemed so promising could have imploded so fast.
The emerging picture suggests FTX wasn’t simply felled by a rival, or undone by a bad trade or the relentless fall this year in the value of cryptocurrencies. Instead, it had long been a chaotic mess. From its earliest days, the firm was an unruly agglomeration of corporate entities, customer assets and Mr. Bankman-Fried himself, according to court papers, company balance sheets shown to bankers and interviews with employees and investors. No one could say exactly what belonged to whom. Prosecutors are now investigating its collapse.
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NEW YORK — Stocks wavered in afternoon trading on Wall Street Friday and are heading for losses for the week after several days of bumpy trading.
The S&P 500 fell 0.2% as of 12:26 p.m. Eastern. The benchmark index had traded as high as 0.8% earlier in the day. The Dow Jones Industrial Average rose 42 points, or 0.1%, to 33,593 and the Nasdaq fell 0.6%.
Small company stocks did better than the the rest of the market. The Russell 2000 rose 0.2%.
Major indexes are all on track for weekly losses.
Health care and financial companies were among the biggest gainers. UnitedHealth Group rose 2.9% and Charles Schwab rose 2%.
Energy stocks fell along with sliding energy prices. U.S. crude oil fell 2.8% and Exxon Mobil fell 1.4%.
Retailers made solid gains after several companies reported strong financial results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 10.3% and clothing retailer Gap rose 7.8% after beating analysts’ expectations. Foot Locker rose 2.9% after raising its profit and revenue forecast for the year.
The solid earnings from retailers cap off a shaky week for Wall Street as investors try to get a better sense of inflation’s path and its impact on consumers and businesses. Investors have been particularly anxious about the Federal Reserve’s fight against inflation and have been looking for signs that might allow the central bank to shift to less aggressive interest rate increases. That anxiety was heightened on Thursday after a Fed official suggested U.S. interest rates might have to be raised higher than expected to cool inflation.
“It’s all been the same story for a year,” said Keith Buchanan, portfolio manager at Globalt Investments. “It’s about what inflation is doing, how the Fed responds, and from there how does the consumer respond.”
The central bank has already warned that the main lending rate may have to rise to a more painful level than anybody had anticipated, possibly between 5% and 7%. The Fed’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March.
The Fed is trying to tame the hottest inflation in decades by making borrowing more difficult and curtailing spending. Several big measures of inflation have shown that prices are easing a bit, but other economic indicators show that consumers remain resilient, as does the jobs market.
The Fed’s strategy risks sending the economy into a recession if it hits the brakes too hard on economic growth. The latest mix of inflation and economic data has Wall Street trying to gauge whether the Fed needs to keep pushing along with interest rate increases and whether it can achieve its goal without severely crimping consumer spending or employment.
The U.S. reported this week that retail sales rose 1.3% in October as Americans increase their spending at stores, restaurants, and auto dealers, a sign of consumer resilience as the holiday shopping season begins. That’s not to say consumer behavior hasn’t been affected by inflation. Major retailers say Americans are holding out for sales, refusing to pay full price, with the cost of gasoline, rent, food and almost everything else much higher than it was last year.
European markets were higher and Asian markets closed mixed overnight.
Bond yields rose. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.82% from 3.77%.
———
Joe McDonald and Matt Ott contributed to this report.
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The U.S. leading economic index fell 0.8% in October, the Conference Board said Friday.
Economists polled by The Wall Street Journal had expected a 0.4% fall.
This is the eighth straight decline in the leading index.
The long period of declines suggests “the economy is possibly in a recession,” said Ataman Ozyildirim, senior director of economic research at the Conference Board. He said the data show a recession is likely to start around the end of the year and last through mid-2023.
The coincident index, which measures current conditions, rose 0.2% in October after a 0.1% gain in the prior month. The lagging index increased by 0.1%, matching the September gain.
The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.
Stocks
DJIA,
SPX,
were trading higher on Friday morning and the yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.8%.
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The numbers: Existing-home sales fell 5.9% to a seasonally adjusted annual rate of 4.43 million in October, the National Association of Realtors said Friday. Compared with October 2021, home sales were down 28.4%.
Economists polled by the Wall Street Journal had expected an decrease to 4.37 million units.
The level of sales is the lowest since December 2011 excluding the 2020 pandemic.
This is also the ninth straight monthly decline in sales, the longest streak on record.
Key details: The median price for an existing home was $379,100 up 6.6% from October 2021.
But price gains are decelerating. Prices were up over 20% on a year-on-year basis earlier this year.
Housing inventory fell 0.8% to 1.22 million units in October. Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 3.1 months in September and 2.4 months a year ago.
A 6-month supply of homes is generally viewed as indicative of a balanced market.
Sales declined in all regions of the country.
Big picture: Home sales have dropped as mortgage rates have risen sharply and affordability has dropped.
Softer inflation data in October have led to a drop in mortgage rates, which could lead for a floor on sales.
At the same time, Federal Reserve officials may pencil in a “peak” interest rate above 5% at the policy meeting next month.
Economists see home prices have further to fall in this market.
What the NAR is saying: Home sales have been very low and the softness could continue for a few months. But sales could pick up early next year if the mortgage rate has peaked, said Lawrence Yun, chief economist at the NAR.
Market reaction: Stocks
DJIA,
SPX,
opened lower on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.79%.
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