ReportWire

Tag: U.S. Economy

  • Bank of Japan shocks global markets with bond yield shift

    Bank of Japan shocks global markets with bond yield shift

    [ad_1]

    The Bank of Japan on Tuesday shocked global markets by widening the target range for its 10-year government bond yield.

    Kazuhiro Nogi | Afp | Getty Images

    Global markets were jolted overnight after the Bank of Japan unexpectedly widened its target range for 10-year Japanese government bond yields, sparking a sell-off in bonds and stocks around the world.

    The central bank caught markets off guard by tweaking its yield curve control (YCC) policy to allow the yield on the 10-year Japanese government bond (JGB) to move 50 basis points either side of its 0% target, up from 25 basis points previously, in a move aimed at cushioning the effects of protracted monetary stimulus measures.

    In a policy statement, the BOJ said the move was intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.”

    The central bank introduced its yield curve control mechanism in September 2016, with the intention of lifting inflation toward its 2% target after a prolonged period of economic stagnation and ultralow inflation.

    The BOJ — an outlier compared with most major central banks — also left its benchmark interest rate unchanged at -0.1% on Tuesday and vowed to significantly increase the rate of its 10-year government bond purchases, retaining its ultra-loose monetary policy stance. In contrast, other central banks around the world are continuing to hike rates and tighten monetary policy aggressively in an effort to rein in sky-high inflation.

    The YCC change prompted the yen and bond yields around the world to rise, while stocks in Asia-Pacific tanked. Japan’s Nikkei 225 closed down 2.5% on Tuesday afternoon. The 10-year JGB yield briefly climbed to more than 0.43%, its highest level since 2015.

    By midafternoon in Europe, the U.S. dollar was down 3.3% against the surging yen. The yen’s rally saw the currency notch the biggest single-day gain against the U.S. dollar since March 1995 (27 years, eight months, 20 days), according to FactSet currency data.

    U.S. Treasury yields spiked, with the 10-year note climbing by around 7 basis points to just below 3.66% and the 30-year bond rising by more than 8 basis points to 3.7078%. Yields move inversely to prices.

    Shares in Europe retreated initially, with the pan-European Stoxx 600 shedding 1% in early trade before recovering most of its losses by late morning. European government bonds also sold off, with Germany’s 10-year bund yield up almost 7 basis points to trade at 2.2640%, having slipped from its earlier highs.

    ‘Testing the water’

    “The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy to try and prod demand and wake up prices,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

    “But the Bank is still staying firmly plugged into its bond purchase program, claiming this is just fine tuning, not the start of a reversal of policy.”

    That sentiment was echoed by Mizuho Bank, which said in an email Tuesday that the market moves reflect a sudden flurry of bets on a hawkish policy pivot from the BOJ, but argued that the “popular bet does not mean that is the policy reality, or the intended policy perception.”

    Central banks won't reach inflation reduction targets in 2023, portfolio manager says

    “Fact is, there is nothing in the fundamental nature of the move or the accompanying communique that challenges our fundamental view that the BoJ will calibrate policy to relieve JPY pressures, but not turn overtly hawkish,” said Vishnu Varathan, head of economics and strategy for the Asia and Oceania Treasury Department at Mizuho.

    “For one, there was every effort made to emphasize that policy accommodation is being maintained, whether this was in reference to intended as well as potential step-up in bond purchases or suggesting no further YCC target band expansion (for now).”

    Spikes in volatility

    The Bank of Japan noted in its statement that since early spring, market volatility around the world had risen, “and this has significantly affected these markets in Japan.”

    “The functioning of bond markets has deteriorated, particularly in terms of relative relationships among interest rates of bonds with different maturities and arbitrage relationships between spot and futures markets,” it added.

    The central bank said if these market conditions persisted, it could have a “negative impact on financial conditions such as issuance conditions for corporate bonds.”

    Luis Costa, head of CEEMEA strategy at Citi, indicated on Tuesday that the market move may be an overreaction, telling CNBC there was “absolutely nothing stunning” about the BOJ’s decision.

    “You have to take this BOJ measure in the context of a positioning in dollar-yen that was obviously not expecting this tweak. It’s a tweak,” he said.

    Japanese inflation is projected to come in at 3.7% annually in November, according to a Reuters poll last week — a 40-year high, but still well below the levels seen in comparable Western economies.

    Costa said the Bank of Japan’s move was not geared toward combating inflation but addressing the “infrastructure and the dynamics of JGB trading” and the gap in volatility between the trade in JGBs and the rest of the market.

    [ad_2]

    Source link

  • Central banks around the world have now given the markets a clear message — tighter policy is here to stay

    Central banks around the world have now given the markets a clear message — tighter policy is here to stay

    [ad_1]

    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 | Reuters

    The U.S. Federal Reserve, European Central Bank, Bank of England and Swiss National Bank all raised interest rates by 50 basis points this week, in line with expectations, but markets are honing in on their shifting tones.

    Markets reacted negatively after the Fed on Wednesday hiked its benchmark rate by 50 basis points to its highest level in 15 years. This marked a slowdown from the previous four meetings, at which the central bank implemented 75 basis point hikes.

    However, Fed Chairman Jerome Powell signaled that despite recent indications that inflation may have peaked, the fight to wrestle it back to manageable levels is far from over.

    “There’s an expectation really that the services inflation will not move down so quickly, so we’ll have to stay at it,” Powell said in Wednesday’s press conference.

    “We may have to raise rates higher to get where we want to go.”

    On Thursday, the European Central Bank followed suit, also opting for a smaller hike but suggesting it would need to raise rates “significantly” further to tame inflation.

    The Bank of England also implemented a half-point hike, adding that it would “respond forcefully” if inflationary pressures begin to look more persistent.

    George Saravelos, head of FX research at Deutsche Bank, said the major central banks had given the markets a “clear message” that “financial conditions need to stay tight.”

    “We wrote at the start of 2022 that the year was all about one thing: rising real rates. Now that central banks have achieved this, the 2023 theme is different: preventing the market from doing the opposite,” Saravelos said.

    “Buying risky assets on the premise of weak inflation is a contradiction in terms: the easing in financial conditions that it entails undermines the very argument of weakening inflation.”

    Within that context, Saravelos said, the ECB and the Fed’s explicit shift in focus from the consumer price index (CPI) to the labor market is notable, as it implies that supply-side movements in goods are not sufficient to declare “mission accomplished.”

    “The overall message for 2023 seems clear: central banks will push back on higher risky assets until the labour market starts to turn,” Saravelos concluded.

    Economic outlook tweaks

    The hawkish messaging from the Fed and the ECB surprised the market somewhat, even though the policy decisions themselves were in line with expectations.

    Berenberg on Friday adjusted its terminal rate forecasts in accordance with the developments of the last 48 hours, adding an additional 25 basis point rate hike for the Fed in 2023, taking the peak to a range between 5% and 5.25% over the course of the first three meetings of the year.

    “We still think that a decline in inflation to c3% and a rise in unemployment to well above 4.5% by the end of 2023 will eventually trigger a pivot to a less restrictive stance, but for now, the Fed clearly intends to go higher,” Berenberg Chief Economist Holger Schmieding said.

    Inflation has peaked in the euro zone, Barclays says

    The bank also upped its projections for the ECB, which it now sees raising rates to “restrictive levels” at a steady pace for more than one meeting to come. Berenberg added a further 50 basis point move on March 16 to its existing anticipation of 50 basis points on Feb. 2. This takes the ECB’s main refinancing rate to 3.5%.

    “From such a high level, however, the ECB will likely need to reduce rates again once inflation has fallen to close to 2% in 2024,” Schmieding said.

    “We now look for two cuts of 25bp each in mid-2024, leaving our call for the ECB main refi rate at end-2024 unchanged at 3.0%.”

    The Bank of England was slightly more dovish than the Fed and the ECB and future decisions will likely be heavily dependent on how the expected U.K. recession unfolds. However, the Monetary Policy Committee has repeatedly flagged caution over labor market tightness.

    Berenberg expects an additional 25 basis point hike in February to take the bank rate to a peak of 3.75%, with 50 basis points of cuts in the second half of 2023 and a further 25 basis points by the end of 2024.

    “But against a backdrop of positive surprises in recent economic data, the extra 25bp rate hikes from the Fed and the BoE do not make a material difference to our economic outlook,” Schmieding explained.

    Oliver Wyman: ECB undertaking three stage policy of denial, determination and moderation

    “We still expect the U.S. economy to contract by 0.1% in 2023 followed by 1.2% growth in 2024 whereas the U.K. will likely suffer a recession with a 1.1% drop in GDP in 2023 followed by a 1.8% rebound in 2024.”

    For the ECB, though, Berenberg does see the extra 50 basis points expected from the ECB to have a visible impact, restraining growth most evidently in late 2023 and early 2024.

    “While we leave our real GDP call for next year unchanged at -0.3%, we lower our call for the pace of economic recovery in 2024 from 2.0% to 1.8%,” Schmieding said.

    He noted, however, that over the course of 2022, central banks’ forward guidance and shifts in tone have not proven themselves to be a reliable guide to future policy action.

    “We see the risks to our new forecasts for the Fed and the BoE as balanced both ways, but as the winter recession in the euro zone will likely be deeper than the ECB projects, and as inflation will probably fall substantially from March onwards, we see a good chance that the ECB’s final rate increase in March 2023 will be by 25bp rather than 50bp,” he said.

    [ad_2]

    Source link

  • No signs of crypto spilling over into traditional assets – yet, analyst says

    No signs of crypto spilling over into traditional assets – yet, analyst says

    [ad_1]

    The collapse of FTX has sent shockwaves through the cryptocurrency industry. The price of bitcoin and other major digital coins have fallen sharply as problems at FTX emerged.

    Jakub Porzycki | Nurphoto | Getty Images

    There are “no signs of spillover” from cryptocurrency into more traditional assets, according to an investment analyst from AJ Bell.

    Billions of dollars were lost when the exchange FTX collapsed, raising questions about whether movements in the crypto sphere could ricochet through to other financial systems.

    “Crypto has a lot of money but it’s kind of built up as a separate ecosystem,” head of investment analysis Laith Khalaf said on “Squawk Box Europe” Wednesday.

    But that doesn’t necessarily mean there couldn’t be some overlap in the future.

    “If we had a more system-wide issue you could start see it affecting other assets,” Khalaf said, “but I don’t really see that,” he added.

    In two separate court filings, FTX’s lawyers said in November that it likely had more than 1 million creditors, and owes its top 50 unsecured creditors $3.1 billion.

    The founder and former CEO of the exchange, Sam Bankman-Fried, was then charged with defrauding investors Tuesday after being arrested Monday.

    A ‘highly volatile’ asset

    Khalaf was reluctant to make predictions as to where cryptocurrency will go next because it’s so changeable as an asset.

    “We could be sitting here talking this time next year and [Bitcoin] could be at $5,000 or $50,000. It just wouldn’t surprise me because the market is so heavily driven by sentiment,” Khalaf said.

    And while there are questions as to the long-term adoption of cryptocurrency, Khalaf made one point with a lot of certainty.

    “For the foreseeable, [cryptocurrency] remains highly volatile and speculative asset,” he said.

    [ad_2]

    Source link

  • Here’s what the Federal Reserve’s half-point rate hike means for you

    Here’s what the Federal Reserve’s half-point rate hike means for you

    [ad_1]

    The Federal Reserve raised its target federal funds rate by 0.5 percentage points at the end of its two-day meeting Wednesday in a continued effort to cool inflation.

    Although this marks a more typical hike compared to the super-size 0.75 percentage point moves at each of the last four meetings, the central bank is far from finished, according to Greg McBride, chief financial analyst at Bankrate.com.

    “The months ahead will see the Fed raising interest rates at a more customary pace,” McBride said.

    More from Invest in You:
    Just 12% of adults, and 29% of millionaires, feel ‘wealthy′
    35% of millionaires say they won’t have enough to retire
    Inflation boosts U.S. household spending by $433 a month

    The latest move is only one part of a rate-hiking cycle, which aims to bring down inflation without tipping the economy into a recession, as some feared would have happened already.

    “I thought we would be in the midst of a recession at this point, and we’re not,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School.

    “Every single time since World War II the Federal Reserve has acted to reduce inflation, unemployment has shot up, and we are not seeing that this time, and that’s what stands out,” she said. “I couldn’t really imagine a better scenario.”

    Still, the combination of higher rates and inflation has hit household budgets particularly hard.

    What the federal funds rate means for you

    The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Whether directly or indirectly, higher Fed rates influence borrowing costs for consumers and, to a lesser extent, the rates they earn on savings accounts.

    For now, this leaves many Americans in a bind as inflation and higher prices cause more people to lean on credit just when interest rates rise at the fastest pace in decades.

    With more economic uncertainty ahead, consumers should be taking specific steps to stabilize their finances — including paying down debt, especially costly credit card and other variable rate debt, and increasing savings, McBride advised.

    Pay down high-rate debt

    Since most credit cards have a variable interest rate, there’s a direct connection to the Fed’s benchmark, so short-term borrowing rates are already heading higher.

    Credit card annual percentage rates are now over 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.

    The cost of existing credit card debt has already increased by at least $22.9 billion due to the Fed’s rate hikes, and it will rise by an additional $3.2 billion with this latest increase, according to a recent analysis by WalletHub.

    If you’re carrying a balance, “grab one of the zero-percent or low-rate balance transfer offers,” McBride advised. Cards offering 15, 18 and even 21 months with no interest on transferred balances are still widely available, he said.

    “This gives you a tailwind to get the debt paid off and shields you from the effect of additional rate hikes still to come.”

    Otherwise, try consolidating and paying off high-interest credit cards with a lower interest home equity loan or personal loan.

    Consumers with an adjustable-rate mortgage or home equity lines of credit may also want to switch to a fixed rate. 

    How to know if we are in a recession

    Because longer-term 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the broader economy, those homeowners won’t be immediately impacted by a rate hike.

    However, the average interest rate for a 30-year fixed-rate mortgage is around 6.33% this week — up more than 3 full percentage points from 3.11% a year ago.

    “These relatively high rates, combined with persistently high home prices, mean that buying a home is still a challenge for many,” said Jacob Channel, senior economic analyst at LendingTree.

    The increase in mortgage rates since the start of 2022 has the same impact on affordability as a 32% increase in home prices, according to McBride’s analysis. “If you had been approved for a $300,000 mortgage in the beginning of the year, that’s the equivalent of less than $204,500 today.”

    Anyone planning to finance a new car will also shell out more in the months ahead. Even though auto loans are fixed, payments are similarly getting bigger because interest rates are rising.

    The average monthly payment jumped above $700 in November compared to $657 earlier in the year, despite the average amount financed and average loan term lengths staying more or less the same, according to data from Edmunds.

    “Just as the industry is starting to see inventory levels get to a better place so that shoppers can actually find the vehicles they’re looking for, interest rates have risen to the point where more consumers are facing monthly payments that they likely cannot afford,” said Ivan Drury, Edmunds’ director of insights. 

    Federal student loan rates are also fixed, so most borrowers won’t be impacted immediately by a rate hike. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates — which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.

    That makes this a particularly good time to identify the loans you have outstanding and see if refinancing makes sense.

    Shop for higher savings rates

    While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.

    Thanks, in part, to lower overhead expenses, the average online savings account rate is closer to 4%, much higher than the average rate from a traditional, brick-and-mortar bank.

    “The good news is savers are seeing the best returns in 14 years, if they are shopping around,” McBride said.

    Top-yielding certificates of deposit, which pay between 4% and 5%, are even better than a high-yield savings account.

    And yet, because the inflation rate is now higher than all of these rates, any money in savings loses purchasing power over time. 

    What’s coming next for interest rates

    Consumers should prepare for even higher interest rates in the coming months.

    Even though the Fed has already raised rates seven times this year, more hikes are on the horizon as the central bank slowly reins in inflation.

    Recent data show that these moves are starting to take affect, including a better-than-expected consumer prices report for November. However, inflation remains well above the Fed’s 2% target.

    “They will still be raising interest rates now and into 2023,” McBride said. “The ultimate stopping point is unknown, as is how long rates will stay at that eventual destination.”

    Subscribe to CNBC on YouTube.

    Correction: A previous version of this story misstated the extent of previous rate hikes.

    [ad_2]

    Source link

  • The Federal Reserve is about to hike interest rates one last time this year. Here’s how it may affect you

    The Federal Reserve is about to hike interest rates one last time this year. Here’s how it may affect you

    [ad_1]

    The Federal Reserve is expected on Wednesday to raise interest rates for the seventh time this year to combat stubborn inflation. 

    The U.S. central bank will likely approve a 0.5 percentage point hike, a more typical pace compared with the super-size 75 basis point moves at each of the last four meetings.

    This would push benchmark borrowing rates to a target range of 4.25% to 4.5%. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates consumers see every day.

    Why a smaller rate hike may be ‘pretty good news’

    By raising rates, the Fed makes it costlier to take out a loan, causing people to borrow and spend less, effectively pumping the brakes on the economy and slowing down the pace of price increases. 

    “For most people this is pretty good news because prices are starting to stabilize,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School. “That’s going to bring a lot of reassurance to households.”

    However, “there are some households that will be hurt by this,” she added — particularly those with variable rate debt.

    For example, most credit cards come with a variable rate, which means there’s a direct connection to the Fed’s benchmark rate.

    But it doesn’t stop there.

    More from Personal Finance:
    Just 12% of adults, and 29% of millionaires, feel ‘wealthy‘
    35% of millionaires say they won’t have enough to retire
    Inflation boosts U.S. household spending by $433 a month

    What the Fed’s rate hike means for you

    Another increase in the prime rate will send financing costs even higher for many other forms of consumer debt. On the flip side, higher interest rates also mean savers will earn more money on their deposits.

    “Credit card rates are at a record high and still increasing,” said Greg McBride, chief financial analyst at Bankrate.com. “Auto loan rates are at an 11-year high, home equity lines of credit are at a 15-year high, and online savings account and CD [certificate of deposit] yields haven’t been this high since 2008.”

    Here’s a breakdown of how increases in the benchmark interest rate have impacted everything from mortgages and credit cards to car loans, student debt and savings:

    1. Mortgages

    Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

    “Though they are falling, mortgage rates are still at a more than 10-year high,” said Jacob Channel, senior economic analyst at LendingTree.

    The average rate for a 30-year, fixed-rate mortgage currently sits at 6.33%, down from mid-November, when it peaked at 7.08%.

    For would-be buyers, a 30-year, fixed-rate mortgage on a $300,000 loan would cost about $1,283 a month at last year’s 3.11% rate. If you paid today’s 6.33% instead, that would cost an extra $580 a month or $6,960 more a year and another $208,800 over the lifetime of the loan, Channel calculated.

    Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate. As the federal funds rate rises, the prime rate does, as well, and these rates follow suit. Most ARMs adjust once a year, but a HELOC adjusts right away. Already, the average rate for a HELOC is up to 7.3% from 4.24% earlier in the year.

    2. Credit cards

    Credit card annual percentage rates are now more than 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.

    “Even those with the best credit card can expect to be offered APRs of 18% and higher,” said Matt Schulz, LendingTree’s chief credit analyst.

    But “rates aren’t just going up on new cards,” he added. “The rate you’re paying on your current credit card is likely going up, too.”

    Further, households are increasingly leaning on credit cards to afford basic necessities since incomes have not kept pace with inflation, making it even harder for those carrying a balance from month to month.

    If the Fed announces a 50 basis point hike as expected, the cost of existing credit card debt will increase by an additional $3.2 billion in the next year alone, according to a new analysis by WalletHub.

    3. Auto loans

    Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans. So if you are planning to buy a car, you’ll shell out more in the months ahead.

    The average interest rate on a five-year new car loan is currently 6.05%, up from 3.86% at the beginning of the year, although consumers with higher credit scores may be able to secure better loan terms.

    Paying an annual percentage rate of 6.05% instead of 3.86% could cost consumers roughly $5,731 more in interest over the course of a $40,000, 72-month car loan, according to data from Edmunds.

    Still, it’s not the interest rate but the sticker price of the vehicle that’s primarily causing an affordability crunch, McBride said.

    4. Student loans

    The interest rate on federal student loans taken out for the 2022-23 academic year already rose to 4.99%, up from 3.73% last year and 2.75% in 2020-21. It won’t budge until next summer: Congress sets the rate for federal student loans each May for the upcoming academic year based on the 10-year Treasury rate. That new rate goes into effect in July.

    Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that, as the Fed raises rates, those borrowers are also paying more in interest. How much more, however, will vary with the benchmark.

    Currently, average private student loan fixed rates can range from 2.99% to 14.96%, and 2.99% to 14.86% for variable rates, according to Bankrate. As with auto loans, they vary widely based on your credit score.

    5. Savings accounts

    On the upside, the interest rates on some savings accounts are also higher after consecutive rate hikes.

    While the Fed has no direct influence on deposit rates, the rates tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.

    Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 4%, much higher than the average rate from a traditional, brick-and-mortar bank, according to Bankrate.

    “Interest rates can vary substantially, especially in today’s interest rate environment in which the Fed has raised its benchmark rate to its highest level in more than a decade,” said Ken Tumin, founder of DepositAccounts.com.

    “Banks make money off of customers who don’t monitor their interest rates,” Tumin said.

    With balances of $1,000 to $25,000, the difference between the lowest and highest annual percentage yield can result in an additional $51 to $965 in a year and $646 to $11,685 in 10 years, according to an analysis by DepositAccounts.

    Still, any money earning less than the rate of inflation loses purchasing power over time. 

    Subscribe to CNBC on YouTube.

    [ad_2]

    Source link

  • Inflation has peaked — but it’s not returning to pre-Covid levels in 2023, Mastercard says

    Inflation has peaked — but it’s not returning to pre-Covid levels in 2023, Mastercard says

    [ad_1]

    Inflation has already peaked, but it will remain above pre-Covid levels in 2023, said David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute.

    “Inflation has seen its peak this year, but it will still be above what we had been used to pre-pandemic next year,” Mann told CNBC’s “Squawk Box Asia” on Friday. 

    It’ll take a few years to return to 2019 levels, he said. 

    “We do expect that we go back down in the direction of where we were back in 2019 where we were still debating how many countries needed negative interest rates.”

    Central banks around the world have been hiking interest rates as recently as November in response to high inflation.

    They include central banks from the Group of 10 countries — such as the U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia — as well those of emerging markets, such as Indonesia, Thailand, Malaysia and the Philippines, Reuters reported.

    The Fed will hold its December policy meeting this week, where it is expected to hike interest rates by 50 basis points. The central bank has raised rates by 375 basis points so far this year. 

    “Inflation has become that big challenge. It’s been spiking and staying very high,” Mann said. But he warned that it would be risky if central banks end up hiking rates more than they need to. 

    “The challenge is if you’ve lost orientation of where the sky and the ground is, you’re not quite sure where you need to end up,” Mann said. 

    It would be a “serious scenario” if central banks “end up going slightly too far and then need to reverse relatively quickly,” he added. 

    Consumer spending

    Despite high inflation, Mann said, U.S. consumers are still willing to engage in discretionary spending in areas such as travel. 

    Travel recovery in the U.S. is strong and people are still choosing to spend on experiences rather than material goods, Mann said.

    And they are being frugal about their spending on necessities in order to be able to afford non-essentials, he added.

    “There is something in the back of people’s minds that worries them that even though it’s not very likely, it’s still possible that those [Covid] restrictions [will] come back,” he said. 

    [ad_2]

    Source link

  • Elon Musk Sounds a Dire Warning About the Economy

    Elon Musk Sounds a Dire Warning About the Economy

    [ad_1]

    Elon Musk is worried about the economy. 

    For several months now, the richest man in the world has continued to sound the alarm, warning that the economy risks a deep recession if the central bank’s monetary policy stays on course. 

    While the Federal Reserve is holding its last monetary meeting of the year in the coming days, the serial entrepreneur has just made a new prediction. And like his past predictions, this one is very alarming.

    [ad_2]

    Source link

  • Watch CNBC’s full interview with Bank of America’s Brian Moynihan

    Watch CNBC’s full interview with Bank of America’s Brian Moynihan

    [ad_1]

    Share

    Brian Moynihan, Bank of America chairman and CEO, joins ‘Closing Bell’ to discuss the U.S. economy and why he sees a slight recession early next year, issues that worry him regarding the United States’ long-term competitiveness and his expectations for 2023.

    [ad_2]

    Source link

  • We predict a slight recession next year, but we’ll fare better than most other countries: BofA’s Moynihan

    We predict a slight recession next year, but we’ll fare better than most other countries: BofA’s Moynihan

    [ad_1]

    Share

    Brian Moynihan, Bank of America chairman and CEO, joins ‘Closing Bell’ to discuss the U.S. economy and why he sees a slight recession early next year, issues that worry him regarding the United States’ long-term competitiveness and his expectations for 2023.

    04:23

    Fri, Dec 9 20223:30 PM EST

    [ad_2]

    Source link

  • Arizona Sen. Kyrsten Sinema leaves Democratic Party to become independent

    Arizona Sen. Kyrsten Sinema leaves Democratic Party to become independent

    [ad_1]

    Arizona Sen. Kyrsten Sinema has switched parties to become an independent, complicating the Democrats’ narrow control of the U.S. Senate.

    Sinema said in a tweet Friday that she was declaring her “independence from the broken partisan system in Washington and formally registering as an Arizona Independent.”

    Senate Majority Leader Chuck Schumer, D-N.Y. was informed of Sinema’s plans to become independent on Thursday. In a statement Friday, Schumer said Sinema asked to keep her committee assignments.

    “Kyrsten is independent; that’s how she’s always been,” Schumer said. “I believe she’s a good and effective senator and am looking forward to a productive session in the new Democratic majority Senate. We will maintain our new majority on committees, exercise our subpoena power, and be able to clear nominees without discharge votes.”

    By keeping her committee assignments, Sinema signaled she intends to continue to caucus with Democrats as an independent, like Sens. Bernie Sanders of Vermont and Angus King of Maine do. A senior Biden administration official told NBC News that the White House learned of Sinema’s intention to switch parties “mid-afternoon Thursday” and that she intended to continue to caucus as before.

    If Sinema still caucuses with Democrats, her switch to independent would not change much about how the party functions with its new 51-49 majority. The outright advantage in the chamber will make it easier for Democrats to advance President Joe Biden’s nominees and issue subpoenas.

    Sinema and Sen. Joe Manchin of West Virginia have been wild cards for Democrats since the party gained narrow control of the Senate from Republicans in 2020. Both had an outsize role in policymaking, as Manchin significantly curbed Democrats’ dreams of passing sweeping legislation. Neither senator was up for reelection until 2024 and many expect Manchin to lean further conservative now that the midterms have passed.

    Sinema had exerted her own influence on major Democratic bills even before she left the party. She notably rejected a corporate tax increase as part of Democrats’ Inflation Reduction Act passed earlier this year, instead opting for a 15% minimum tax.

    Sen. Raphael Warnock’s reelection win Tuesday in Georgia’s U.S. Senate runoff election gave the Democrats one more vote in the chamber and boosted the party’s hopes that a 51-49 majority in the Senate would give Sinema and Manchin less control on crucial bills. The chamber was previously split 50-50, with Vice President Kamala Harris casting the tiebreaking vote.

    Sinema, who shared her party switch with a handful of news outlets along with her tweets at 6:01 a.m. ET, prides herself on “maverick” behavior like her Arizona predecessor, the late Sen. John McCain. She has made a career in the chamber by trying to work with Republicans as frequently as she did her former party, and told Politico in an interview Friday that switching party affiliations was a logical next step for her.

    “Registering as an independent is what I believe is right for my state,” Sinema said in the interview. “It’s right for me. I think it’s right for the country.”

    Sinema, a 46-year-old and the first openly bisexual senator, was not always the conservative-leaning Democrat that her last four years legislating would indicate. She has always maintained an independent streak and continues to buck Senate norms with colorful outfits and wigs.

    Sinema started her career as a Green Party activist focusing on LGBTQ rights. She switched to the Democratic Party in 2004 and was elected to the U.S. House in 2012.

    Sinema utilized her friendliness with Republicans to be a key broker on several signature bills of Biden’s first term, aiding on issues including infrastructure, guns and same-sex marriage. But her views on increasing taxes on the wealthy and opposition to changing filibuster rules did not win her favor with her former party.

    She notably rejected a corporate tax increase as part of Democrats’ Inflation Reduction Act passed earlier this year, instead opting for a 15% minimum tax.

    Long before her announcement Friday morning, some Arizona Democrats had already started trying to find a replacement to primary her. Groups like the Primary Sinema PAC emerged late last year after her reluctance to filibuster reform prevented Democrats from moving forward with an exception for voting rights legislation, leading to the central committee of the Arizona Democratic Party to issue a no-confidence vote in its senator.

    Primary Sinema PAC does not support a single candidate, but rather funds local Arizona groups to pressure Sinema and to lay the groundwork for the candidate that emerges. Speculation had already started that Rep. Ruben Gallego, D-Ariz., would challenge her.

    Sinema’s decision to switch parties would prevent her from having to face a primary from the left.

    In her interview with Politico though, Sinema did not say whether she would seek a second term in the U.S. Senate: “It’s fair to say that I’m not talking about it right now.”

    [ad_2]

    Source link

  • U.S. lawmakers press federal banking regulators on the industry’s exposure to crypto after Alameda stake in bank comes to light

    U.S. lawmakers press federal banking regulators on the industry’s exposure to crypto after Alameda stake in bank comes to light

    [ad_1]

    The logo of FTX is seen on a flag at the entrance of the FTX Arena in Miami, Florida, November 12, 2022.

    Marco Bello | Reuters

    Top Senate Democrats pressed key banking regulators on possible ties between the industry and digital currency exchanges following the bankruptcy of major cryptocurrency firm, FTX.

    Sens. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., members of the Senate Banking, House and Urban Affairs Committee, sent letters Wednesday to the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency asking about the close ties between crypto markets and traditional banking following the collapse of crypto exchange FTX.

    related investing news

    CNBC Pro
    Crypto winners and losers from the FTX fallout, according to Bernstein

    The letters are the latest in a series of inquiries to various financial institutions and regulators about cryptocurrency oversight.

    “It appears crypto firms may have closer ties to the banking system than previously understood,” the senators wrote to Federal Reserve Chair Jerome Powell, Martin Gruenberg, acting chair of the FDIC and Michael Hsu, acting comptroller of the OCC. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access.” 

    The letter referenced reporting from The New York Times that revealed former FTX CEO Sam Bankman-Fried’s sister company Alameda Research invested $11.5 million in Washington state-based Moonstone Bank. The amount was more than double the bank’s worth at the time, according to the report.

    The head of Moonstone’s parent company FBH Corp also chairs Bahamas-based Deltec Bank, which offers banking services to FTX trading partner and stablecoin issuer Tether, according to the letter.

    Silvergate Capital Corp., Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank, Customers Bancorp Inc. are among several noted banks experiencing heightened volatility after the FTX failure. Crypto deposits made up 90% of Silvergate’s overall deposit base. The bank’s average quarter-to-date deposits fell to $9.8 billion from an overall deposit base of $11.9 billion, the letter states.

    Crypto loans comprised over half the equity capital for Provident bank, which is experiencing potential losses as high as $27.5 million, the senators wrote.

    “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access to banks,” the senators wrote.

    Warren and Smith acknowledged that the banking system has remained relatively unscathed by the FTX failure, but the company’s entanglement with small banks exposes potential loopholes that crypto firms could use to gain further access to traditional financial institutions.

    FTX’s investment in Moonstone could be interpreted as a way to bypass banking licenses in the U.S., according to a Nov. 25 CoinTelegraph article cited in the letter.

    To better understand the banking industry’s exposure to crypto, the senators asked for responses to a roster of questions, including all business relationships between FTX, Alameda and Moonstone, by Dec. 21.

    [ad_2]

    Source link

  • Mortgage demand falls again even as rates sink further

    Mortgage demand falls again even as rates sink further

    [ad_1]

    A “For Sale” sign in front of a home in Sacramento, California, on Monday, Dec. 5, 2022.

    David Paul Morris | Bloomberg | Getty Images

    Lower mortgage rates are pulling some current homeowners back to the refinance market, but not enough to offset the drop in demand from homebuyers.

    Mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.41% from 6.49%, with points decreasing to 0.63 from 0.68 (including the origination fee) for loans with a 20% down payment. That is 73 basis points lower than it was a month ago but still more than three full percentage points higher than it was a year ago.

    Applications to refinance a home loan rose 5% for the week but were still 86% lower than the same week one year ago. There are still precious few current borrowers who can benefit from a refinance at today’s higher interest rates. The refinance share of mortgage activity increased to 28.7% of total applications from 26.1% the previous week.

    Mortgage applications to purchase a home fell 3% for the week and were 40% lower than the same week one year ago.

    “Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” noted Joel Kan, an MBA economist in a release.

    The average loan size for homebuyer applications decreased to $387,300 — its lowest level since January 2021, which is consistent with slightly stronger government applications and a rapidly cooling home-price environment, according to Kan.

    Mortgage rates haven’t moved much this week, with no significant economic news making headlines. The next big shift will likely come next week, with the much-anticipated monthly read on inflation.

    [ad_2]

    Source link

  • Oil plunge, tech collapse and Fed cuts? Strategist shares possible 2023 market ‘surprises’

    Oil plunge, tech collapse and Fed cuts? Strategist shares possible 2023 market ‘surprises’

    [ad_1]

    A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, August 29, 2022.

    Brendan McDermid | Reuters

    After a tumultuous year for financial markets, Standard Chartered outlined a number of potential surprises for 2023 that it says are being “underpriced” by the market.

    Eric Robertson, the bank’s head of research and chief strategist, said outsized market moves are likely to continue next year, even if risks decline and sentiment improves. He warned investors to prepare for “another year of shaken nerves and rattled brains.”

    The biggest surprise of all, according to Robertson, would be a return to “more benign economic and financial-market conditions,” with consensus pointing to a global recession and further turbulence across asset classes next year.

    As such, he named eight potential market surprises that have a “non-zero probability” of occurring in 2023, which fall “materially outside of the market consensus” or the bank’s own baseline views, but are “underpriced by the markets.”

    Collapsing oil prices

    Oil prices surged over the first half of 2022 as a result of persistent supply blockages and Russia’s invasion of Ukraine, and have remained volatile throughout the remainder of the year. They declined 35% between June 14 and Nov. 28, with output cuts from OPEC+ and hopes for an economic resurgence in China preventing the slide from accelerating further.

    However, Robertson suggested that a deeper-than-expected global recession, including a delayed Chinese recovery on the back of an unexpected surge in Covid-19 cases, could lead to a “significant collapse in oil demand” across even previously resilient economies in 2023.

    Should a resolution of the Russia-Ukraine conflict occur, this would remove the “war-related risk premia” — the additional rate of return investors can expect for taking more risk — from oil, causing prices to lose around 50% of their value in the first half of 2023, according to Robertson’s list of “potential surprises.”

    “With oil prices falling quickly, Russia is unable to fund its military activities beyond Q1-2023 and agrees to a ceasefire. Although peace negotiations are protracted, the end of the war causes the risk premium that had supported energy prices to disappear completely,” Robertson speculated.

    “Risk related to military conflict had helped to keep front contract prices elevated relative to deferred contracts, but the decline in risk premia and the end of the war see the oil curve invert in Q1-2023.”

    In this potential scenario, the collapse in oil prices would take international benchmark Brent crude from its current level of around $79 per barrel to just $40 per barrel, its lowest point since the peak of the pandemic.

    Fed cuts by 200 basis points

    The main central bank story of 2022 was the U.S. Federal Reserve’s underestimation of rising prices, and Chairman Jerome Powell’s mea culpa that inflation was not, in fact, “transitory.”

    The Fed has subsequently hiked its short-term borrowing rate from a target range of 0.25%-0.5% at the start of the year to 3.75%-4% in November, with a further increase expected at its December meeting. The market is pricing an eventual peak of around 5%.

    We're not on the edge of a recession, says JPMorgan's chief U.S. economist Mike Feroli

    Robertson said a potential risk for next year is that the Federal Open Market Committee now underestimates the economic damage inflicted by 2023’s massive interest rate hikes.

    Should the U.S. economy fall into a deep recession in the first half of the year, the central bank may be forced to cut rates by up to 200 basis points, according to Robertson’s list of “potential surprises.”

    “The narrative in 2023 quickly shifts as the cracks in the foundation spread from the most highly leveraged sectors of the economy to even the most stable,” he added.

    “The message from the FOMC also shifts rapidly from the need to keep monetary conditions restrictive for an extended period to the need to provide liquidity to avoid a major hard landing.”

    Tech stocks fall even further

    Growth-oriented technology stocks took a hammering over the course of 2022 as the steep rise in interest rates increased the cost of capital.

    But Standard Chartered says the sector could have even further to fall in 2023.

    The Nasdaq 100 closed Monday down more than 29% since the start of the year, though a 15% rally between Oct. 13 and Dec. 1 on the back of softening inflation prints helped cushion the annual losses.

    On his list of potential surprises for 2023, Robertson said the index could slide another 50% to 6,000.

    “The technology sector broadly continues to suffer in 2023, weighed down by plunging demand for hardware, software and semiconductors,” he speculated.

    “Further, rising financing costs and shrinking liquidity lead to a collapse in funding for private companies, prompting further significant valuation cuts across the sector, as well as a wave of job losses.”

    There's 'a lot of upside' for tech, investment firm says

    Next-generation tech companies could then see a surge in bankruptcies in 2023, shrinking the market cap share of these companies on the S&P 500 from 29.5% at its peak to 20% by the end of the year, according to Robertson.

    “The dominance of the tech sector in the S&P 500 drags the broader equity index lower too,” he suggested, adding: “The tech sector leads a global equity collapse.”

    [ad_2]

    Source link

  • Transitory inflation talk is back. But economists say higher prices are here to stay

    Transitory inflation talk is back. But economists say higher prices are here to stay

    [ad_1]

    Prices of fruit and vegetables are on display in a store in Brooklyn, New York City, March 29, 2022.

    Andrew Kelly | Reuters

    Global markets have taken heart in recent weeks from data indicating that inflation may have peaked, but economists warn against the return of the “transitory” inflation narrative.

    Stocks bounced when October’s U.S. consumer price index came in below expectations earlier this month, as investors began to bet on an easing of the Federal Reserve’s aggressive interest rate hikes.

    related investing news

    CNBC Pro
    Goldman Sachs’ Currie says oil stocks are trading ‘far below’ their long-term trend

    While most economists expect a significant general decline in headline inflation rates in 2023, many are doubtful that this will herald a fundamental disinflationary trend.

    Paul Hollingsworth, chief European economist at BNP Paribas, warned investors on Monday to beware the return of “Team Transitory,” a reference to the school of thought that projected rising inflation rates at the start of the year would be fleeting.

    The Fed itself was a proponent of this view, and Chairman Jerome Powell eventually issued a mea culpa accepting that the central bank had misread the situation.

    “Reviving the ‘transitory’ inflation narrative might seem tempting, but underlying inflation is likely to remain elevated by past standards,” Hollingsworth said in a research note, adding that upside risks to the headline rate next year are still present, including a potential recovery in China.

    Central banks will keep rates high next year to avoid 1970s-style second round inflation: CIO

    “Big swings in inflation highlight one of the key features of the global regime shift that we believe is underway: greater volatility of inflation,” he added.

    The French bank expects a “historically large” fall in headline inflation rates next year, with almost all regions seeing lower inflation than in 2022, reflecting a combination of base effects — the negative contribution to annual inflation rate occurring as month-on-month changes shrink — and dynamics between supply and demand shift.

    Hollingsworth noted that this could revive the “transitory” narrative” next year, or at least a risk that investors “extrapolate the inflationary trends that emerge next year as a sign that inflation is rapidly returning to the ‘old’ normal.”

    These narratives could translate into official predictions from governments and central banks, he suggested, with the U.K.’s Office for Budget Responsibility (OBR) projecting outright deflation in 2025-26 in “striking contrast to the current market RPI fixings,” and the Bank of England forecasting significantly below-target medium-term inflation.

    'Light at the end of the tunnel' on inflation, says OECD's chief economist

    The skepticism about a return to normal inflation levels was echoed by Deutsche Bank. Chief Investment Officer Christian Nolting told CNBC last week that the market’s pricing for central bank cuts in the second half of 2023 were premature.

    “Looking through our models, we think yes, there is a mild recession, but from an inflation point of view,” we think there are second-round effects,” Nolting said.

    He pointed to the seventies as a comparable period when the Western world was rocked by an energy crisis, suggesting that second-round effects of inflation arose and central banks “cut too early.”

    “So from our perspective, we think inflation is going to be lower next year, but also higher than compared to previous years, so we will stay at higher levels, and from that perspective, I think central banks will stay put and not cut very fast,” Nolting added.

    Reasons to be cautious

    Some significant price increases during the Covid-19 pandemic were widely considered not to actually be “inflation,” but a result of relative shifts reflecting specific supply and demand imbalances, and BNP Paribas believes the same is true in reverse.

    As such, disinflation or outright deflation in some areas of the economy should not be taken as indicators of a return to the old inflation regime, Hollingsworth urged.

    What’s more, he suggested that companies may be slower to adjust prices downward than they were to increase them, given the effect of surging costs on margins over the past 18 months.

    Although goods inflation will likely slow, BNP Paribas sees services inflation as stickier in part due to underlying wage pressures.

    “Labour markets are historically tight and – to the extent that there has likely been a structural element to this, particularly in the U.K. and U.S. (e.g. the increase in inactivity due to long-term sickness in the UK) – we expect wage growth to stay relatively elevated by past standards,” Hollingsworth said.

    Goldman Sachs: Energy crisis will push euro zone into 'shallow' recession

    China’s Covid policy has recaptured headlines in recent days, and stocks in Hong Kong and the mainland bounced on Tuesday after Chinese health authorities reported a recent uptick in senior vaccination rates, which is regarded by experts as crucial to reopening the economy.

    BNP Paribas projects that a gradual relaxation of China’s zero-Covid policy could be inflationary for the rest of the world, as China has been contributing little to global supply constraints in recent months and an easing of restrictions is “unlikely to materially boost supply.”

    “By contrast, a stronger recovery in Chinese demand is likely to put upward pressure on global demand (for commodities in particular) and thus, all else equal, fuel inflationary pressures,” Hollingsworth said.

    A further contributor is the acceleration and accentuation of the trends of decarbonization and deglobalization brought about by the war in Ukraine, he added, since both are likely to heighten medium-term inflationary pressures.

    BNP maintains that the shift in the inflation regime is not just about where price increases settle, but the volatility of inflation that will be emphasized by big swings over the next one to two years.

    “Admittedly, we think inflation volatility is still likely to fall from its current extremely high levels. However, we do not expect it to return to the sorts of levels that characterised the ‘great moderation’,” Hollingsworth said.

    [ad_2]

    Source link

  • U.S. criticizes China’s zero Covid strategy, says Beijing needs to boost vaccination among elderly

    U.S. criticizes China’s zero Covid strategy, says Beijing needs to boost vaccination among elderly

    [ad_1]

    People hold white sheets of paper and flowers in a row as police check their IDs during a protest over coronavirus disease (COVID-19) restrictions in mainland China, during a commemoration of the victims of a fire in Urumqi, in Hong Kong, China November 28, 2022. 

    Tyrone Siu | Reuters

    The White House on Monday criticized Beijing’s zero Covid strategy as ineffective and said the Chinese people have a right to peacefully protest.

    “We’ve long said everyone has the right to peacefully protest, here in the United States and around the world. This includes in the PRC,” a spokesperson for President Joe Biden’s National Security Council said in a statement.

    Rare protests broke out against Covid lockdowns in Beijing, Shanghai, Urumqi and other cities over the weekend. Nearly three years after the virus first emerged in Wuhan, China is still imposing strict social controls to quash Covid outbreaks, while countries such as the U.S. have largely returned to normal life.

    “We’ve said that zero COVID is not a policy we pursuing here in the United States,” the NSC spokesperson said. “And as we’ve said, we think it’s going to be very difficult for the People’s Republic of China to be able to contain this virus through their zero COVID strategy.”

    The U.S. Covid response is focused on increasing vaccination rates and making testing and treatment more accessible, the spokesperson said.

    China’s stringent Covid controls have kept deaths very low compared to the U.S., but the measures have also deeply disrupted economic and social life. In China, more than 30,000 people have died from Covid since the pandemic began, according to the World Health Organization. In the U.S., more than 1 million people have died.

    Dr. Anthony Fauci, the top infectious disease expert in the U.S., said China’s approach to Covid “doesn’t make public health sense.” Vaccination rates among the elderly, one of the groups most vulnerable to Covid, are low in China compared to other countries. The vaccination campaign in China focused on people in critical positions first, those ages 18 to 59 next, and only then people ages 60 and over.

    “If you look at the prevalence of vaccinations among the elderly, that it was almost counterproductive, the people you really needed to protect were not getting protected,” Fauci told NBC’s Meet the Press on Sunday.  A temporary lockdown might make sense if the goal was to buy time to boost vaccination rates but China doesn’t seem to be doing that, he said.

    “It seems that in China, it was just a very, very strict extraordinary lockdown where you lock people in the house but without any seemingly endgame to it,” Fauci said.

    As of August, about 86% of people ages 60 and older in China were fully vaccinated and 68% had received a booster, according to a September report from China’s Center for Disease Control and Prevention. By comparison, 92% of older Americans were fully vaccinated and 70% had received a booster during that same period.

    Fauci said China’s domestically developed vaccines are also not very effective.

    The authors of the China CDC report said older people are more skeptical of the vaccine. The clinical trials didn’t enroll enough older people and as a consequence there wasn’t sufficient data on the vaccine’s safety and efficacy for this age group when the immunization campaign started, they wrote.

    Dr. Ashish Jha, head of the White House Covid task force, said China should focus on making sure the elderly get vaccinated.

    “That I think is the path out of this virus. Lockdowns and zero COVID is going to be very difficult to sustain,” Jha told ABC’s “This Week” on Sunday.

    CNBC Health & Science

    Read CNBC’s latest global health coverage:

    [ad_2]

    Source link

  • Black Friday online sales top $9 billion in new record

    Black Friday online sales top $9 billion in new record

    [ad_1]

    Black Friday shoppers wait to enter the Coach store at the Opry Mills Mall in Nashville, Tennessee, on November 25, 2022.

    Seth Herald | AFP | Getty Images

    Consumers spent a record $9.12 billion online shopping during Black Friday this year, according to Adobe, which tracks sales on retailers’ websites.

    Overall online sales for the day after Thanksgiving were up 2.3% year over year, and electronics were a major contributor, as online sales surged 221% over an average day in October, Adobe said. Toys were another popular category for shoppers, up 285%, as was exercise equipment, up 218%.

    Many consumers embraced flexible payment plans on Black Friday as they continue to grapple with high prices and inflation. Buy Now Pay Later payments increased by 78% compared with the past week, beginning Nov. 19, and Buy Now Pay Later revenue is up 81% for the same period.

    Some of this year’s hottest items included gaming consoles, drones, Apple MacBooks, Dyson products and toys like Fortnite, Roblox, Bluey, Funko Pop! and Disney Encanto, according to the report.

    Black Friday shoppers also broke a record for mobile orders, as 48% of online sales were made on smartphones, an increase from 44% last year.

    The record-breaking spending comes on the heels of a strong day of Thanksgiving shopping, in which consumers shelled out an all-time high of $5.29 billion online, up 2.9% year-over-year. Typically, shoppers spend about $2 billion to $3 billion online in a day, according to Adobe. 

    For retailers, these numbers may be a promising indicator of the coming weeks. Early holiday forecasts have been muted, and Target, Macy’s, Nordstrom and other retailers reported a lull in sales in late October and early November. Consumer sentiment has also weakened in the past month as inflation hovers near four-decade highs.

    Though Black Friday is over, e-commerce activity will remain strong through the weekend, according to Adobe’s report. Adobe expects consumers to spend $4.52 billion on Saturday and $4.99 billion on Sunday, ahead of the year’s biggest online shopping day, Cyber Monday.

    This year, Cyber Monday is expected to drive $11.2 billion in spending, up 5.1% year-over-year, according to Adobe.

    [ad_2]

    Source link

  • Omicron boosters probably aren’t very effective against mild Covid illness, but will likely prevent hospitalizations, experts say

    Omicron boosters probably aren’t very effective against mild Covid illness, but will likely prevent hospitalizations, experts say

    [ad_1]

    A healthcare worker administers a dose of the Pfizer-BioNTech Covid-19 vaccine at a vaccination clinic in the Peabody Institute Library in Peabody, Massachusetts, U.S., on Wednesday, Jan. 26, 2022.

    Vanessa Leroy | Bloomberg | Getty Images

    The new omicron Covid boosters probably aren’t very effective at preventing Covid infections and mild illness, but they will likely help keep the elderly and other vulnerable groups out of the hospital this winter, experts say.

    The Centers for Disease Control and Prevention, in a real-world study published this week, found the boosters are less than 50% effective against mild illness across almost all adult age groups when compared to people who are unvaccinated.

    For seniors, the booster was 19% effective at preventing mild illness when administered as their fourth dose, compared to the unvaccinated. It was 23% effective against mild illness when given as their fifth dose.

    Though the vaccine’s effectiveness against mild illness was low, people who received the boosters were better off than those who did not. The booster increased people’s protection against mild illness by 28% to 56% compared to those who only received the old shots, depending on age and when they received their last dose.

    The Food and Drug Administration authorized the boosters in late August with the goal of restoring the high levels of protection the vaccines demonstrated in late 2020 and early 2021. At that time, the shots were more than 90% effective against infection. But the first real-world data from the CDC indicates that the boosters aren’t meeting those high expectations.

    “The boosters give you some additional protection but it’s not that strong, and you shouldn’t rely on it as your sole protective device against infection,” said John Moore, a professor of microbiology and immunology at Weill Cornell Medical College.

    Moore said people at higher risk from Covid have every reason to get a booster since it modestly increases protection. But he said common sense measures such as masking and avoiding large crowds remain important tools for vulnerable groups since the boosters aren’t highly effective against infection.

    The CDC study looked at more than 360,000 adults with healthy immune systems who tested for Covid at retail pharmacies from September to November when omicron BA.5 was dominant. The participants received either the booster, got two or more doses of the old shots or they were unvaccinated. It then compared those who tested positive for Covid with those who did not.

    The study did not evaluate how well the boosters performed against severe disease, so it’s still unclear whether they will provide better protection against hospitalization than the old shots. The CDC in a statement said it will provide data on more severe outcomes when it becomes available.

    CNBC Health & Science

    Read CNBC’s latest global health coverage:

    Andrew Pekosz, a virologist at Johns Hopkins University, said the fact that the shots are providing some protection against infection in an era of highly immune evasive omicron subvariants is a good sign that they will provide strong protection against hospitalization. The vaccines have always performed better against severe disease than mild illness, he said.

    “It’s better than nothing. Certainly, it doesn’t sort of show that the protection is incredibly high against infection,” Pekosz said. “I would expect that you would then see even greater protection from hospitalization or death.”

    Dr. Paul Offit, a member of the FDA’s vaccine advisory committee, said trying to prevent mild illness is not a viable public health strategy because the antibodies that block infection simply wane over time.

    “Protection against mild disease just isn’t that good in the omicron subvariant era. The goal is protecting against severe disease,” said Offit, an infectious disease expert at Children’s Hospital of Philadelphia who helped develop the rotavirus vaccine.

    Dr. Celine Gounder, a senior public health fellow at the Kaiser Family Foundation, said she’s not alarmed by the data. Reducing risk by even a modest amount at the individual level can have a significant positive effect on public health at the population level.

    “If you can reduce risk among the elderly by even 30%, even 20%, that is significant when 90% of the COVID deaths are occurring in that group,” Gounder said. “For me, what’s really gonna matter is are you keeping that 65 year old out of the hospital.”

    The boosters, called bivalent vaccines, target both omicron BA.5 and the original Covid strain that first emerged in Wuhan, China in 2019. The original shots, called monovalent vaccines, only include the first Covid strain.

    It’s still unclear how the boosters will perform against more immune evasive omicron subvariants, such as BQ.1 and BQ.1.1, which are now dominant in the U.S. Pfizer and Moderna last week said early clinical trial data shows the boosters induce an immune response against these subvariants.

    About 11% of those eligible for the new booster, or 35 million people, have received it so far, according to CDC data. About 30% of seniors have received the shot.

    [ad_2]

    Source link

  • Omicron BQ Covid variants, which threaten people with compromised immune systems, are now dominant in U.S.

    Omicron BQ Covid variants, which threaten people with compromised immune systems, are now dominant in U.S.

    [ad_1]

    A person receives a coronavirus disease (COVID-19) test as the Omicron coronavirus variant continues to spread in Manhattan, New York City, U.S., December 22, 2021.

    Andrew Kelly | Reuters

    The omicron BQ coronavirus subvariants have risen to dominance in the U.S. as people gather and travel for the Thanksgiving holiday, putting people with compromised immune systems at increased risk.

    BQ.1 and BQ.1.1 are causing 57% of new infections in the U.S., according to data published by the Centers for Disease Control and Prevention on Friday. The omicron BA.5 subvariant, once dominant, now makes up only a fifth of new Covid cases.

    The BQ subvariants are more immune evasive and likely resistant to key antibody medications, such as Evusheld and bebtelovimab, used by people with compromised immune systems, according to the National Institutes of Health. This includes organ transplant and cancer chemotherapy patients.

    There are currently no replacements for these drugs. President Joe Biden, in an October speech, told people with compromised immune systems that they should consult with their physicians and take extra precautions this winter.

    “New variants may make some existing protections ineffective for the immunocompromised. Sadly, this means you may be at a special risk this winter,” Biden said.

    The XBB subvariant is also circulating at a low level right now, causing about 3% of new infections. Chief White House medical advisor Dr. Anthony Fauci, in a briefing Tuesday, said XBB is even more immune evasive than the BQ subvariants.

    Fauci, director of the National Institute of Allergy and Infectious Diseases, said the new boosters, which were designed against omicron BA.5, probably aren’t as effective against infection and mild illness from XBB. But the shots should protect against severe disease, he said. Singapore saw a spike in cases from XBB, but there wasn’t a major surge in hospitalizations, he added.

    Moderna and Pfizer said last week that their boosters induce an immune response against BQ.1.1, which is a descendent of the BA.5 subvariant.

    Fauci, in the press briefing, said public health officials believe there is enough immunity from vaccination, boosting and infection to prevent a repeat of the unprecedented Covid surge that occurred last winter when omicron first arrived.

    [ad_2]

    Source link

  • With unions aligned, timeline for rail strike and railroad emergency prep is now clear

    With unions aligned, timeline for rail strike and railroad emergency prep is now clear

    [ad_1]

    The alignment of the four unions that have voted not to ratify a labor deal has provided a clear timeline for strike prep plans among the freight railroads and with sensitive cargo including chemicals.

    The Brotherhood of Railroad Signalmen (BRS) announced Tuesday it is extending its status quo period through December 8 to align with the BMWED (Brotherhood of Maintenance of Way Employees), SMART-TD, and the International Brotherhood of Boilermakers. If no agreement is reached by then, a coordinated strike could start on December 9. Railroad unions that voted for ratification have said they will not cross the picket lines and will support their fellow union workers, posing the risk of a nationwide freight rail shutdown.

    According to federal safety measures, railroad carriers begin prepping for a strike seven days before the strike date. The carriers start to prioritize the securing and movement of security-sensitive materials like chlorine for drinking water and hazardous materials in the rail winddown.

    Ninety-six hours before a strike date, chemicals are no longer transported. According to the American Chemistry Council, railroad industry data shows a drop of 1,975 carloads of chemical shipments during the week of September 10 when the railroads stopped accepting shipments due to the previous threat of a strike.

    The Association of American Railroads would be expected to release its planning steps, similar to what it announced in September.

    A new economic analysis released by the American Chemistry Council estimates that a rail strike would impact approximately $2.8 billion in chemical cargo that is moved weekly, with a month-long strike resulting in an overall hit to the economy of $160 billion, or one percentage point of GDP.

    The ACC represents companies across industrial, energy and pharmaceutical sectors, among other manufacturing niches, including 3M, Dow, Dupont, Exxon Mobil, Chevron, BP and Eli Lilly.

    If no agreement is reached between the four unions and rail carriers during cooling-off periods, there could be a strike or a lockout unless Congress intervenes using its power through the Constitution’s Commerce Clause. Under this clause, Congress would be able to introduce legislation to stop a strike or a lockout and to set terms of the agreements between the unions and the carriers.

    One of the key points of negotiation for labor during this status quo period is asking for 56 hours of sick time based on an executive order for federal contractor benefits.

    The Association of American Railroads provided CNBC with its leave policy explainer which was updated in mid-October. In a September report, the AAR quantified the impact of a strike on the supply chain and the U.S. economy at up to $2 billion a day.

    It's important our employees to get the compensation they deserve, says Assoc. of American Railroads CEO

    [ad_2]

    Source link

  • Mortgage demand rises 2.2% as interest rates decline slightly

    Mortgage demand rises 2.2% as interest rates decline slightly

    [ad_1]

    Mortgage applications rose 2.2% last week compared with the previous week, prompted by a slight decline in interest rates, according to the Mortgage Bankers Association’s seasonally adjusted index.

    Refinance applications, which are usually most sensitive to weekly rate moves, rose 2% for the week but were still 86% lower than the same week one year ago. Even with interest rates now back from their recent high of 7.16% a month ago, there are precious few who can still benefit from a refinance — just 220,000, according to real estate data firm Black Knight.

    Mortgage applications to purchase a home rose 3% for the week, but they were down 41% from a year ago. Some potential buyers may now be venturing back in, hearing that there is less competition and more negotiating power, but there is still a shortage of homes for sale and prices have not come down significantly.

    A home, available for sale, is shown on August 12, 2021 in Houston, Texas.

    Brandon Bell | Getty Images

    Rates are still twice what they were at the beginning of the year, but they eased somewhat last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.67% from 6.90%, with points increasing to 0.68 from 0.56 (including the origination fee) for loans with a 20% down payment.

    “The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year,” Joel Kan, an MBA economist, said in a release. “With the decline in rates, the ARM share [adjustable-rate] of applications also decreased to 8.8% of loans last week, down from the range of 10% and 12% during the past two months.”

    Mortgage rates haven’t moved at all this week, as the upcoming Thanksgiving holiday tends to weigh on volumes.

    “It’s not that things aren’t moving. They just aren’t moving like normal,” said Matthew Graham, chief operating officer at Mortgage News Daily. “Expect things to get back closer to normal next week, but for the market to continue to wait until December 13 and 14 for the biggest moves.”

    That’s when the government releases its next major report on inflation and the Federal Reserve announces its next move on interest rates.

    [ad_2]

    Source link