FinancialMarkets 5 Things You Need To Know
Good Day, Wall Street's top bankers caution about rate-cut bets. Red sea tensions, and China concerns.
Caution Ahead
Top Wall Street bankers are saying they expect central banks to cut interest rates more slowly than the market is anticipating. Their caution echoes that of central bankers in recent days, prompting traders to wind back aggressive bets for lower rates this year. “It doesn’t make sense,” State Street Chairman and CEO Ron O’Hanley said. “The Fed was very clear in their dot plot.” Everyone from JPMorgan’s Daniel Pinto to Standard Chartered’s Bill Winters to Cantor Fitzgerald’s Howard Lutnick have said they expect monetary policy to ease slower than anticipated by the market. Their caution echoes that of central bankers in recent days, which has already prompted traders to wind back bets on aggressive interest-rate cuts this year.
Dangerous Path
Another commercial vessel was struck by a drone south of Yemen, the third such incident in as many days that’s underscoring the intensifying danger to vessels in one of the world’s most vital waterways. The attack occurred about 60 miles (97 kilometers) southeast of Aden, Yemen, according to the UK Navy. Meanwhile, the US launched another round of strikes at 14 Houthi targets in Yemen overnight as the militant group’s attacks on shipping in the Red Sea continue.
China Risk-Reward
The “risk-reward” equation in China has “changed dramatically,” said JPMorgan CEO Jamie Dimon, even as the nation has been “very consistent” in opening up to financial-services companies. This came as Chinese Premier Li Qiang gave his clearest signal yet that Beijing won’t resort to huge stimulus to revive growth amid the worst bout of deflation in decades, even as another batch of troubling economic data tested the patience of investors.
Oil Market Yesterday
Oil prices rose on Thursday as OPEC forecast relatively strong growth in global oil demand over the next two years and the market eyed disrupted U.S. oil production amid a cold blast, as well as geopolitical tensions in the Middle East. The IEA expects oil markets to be in a "comfortable and balanced position" this year, despite Middle East tensions amid a rising supply and slowing demand growth outlook, its executive director Fatih Birol told the Reuters Global Markets Forum on Wednesday. OPEC on Wednesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and said 2025 will see a robust increase in oil use, led by China and the Middle East, in a surprise early prediction. China boosted the volume of crude oil being stockpiled in December as lower prices encouraged refiners to lift imports and maintain high levels of throughput at their plants. U.S. government data on oil inventories is due at 11 a.m. ET (1600 GMT) on Thursday. Domestic crude stockpiles rose last week by 480,000 barrels, according to market sources citing American Petroleum Institute figures on Wednesday.
MACRO Economics
The dollar hovered near a one-month peak versus
major peers on Thursday after robust U.S. retail
sales data added to building expectations the Federal Reserve will not rush to lower interest rates.
U.S. Treasury yields climbed on Wednesday after an
unexpected rise in UK inflation last month and
stronger-than-expected U.S. December retail sales
data strengthened the case that interest rate cuts
will not be as imminent as the market expects.
Gold prices hovered near five-week lows on Thursday, as hawkish remarks from Federal Reserve officials and robust data dampened investors' expectation for deeper and early interest rate cuts in U.S.
this year.
U.S. Retail sales for December rose +0.6%, more
than the +0.4% rise expected as consumers stepped
up purchases of motor vehicles and retailers offered
discounts. Data for November was unrevised to
show sales rising +0.3%. Ex: autos, gasoline, building
materials and food services, retail sales jumped
+0.8% last month. November core sales were revised higher to show them rising 0.5% instead of
0.4% as previously reported. Retail Sales increased
5.6% YoY in December, the biggest increase in 11
months, following a downwardly revised 4% rise in
November.
Key Market Data
Today / Tomorrow
Thursday
Housing Starts
08.30
Jobless Claims
08.30
Philly Fed Manufacturing Index
08.30
Crude Oil Inventories
11.00
Wednesday
Existing Home Sales
10.00
Michigan Consumer Expectations
10.00
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