Tag: Monetary Policy

Policy Missteps Have Real World Consequences!

Wall Street’s ended lower on Thursday, with the NASDAQ dropping more than 2%, as investors reacted to Federal Reserve officials including Chair Jerome Powell offering further signposting of aggressive interest rate hikes this year.

He outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest-rate increases while describing the labor market as overheated.

“I would say that 50 basis points will be on the table for the May meeting,” Powell said at an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank President Christine Lagarde and other officials. He said demand for workers is “too hot — you know, it is unsustainably hot.”

Australian shares dropped 1.4 per cent, or 108.5 points, to 7484.3, in early trade, tracking Wall Street and pulling away from a near record high on Thursday.

Ten out of the index’s 11 categories fell with materials the biggest laggard down 3.5 per cent. Industrials stocks were unchanged.

The major banks and mining giants were also under pressure. The AUD was down a little to 73.64. This continues a decoupling if the AUD and commodities, which is worth a more detailed separate post.

Go to the Walk The World Universe at https://walktheworld.com.au/

Investors: Standby For A Reality Check!

The Dow stumbled on Thursday to close out the shortened U.S. trading week despite mostly better-than-expected quarterly results from major Wall Street banks. Tech stocks were a sea of red.

US markets will be closed on Good Friday. The ASX is closed on Friday and on Monday, as are most major European markets.

Thursday marked the monthly expiration for options contracts, an occurrence that has in the recent past helped amplify stock market gyrations as investors make adjustments to account for millions of expiring options contracts on stocks, ETFs and indexes.

Amidst the carnage, John Lynch, chief investment officer at Comerica Wealth Management, said investors are set for a reality check. “After almost two years of earnings-per-share (EPS) growth at a multiple of historical averages, this year’s opening quarter is projected to deliver single digit profit growth for the first time since the fourth quarter of 2020,” Lynch said.

“It’s a tough environment,” said David Donabedian, chief investment officer at CIBC Private Wealth Management. “Inflation numbers are going to stay very high and haven’t peaked yet, and we’re also going to start to see a deteriorating outlook for economic growth — not a recession, but significantly slower economic growth than certainly we’d anticipated as the year began.”

Wherever you look there is pain. For example. Mortgage rates in the U.S. surged, reaching 5% for the first time in more than a decade.

On the economic front, investors digested a weaker picture as data showed initial jobless claims rose more than expected, while the latest retail sales report flagged the impact of red-hot inflation on the consumer.

Bitcoin slumped 3.4 per cent to under $40,000 USD. North Korean-tied hackers were responsible for a $620-million cryptocurrency heist last month targeting players of the popular Axie Infinity game, US authorities said Thursday.

Go to the Walk The World Universe at https://walktheworld.com.au/

Half A Percent Cash Rate Rise Drives Another Nail into New Zealand Property Falls

The New Zealand Reserve Bank’s Monetary Policy Committee dropped a 50 basis point hike today by lifting the official cash rate to 1.5% from 1% Wednesday in Wellington, the first time it has delivered an increase of that magnitude since 2000, its biggest hike in 22 years.

SO the question is, does the 50 basis point hike represent a stitch in time, or a nail in the coffin of the property market?

The move wrong-footed 15 of 20 economists who expected a quarter-point adjustment. However, investors had assigned it a 70% probability.

“The Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations,” the RBNZ said. “It is appropriate to continue to tighten monetary conditions at pace.”

Go to the Walk The World Universe at https://walktheworld.com.au/

Half A Percent Cash Rate Rise Drives Another Nail into New Zealand Property Falls

The New Zealand Reserve Bank’s Monetary Policy Committee dropped a 50 basis point hike today by lifting the official cash rate to 1.5% from 1% Wednesday in Wellington, the first time it has delivered an increase of that magnitude since 2000, its biggest hike in 22 years.

So the question is, does the 50 basis point hike represent a stitch in time, or a nail in the coffin of the property market?

The move wrong-footed 15 of 20 economists who expected a quarter-point adjustment. However, investors had assigned it a 70% probability.

“The Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations,” the RBNZ said. “It is appropriate to continue to tighten monetary conditions at pace.”

Go to the Walk The World Universe at https://walktheworld.com.au/

Fed Minutes Stoke The Dollar, Shares Slide Some More (But Don’t Mention The Ruble!)

Stock indexes fell on Wednesday and the U.S dollar surged to a nearly two-year peak, after the Federal Reserve released minutes from its last meeting that reinforced views the central bank may tighten aggressively to curb inflation.

According to minutes of the March 15-16 policy meeting, Fed officials “generally agreed” to cut up to $95 billion a month from the central bank’s asset holdings as another tool in the fight against surging inflation, even as the war in Ukraine tempered the first U.S. interest rate increase.

In March, the Fed raised rates for the first time since 2018 and pivoted away from an easy monetary policy during the coronavirus pandemic. The FOMC is expected to approve the balance-sheet reduction at its next gathering May 3-4.

The United States imposed more sanctions on Russia on Wednesday, as Russian forces bombarded cities in Ukraine. But the Ruble fights back, thanks to the elevated price of oil driving bigger receipts for Russia. So how effective will sanctions be?

Go to the Walk The World Universe at https://walktheworld.com.au/

A Critical Breakout?

Some investors have worried that the Fed could tip the economy into recession should it become too aggressive in raising its benchmark interest rates in an effort to battle rising prices.

We discuss Jim Reid’s insight ( head of thematic research at Deutsche Bank) that yields on the 10-year Treasury note have spiked through the top line of a downward trend channel tracing back to the mid-1980s, with surging inflation and the Federal Reserve’s reaction to it sparking questions over whether the long-term trend will imminently end.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Buying The Dip As Risks Rise Again

In today’s weekly market review, we tour the major markets to see what happened this week. Overall, the markets are in dip-buying mode, even as inflation roars higher and rate hikes are likely to become more aggressive.
New York Fed president John Williams said that if the central bank needs to raise rates by a half point, it should — reinforcing comments by Fed chairman Jerome Powell and other officials over the past week.

The Fed’s steps to contain inflation are “what ultimately will drive a more aggressive inversion of the curve, which we think is coming quite quickly,” Columbia Threadneedle Investments global head of fixed income Gene Tannuzzo told Bloomberg.

But that doesn’t necessarily signal a recession, since “this is a very different cycle and the first one in over 30 years where the Fed is playing catch-up to inflation,” he added. Despite the strong correlations in the past, as I discussed the other day.

Economists at both Citibank and Bank of America said they now expect the Fed to lift its key rate in multiple 50-basis-point increments.

Go to the Walk The World Universe at https://walktheworld.com.au/

Where Has The Fed Put The Fed Put Now?

We got the first rate rise from the FED overnight, and the markets went ballistic. So what do we make of all this, and is the FED now on a path to significant tightening, what will the fallout be?

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Send In The Clowns (Or The Australian Market Is Different…) [Podcast]

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Send In The Clowns (Or The Australian Market Is Different...) [Podcast]
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Squeezing Until The Pips Squeak! [Podcast]

Suddenly Central Banks and Governments have the perfect alibi (a claim or piece of evidence that one was elsewhere when an act, typically a criminal one, is alleged to have taken place) to account for years of poor policy, as costs of living, and inflation are rising. And as RBA Deputy Governor Guy Debelle leaves the bank – does he see the writing on the wall?

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Squeezing Until The Pips Squeak! [Podcast]
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