By Geoffrey Smith
Investing.com -- The Federal Reserve's vice-chair Lael Brainard reckons the Fed can start slowing its rate hikes "soon." U.S. producer price data for October and Walmart earnings may shed light on how soon that may be. China's industry and retail sales both weakened markedly in October, providing a fresh headwind to crude oil prices. Amazon is looking at mass layoffs to restore profitability, and the first substantial filing from FTX's bankruptcy says the collapsed crypto exchange may have up to 1 million creditors. Here's what you need to know in financial markets on Tuesday, 15th November.
1. Brainard sees slowdown in rate hikes "soon;" PPI data
Lael Brainard, vice-chair of the Federal Reserve, said that the Fed may be able to slow the pace of interest rate hikes going forward. The comments, coming from the central bank’s most senior economist, are the clearest indication yet that the Fed is beginning its long-awaited “dovish pivot” as inflation starts to fall.
“It will probably be appropriate soon to move to a slower pace of increases,” Brainard told Bloomberg, although she added “I think what’s really important to emphasize: We’ve done a lot, but we have additional work to do.”
Benchmark 2-Year Treasury note yields, sensitive to expectations for Fed rates, eased another 8 basis points on the comments to trade at 4.35% by 06:00 ET (11:00 GMT).
The comments came ahead of U.S. producer price data for October. U.S. producer price inflation fell to its lowest in over a year in October, bolstering hopes that pipeline inflation pressures have peaked thanks to the improvement in global supply chains over recent months.
Prices rose by a modest 0.2% on the month and were up 8.0% from a year earlier, comfortably below the 8.3% that was the consensus forecast.
2. Chinese output, retail sales weaken; COVID spread casts doubt on rules relaxation
There was fresh evidence of the steam coming out of the global economy overnight, as Chinese data for industrial production, retail sales and fixed asset investment all fell short of estimates under pressure from the ongoing real estate crisis and recurring localized COVID-19 lockdowns. The output and investment data illustrate why the government extended a deadline for banks to reduce their exposure to real estate developers on Monday, a policy that was tightening financial conditions for the sector still further.
Industrial output growth slowed to 5.0% while retail sales turned negative in year-on-year terms.
Lockdowns are likely to persist in the near future, despite signs of the government marginally relaxing its quarantine requirements. The nationwide incidence of cases has spiked to its highest level since April in recent days, and while the omicron strain of the virus appears to be less virulent than previous dominant strains, it still represents a significant threat to public health, given the lower efficacy of Chinese vaccines.
3. Stocks set to open higher; Amazon lay-offs, Walmart, Home Depot earnings in focus
U.S. stock markets are set to open a little higher, supported by the comments from Brainard. Investors will have one eye firmly on how the PPI reacts to the latest strength in energy prices and the other on earnings from retail bellwethers Walmart (NYSE:WMT) and Home Depot (NYSE:HD), the latter being first out with a modest beat on top and bottom lines.
By 06:15 ET, Dow Jones futures were up 120 points or 0.4%, while S&P 500 futures were up 0.7%, and Nasdaq 100 futures were up 0.2%.
Tech was supported by fresh evidence of cost-cutting to restore profitability, as The Wall Street Journal reported that Amazon (NASDAQ:AMZN) is looking at up to 10,000 corporate job cuts (not to be confused with the temporary surge in hiring around the holiday season).
4. FTX bankruptcy ain't getting any prettier
Collapsed cryptocurrency exchange FTX posted the first real details of its bankruptcy with the responsible court in Delaware, saying it may have up to 1M creditors.
The details surrounding FTX’s collapse get uglier by the day, with fresh indications that the heist it reported at the weekend, which drained some $400M of its remaining liquid assets, may have been an ‘inside job’, rather than an exploit by experienced hackers.
Research from Arkham Intelligence suggested that the hackers panicked after withdrawing the amount from FTX wallets, losing significant amounts of their token holdings as they moved assets across different chains.
Reuters had reported at the weekend that FTX founder Sam Bankman-Fried had personally inserted a ‘back-door’ into the company’s software, allowing him to move client funds to his hedge fund affiliate Alameda Research without being detected.
5. Oil slips on China data; IEA raises 2022 demand forecast, trims 2023
Crude oil prices eased further on the weak economic data from China, ignoring the International Energy Agency, which had to revise up its lowball estimates of demand growth in the fourth quarter of this year.
It also trimmed its forecast for average demand growth next year by 40,000 b/d to 1.6M barrels a day next year from 2.1M b/d in 2022, a revision entirely due to the outlook in China. The market is likely to stay tight, however, due to continued pressure on Russian output from sanctions, it reckons.
By 06:30 ET, U.S. crude futures were down 0.5% at $85.44 a barrel, while Brent futures were down 0.3% at $92.83 a barrel.