In a note to clients, UBS strategists put the current situation like this: “Omicron + taper = volatility.”
The Fed already had an incredibly difficult task on its hands. Its preferred measure of inflation, released last week, showed consumer prices climbing at the fastest pace in three decades.
The central bank has said it will begin rolling back crisis-era measures to keep the economy from overheating – although it does not want to jeopardize the recovery in the US job market, where unemployment still stands at 4.6%. Before the pandemic, the unemployment rate was 3.5%.
The arrival of the Omicron version has made the situation even more difficult to assess. While scientists are racing to determine whether the strain is more transmitted and if vaccines remain effective at protecting against serious disease, economists worry it could lead to more people staying home or reopening in some places. Huh. can coerce. This will affect the return of jobs.
Despite this development, Powell raged on Tuesday. The Goldman Sachs team noted that Powell said “three times strongly, that it would be appropriate to discuss accelerating the pace of tapering.”
“The economy is very strong at the moment and inflationary pressures are high and so I think it’s appropriate to consider ending the taper of our asset purchases … maybe a few months earlier,” Powell said.
Breaking it down: The pivot says something about the Fed’s assessment of inflation. Powell had said it was “transient” and would pass when the pandemic pressure eases on the supply chain. But on Tuesday he said it was time to move away from using the word.
“Finally, the tentative outlook on inflation is officially over as Powell’s comments reinforce the belief that higher prices are likely to continue well into the next year,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. ” Is.”
The Fed’s ability to fight inflation without scaring the markets — which have become accustomed to easy money — was always going to be a challenge. Powell merely indicated that, in his view, the act was urgent.
Add Omicron Edition influences into the mix, and it looks even trickier.
“The problem now is that waking up so late to the reality of inflation increases the risks of mismanagement of its policy capture process,” said economist Mohamed El-Arian, who has argued that the Fed tends to accept inflation. is very slow. It is written in a column for Bloomberg.
He continued: “Such a policy mistake – putting it into practice – would exacerbate the woes of an economy in which more vulnerable sections of the population are already facing inflation, taking away a substantial portion of their income.” , and wherever so many Americans have been kicked out of the housing market. All of this is particularly unfortunate and could have been completely avoided.”
China may plug loopholes in IPO in favor of tech giants
Such a move could prevent Chinese firms from listing on foreign stock exchanges and potentially force companies that have already gone down this route to overhaul their businesses.
The results are not yet clear, but could be dramatic. Here’s how Bloomberg puts it:
- The people said companies that currently use VIEs listed in the US and Hong Kong will need to make adjustments so that their ownership structures are more transparent in regulatory reviews, especially in areas off-limits to foreign investment. It is not clear whether this will mean a reformation of shareholders or, more seriously, the removal of the most vulnerable firms – moves that could revive fears of a disintegration between China and the US in areas such as technology.
The China Securities Regulatory Commission did not respond to a request for comment from CNN Business.
Should some of the biggest names in Chinese tech be forced to leave Forex, it would be extremely disruptive to the investors who have piled into these stocks.
The Journey Is Back, But O’Micron Could Change Everything
When American Airlines thought they were on the verge of profitability again, along came the Omicron version.
Leisure travel is back near pre-Covid levels, and this Thanksgiving marked the busiest week for air travel since the start of the pandemic. But major US airlines were relying on the return of their most lucrative revenue sources: business and international passengers.
“I think the year-end holiday travel is booked and will go ahead,” said Philip Bagley, the airline’s chief credit analyst at Standard & Poor’s. “But planning international travel and business travel, I think there will be a wait-and-see attitude on them.”
They are reversing some of those losses in premarket trading this morning. But the outlook once again looks very uncertain.
“The unknown is bad news in itself,” Bagley said.
next
Today also:
- Posts the ISM Manufacturing Index for November at 10 a.m. ET.
- Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen testified before the House Financial Services Committee starting at 10 a.m. ET.
Tomorrow: Will America’s jobless claims remain at their lowest level since 1969?