Given policy shifts, one might think investors are panicking. After all, the amount of cash in the system was a major force for market euphoria after the pandemic crash.
“The main driver in the market today is this phenomenal pool of liquidity,” Vis Raghavan, JPMorgan’s CEO for Europe, the Middle East and Africa, told me this week. “The market is just flooded with money. Every asset class is extremely busy.”
However, there was no “narrowed rage” as there was in 2013, when the Fed signaled that it would eventually slow down asset purchases, triggering a strong bond sell-off and turmoil in the global market. The Dow, S&P 500 and Nasdaq Composite hit all-time highs on Wednesday, and the bond market remains stable.
Why? First, the message was very clear. Raghavan believes it is also obvious that central banks would be willing to go all-in again if the recovery after the pandemic went south. After 2020, their willingness to flex their muscles is no secret.
“No one wants any economic turmoil to ruin this recovery,” he said. “Whatever happens, there will be intervention to ensure there is no economic pain.”
Fed President Jerome Powell, who last year saw the central bank’s balance sheet rise to $ 7.4 trillion, the highest level ever, hinted at this on Wednesday.
“We are prepared to adjust the pace of purchases if changes in the economic outlook justify it,” he said.
However, as inflation has been growing the fastest in the last three decades, the question now is whether central banks will have to cut incentives even more aggressively or risk missing the moment to sustain price increases. This will require careful communication to keep investors on the same page.
Powell said the Fed will not raise interest rates until the labor market progresses. But does the central bank risk falling behind?
Take a look at this space: there was a chance that the Bank of England would become the first major central bank to raise interest rates since the crisis hit on Thursday – but kept interest rates at a record low of 0.1%. The Bank of America team believes the central bank will double interest rates by February.
OPEC is under serious pressure to pump more crude oil
While the world is debating the end of fossil fuels at COP26 in Glasgow, OPEC and its allies are debating whether to pump more oil to ease rising prices that boost global inflation and harm vulnerable households.
Latest: Energy ministers from major manufacturers, including Saudi Arabia and Russia, meeting virtually on Thursday, are under pressure from big clients like the U.S. to increase production by more than the planned 400,000 barrels a day, reports my business colleague CNN Charles Riley.
Speaking at a climate summit in Glasgow earlier this week, President Joe Biden said rising petrol prices were “the result” of “Russia’s or OPEC countries’ refusal to pump more oil”.
“When will we see what happens in this regard,” Biden added.
High oil prices would slow down the recovery at a crucial moment, and higher gasoline prices could have political consequences for Democrats heading to the 2022 midterm elections. $ 40 a gallon, and in Nevada, Washington and Oregon they are flirting with $ 4.
Remember: OPEC member countries produce about 40% of the world’s crude oil. In recent years, OPEC has coordinated production decisions with other major producers, including Russia, as part of a larger group called OPEC +.
“The external flexibility of OPEC + from oil-producing countries is increasing, especially from the United States,” said Rystad Energy analyst Louise Dickson.
The CEO of the Web Summit says regulators should turn to China
To leave the pandemic behind, more than 40,000 people in Lisbon are at the online summit, Europe’s largest technology festival.
“It’s good for us and good for society,” he said, while praising the company’s focus on virtual and augmented reality technologies. “We’re not perfect.”
Web Summit CEO Paddy Cosgrave told me that the arrival of whistleblowers on the scene is helping regulators gain momentum.
“They are moving faster than they have ever moved before to write legislation that would start addressing some of these problems,” he said in an interview.
One potential model? Cosgrave believes regulators should turn to China, which he said implements “very sensible policies” related to social media and child protection.
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Also today: first U.S. unemployment claims for mail last week at 8.30 ET.
Coming tomorrow: A strong U.S. job report for October could spur chatter about the Fed’s rate hike sooner than expected.
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