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Economic Times
15 hours ago
- Business
- Economic Times
Trading day: From turmoil to trends — what's steering the market now
After two days of strong gains in world stocks amid the widespread relief over cooling Middle East tensions, relative stability was the hallmark of trading on Wednesday, with major asset classes moving in much narrower ranges. In my column today I look at U.S. foreign direct investment - was the sharp decline in the first quarter an anomaly, or a warning of what's to come in the brave new tariff world? More on that below, but first, a roundup of the main market moves. ADVERTISEMENT If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. 1. Fed's Powell cautions against ending Fed power to pay interest on reserves 2. U.S. current account gap clocks pre-2008 crash milestone: Mike Dolan 3. Israel-Iran war highlights Mideast's declining influence on oil prices: Bousso 4. NATO commits to spending hike sought by Trump, and to mutual defence ADVERTISEMENT 5. U.S. exchanges, SEC in talks to ease public company regulations Today's Key Market Moves ADVERTISEMENT * World stocks and the Nasdaq 100 hit new peaks for a second day in a row. The S&P 500 slips, but is still very close to its record high. * Some big moves in U.S. tech, with Super Micro Computer +8.8%, Nvidia +4.3% to a record high, AMD +3.6%, and Tesla -3.8%. Real estate is the biggest declining sector, -2.5%. ADVERTISEMENT * Oil stops the rot, kind of, gaining nearly 1% on U.S. crude inventory drawdown and signs of strong U.S. gasoline demand. * The dollar slips to fresh multi-year lows against the euro and sterling. ADVERTISEMENT * Platinum up another 2.5% to new 11-year high above $1,350/oz. Now up 28% in June, on for its best month since 1986. The MSCI All Country index and Nasdaq 100 touched new record highs for a second session, and Asian and emerging market stocks posted solid gains earlier in the day. But the Dow, U.S. small caps and benchmark European indexes all fell. The euro's march higher is taking its toll, and European stocks have underperformed since the brief Israel-Iran war broke out on June 13. The euro on Wednesday rose for a fifth straight day to $1.1665, its highest since October 2021. Sterling hit its highest since February 2022 at $1.3670, and Britain's FTSE 100 slipped to its lowest this month. Bank of England policymakers may be secretly cheering the pound's rally, however, if it helps tame inflation pressures. The latest Citi/YouGov survey of UK consumers' inflation expectations on Wednesday showed that long-term inflation expectations among the British public rose to the highest since September 2022. One sector faring better in Europe on Wednesday, though, was defense, after NATO leaders agreed big increases in defense spending, especially from Europe. U.S. defense stocks have moved in the other direction this week following the Iran-Israel ceasefire. On the policy and macro front, Fed Chair Jerome Powell's second day of congressional testimony passed off without fireworks, although there were sparks in his exchanges with some lawmakers. He reiterated his view that the central bank is right to wait and see what the impact is from tariffs before considering further rate cuts. Much of the 'de-dollarization' debate has focused on foreign exposure to U.S. securities like stocks and bonds. But investors shouldn't ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals. Foreign direct investment typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile. U.S. President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a "non-comprehensive running list of new U.S.-based investments" since Trump's second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries. Included are more than $4 trillion in U.S.-bound investments pledged by the United Arab Emirates, Qatar, Japan and Saudi Arabia. During Trump's trip to the Middle East last month, he said the U.S. is on track to receive $12-$13 trillion of investments from countries around the globe, which includes "projects mostly announced ... and some to be announced very shortly." These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to $52.8 billion, the lowest total since the fourth quarter of 2022. That's well below the quarterly averages of the past 10 and 20 years. The Commerce Department figures also showed that the U.S. current account deficit widened to a record $450.2 billion in the quarter, or 6% of U.S. GDP, meaning FDI inflows barely covered 10% of that shortfall. The short answer is probably not, at least not yet. FDI flows are typically far smaller than portfolio flows into equity and fixed income securities, so from the perspective of funding the current account deficit, the drop in FDI is not as pressing a concern. On the other hand, if foreign investors are also buying fewer U.S. securities, capital from elsewhere will be needed to fund that deficit. Additionally, America's balance of payments data in the first quarter was hugely distorted by domestic consumers and businesses front-running Trump's tariffs, loading up on imports before the duties kick in later this year. Trump's bet is that the deficit will shrink this year and beyond as his 'America First' policies spur more "onshoring" from domestic firms as they bring production back home and the weakening dollar helps U.S. manufacturing by making exports more competitive. The subsequent boom will attract investment from companies and governments overseas. In theory. However, these dynamics work both ways. For example, the European Union is by far the largest provider of U.S. FDI, accounting for 45% of the total in 2023, according to Citi. The combination of the continent's German-led fiscal splurge, U.S. tariffs and 'de-dollarization' concerns could easily crimp that flow, perhaps significantly. Another potential risk to U.S.-bound FDI is 'Section 899' - the possible tax of up to 20% on foreigners' U.S. income that could be part of Trump's budget plans. A Tax Foundation report in May found that Section 899 would "hit inbound investment from countries that make up more than 80 percent of the U.S. inbound FDI stock." Industry pushback may water down Section 899, but it remains a cloud on the U.S. investment horizon. The U.S. is the world's biggest recipient of FDI, with a 25% share of global volumes in 2023, up from around 15% before the pandemic, according to Citi. Its economy is the largest in the world, a thriving hub of innovation, pioneering technology, artificial intelligence and money-making potential. That will always attract FDI. Whether it attracts as much in this new environment remains to be seen. * Germany GfK consumer confidence (July) * European Central Bank President Christine Lagarde, Vice President Luis de Guindos and board member Isabel Schnabel speak (at different events) * Bank of England Governor Andrew Bailey and Deputy Governor Sarah Breeden speak (at different events) * U.S. weekly jobless claims * U.S. durable goods (May) * U.S. trade (May) * U.S. GDP (Q1, final estimate) * U.S. 7-year note auction * Richmond Fed President Thomas Barkin, Cleveland Fed President Beth Hammack and Fed Governor Michael Barr speak (at different events) Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Yahoo
a day ago
- Business
- Yahoo
Trading Day: Whirlwind fades, calm returns
By Jamie McGeever ORLANDO, Florida (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist After two days of strong gains in world stocks amid the widespread relief over cooling Middle East tensions, relative stability was the hallmark of trading on Wednesday, with major asset classes moving in much narrower ranges. In my column today I look at U.S. foreign direct investment - was the sharp decline in the first quarter an anomaly, or a warning of what's to come in the brave new tariff world? More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. 1. Fed's Powell cautions against ending Fed power to payinterest on reserves 2. U.S. current account gap clocks pre-2008 crashmilestone: Mike Dolan 3. Israel-Iran war highlights Mideast's declining influenceon oil prices: Bousso 4. NATO commits to spending hike sought by Trump, and tomutual defence 5. U.S. exchanges, SEC in talks to ease public companyregulations Today's Key Market Moves * World stocks and the Nasdaq 100 hit new peaks for a secondday in a row. The S&P 500 slips, but is still very close to itsrecord high. * Some big moves in U.S. tech, with Super Micro Computer+8.8%, Nvidia +4.3% to a record high, AMD +3.6%, and Tesla-3.8%. Real estate is the biggest declining sector, -2.5%. * Oil stops the rot, kind of, gaining nearly 1% on inventory drawdown and signs of strong U.S. gasolinedemand. * The dollar slips to fresh multi-year lows against the euroand sterling. * Platinum up another 2.5% to new 11-year high above$1,350/oz. Now up 28% in June, on for its best month since 1986. Whirlwind fades, calm returns The MSCI All Country index and Nasdaq 100 touched new record highs for a second session, and Asian and emerging market stocks posted solid gains earlier in the day. But the Dow, U.S. small caps and benchmark European indexes all fell. The euro's march higher is taking its toll, and European stocks have underperformed since the brief Israel-Iran war broke out on June 13. The euro on Wednesday rose for a fifth straight day to $1.1665, its highest since October 2021. Sterling hit its highest since February 2022 at $1.3670, and Britain's FTSE 100 slipped to its lowest this month. Bank of England policymakers may be secretly cheering the pound's rally, however, if it helps tame inflation pressures. The latest Citi/YouGov survey of UK consumers' inflation expectations on Wednesday showed that long-term inflation expectations among the British public rose to the highest since September 2022. One sector faring better in Europe on Wednesday, though, was defense, after NATO leaders agreed big increases in defense spending, especially from Europe. U.S. defense stocks have moved in the other direction this week following the Iran-Israel ceasefire. On the policy and macro front, Fed Chair Jerome Powell's second day of congressional testimony passed off without fireworks, although there were sparks in his exchanges with some lawmakers. He reiterated his view that the central bank is right to wait and see what the impact is from tariffs before considering further rate cuts. U.S. foreign investment slump - anomaly or warning? Much of the 'de-dollarization' debate has focused on foreign exposure to U.S. securities like stocks and bonds. But investors shouldn't ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals. Foreign direct investment typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile. U.S. President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a "non-comprehensive running list of new U.S.-based investments" since Trump's second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries. Included are more than $4 trillion in U.S.-bound investments pledged by the United Arab Emirates, Qatar, Japan and Saudi Arabia. During Trump's trip to the Middle East last month, he said the U.S. is on track to receive $12-$13 trillion of investments from countries around the globe, which includes "projects mostly announced ... and some to be announced very shortly." These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to $52.8 billion, the lowest total since the fourth quarter of 2022. That's well below the quarterly averages of the past 10 and 20 years. The Commerce Department figures also showed that the U.S. current account deficit widened to a record $450.2 billion in the quarter, or 6% of U.S. GDP, meaning FDI inflows barely covered 10% of that shortfall. Should the Trump administration be worried? TARIFF DISTORTIONS The short answer is probably not, at least not yet. FDI flows are typically far smaller than portfolio flows into equity and fixed income securities, so from the perspective of funding the current account deficit, the drop in FDI is not as pressing a concern. On the other hand, if foreign investors are also buying fewer U.S. securities, capital from elsewhere will be needed to fund that deficit. Additionally, America's balance of payments data in the first quarter was hugely distorted by domestic consumers and businesses front-running Trump's tariffs, loading up on imports before the duties kick in later this year. Trump's bet is that the deficit will shrink this year and beyond as his 'America First' policies spur more "onshoring" from domestic firms as they bring production back home and the weakening dollar helps U.S. manufacturing by making exports more competitive. The subsequent boom will attract investment from companies and governments overseas. In theory. However, these dynamics work both ways. For example, the European Union is by far the largest provider of U.S. FDI, accounting for 45% of the total in 2023, according to Citi. The combination of the continent's German-led fiscal splurge, U.S. tariffs and 'de-dollarization' concerns could easily crimp that flow, perhaps significantly. Another potential risk to U.S.-bound FDI is 'Section 899' - the possible tax of up to 20% on foreigners' U.S. income that could be part of Trump's budget plans. A Tax Foundation report in May found that Section 899 would "hit inbound investment from countries that make up more than 80 percent of the U.S. inbound FDI stock." Industry pushback may water down Section 899, but it remains a cloud on the U.S. investment horizon. The U.S. is the world's biggest recipient of FDI, with a 25% share of global volumes in 2023, up from around 15% before the pandemic, according to Citi. Its economy is the largest in the world, a thriving hub of innovation, pioneering technology, artificial intelligence and money-making potential. That will always attract FDI. Whether it attracts as much in this new environment remains to be seen. What could move markets tomorrow? * Germany GfK consumer confidence (July) * European Central Bank President Christine Lagarde, VicePresident Luis de Guindos and board member Isabel Schnabel speak(at different events) * Bank of England Governor Andrew Bailey and Deputy GovernorSarah Breeden speak (at different events) * U.S. weekly jobless claims * U.S. durable goods (May) * U.S. trade (May) * U.S. GDP (Q1, final estimate) * U.S. 7-year note auction * Richmond Fed President Thomas Barkin, Cleveland FedPresident Beth Hammack and Fed Governor Michael Barr speak (atdifferent events) Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Jamie McGeever; Editing by Nia Williams) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Trading Day: Whirlwind fades, calm returns
By Jamie McGeever ORLANDO, Florida (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist After two days of strong gains in world stocks amid the widespread relief over cooling Middle East tensions, relative stability was the hallmark of trading on Wednesday, with major asset classes moving in much narrower ranges. In my column today I look at U.S. foreign direct investment - was the sharp decline in the first quarter an anomaly, or a warning of what's to come in the brave new tariff world? More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. 1. Fed's Powell cautions against ending Fed power to payinterest on reserves 2. U.S. current account gap clocks pre-2008 crashmilestone: Mike Dolan 3. Israel-Iran war highlights Mideast's declining influenceon oil prices: Bousso 4. NATO commits to spending hike sought by Trump, and tomutual defence 5. U.S. exchanges, SEC in talks to ease public companyregulations Today's Key Market Moves * World stocks and the Nasdaq 100 hit new peaks for a secondday in a row. The S&P 500 slips, but is still very close to itsrecord high. * Some big moves in U.S. tech, with Super Micro Computer+8.8%, Nvidia +4.3% to a record high, AMD +3.6%, and Tesla-3.8%. Real estate is the biggest declining sector, -2.5%. * Oil stops the rot, kind of, gaining nearly 1% on inventory drawdown and signs of strong U.S. gasolinedemand. * The dollar slips to fresh multi-year lows against the euroand sterling. * Platinum up another 2.5% to new 11-year high above$1,350/oz. Now up 28% in June, on for its best month since 1986. Whirlwind fades, calm returns The MSCI All Country index and Nasdaq 100 touched new record highs for a second session, and Asian and emerging market stocks posted solid gains earlier in the day. But the Dow, U.S. small caps and benchmark European indexes all fell. The euro's march higher is taking its toll, and European stocks have underperformed since the brief Israel-Iran war broke out on June 13. The euro on Wednesday rose for a fifth straight day to $1.1665, its highest since October 2021. Sterling hit its highest since February 2022 at $1.3670, and Britain's FTSE 100 slipped to its lowest this month. Bank of England policymakers may be secretly cheering the pound's rally, however, if it helps tame inflation pressures. The latest Citi/YouGov survey of UK consumers' inflation expectations on Wednesday showed that long-term inflation expectations among the British public rose to the highest since September 2022. One sector faring better in Europe on Wednesday, though, was defense, after NATO leaders agreed big increases in defense spending, especially from Europe. U.S. defense stocks have moved in the other direction this week following the Iran-Israel ceasefire. On the policy and macro front, Fed Chair Jerome Powell's second day of congressional testimony passed off without fireworks, although there were sparks in his exchanges with some lawmakers. He reiterated his view that the central bank is right to wait and see what the impact is from tariffs before considering further rate cuts. U.S. foreign investment slump - anomaly or warning? Much of the 'de-dollarization' debate has focused on foreign exposure to U.S. securities like stocks and bonds. But investors shouldn't ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals. Foreign direct investment typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile. U.S. President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a "non-comprehensive running list of new U.S.-based investments" since Trump's second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries. Included are more than $4 trillion in U.S.-bound investments pledged by the United Arab Emirates, Qatar, Japan and Saudi Arabia. During Trump's trip to the Middle East last month, he said the U.S. is on track to receive $12-$13 trillion of investments from countries around the globe, which includes "projects mostly announced ... and some to be announced very shortly." These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to $52.8 billion, the lowest total since the fourth quarter of 2022. That's well below the quarterly averages of the past 10 and 20 years. The Commerce Department figures also showed that the U.S. current account deficit widened to a record $450.2 billion in the quarter, or 6% of U.S. GDP, meaning FDI inflows barely covered 10% of that shortfall. Should the Trump administration be worried? TARIFF DISTORTIONS The short answer is probably not, at least not yet. FDI flows are typically far smaller than portfolio flows into equity and fixed income securities, so from the perspective of funding the current account deficit, the drop in FDI is not as pressing a concern. On the other hand, if foreign investors are also buying fewer U.S. securities, capital from elsewhere will be needed to fund that deficit. Additionally, America's balance of payments data in the first quarter was hugely distorted by domestic consumers and businesses front-running Trump's tariffs, loading up on imports before the duties kick in later this year. Trump's bet is that the deficit will shrink this year and beyond as his 'America First' policies spur more "onshoring" from domestic firms as they bring production back home and the weakening dollar helps U.S. manufacturing by making exports more competitive. The subsequent boom will attract investment from companies and governments overseas. In theory. However, these dynamics work both ways. For example, the European Union is by far the largest provider of U.S. FDI, accounting for 45% of the total in 2023, according to Citi. The combination of the continent's German-led fiscal splurge, U.S. tariffs and 'de-dollarization' concerns could easily crimp that flow, perhaps significantly. Another potential risk to U.S.-bound FDI is 'Section 899' - the possible tax of up to 20% on foreigners' U.S. income that could be part of Trump's budget plans. A Tax Foundation report in May found that Section 899 would "hit inbound investment from countries that make up more than 80 percent of the U.S. inbound FDI stock." Industry pushback may water down Section 899, but it remains a cloud on the U.S. investment horizon. The U.S. is the world's biggest recipient of FDI, with a 25% share of global volumes in 2023, up from around 15% before the pandemic, according to Citi. Its economy is the largest in the world, a thriving hub of innovation, pioneering technology, artificial intelligence and money-making potential. That will always attract FDI. Whether it attracts as much in this new environment remains to be seen. What could move markets tomorrow? * Germany GfK consumer confidence (July) * European Central Bank President Christine Lagarde, VicePresident Luis de Guindos and board member Isabel Schnabel speak(at different events) * Bank of England Governor Andrew Bailey and Deputy GovernorSarah Breeden speak (at different events) * U.S. weekly jobless claims * U.S. durable goods (May) * U.S. trade (May) * U.S. GDP (Q1, final estimate) * U.S. 7-year note auction * Richmond Fed President Thomas Barkin, Cleveland FedPresident Beth Hammack and Fed Governor Michael Barr speak (atdifferent events) Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Jamie McGeever; Editing by Nia Williams) Sign in to access your portfolio
Yahoo
04-06-2025
- Business
- Yahoo
Trading Day: Teflon stocks glide higher
By Jamie McGeever ORLANDO, Florida (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist Markets again lacked a unifying theme on Wednesday, as world stocks hit record highs, Wall Street ended mixed and Treasury yields tumbled, all against a backdrop of patchy U.S. economic data and a lack of clarity on global trade talks. In my column today I look at how, despite justifiable fears of tariff-fueled price rises later this year and beyond, the global forces of disinflation are stronger right now than the forces of inflation. More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. 1. U.S. private payrolls post smallest gain in over twoyears in May 2. Euro needn't dethrone dollar to draw reserve flood: MikeDolan 3. Trump tax-cut bill could cost $2.4 trillion, less thanearlier forecast 4. Trump calls China's Xi tough, 'hard to make a deal with' 5. U.S. economic activity declines as tariffs pressureprices, Fed says Today's Key Market Moves * World stocks hit an all-time high, as the MSCI AllCountry index rises for a third day to 890.94 points. * The S&P 500 and Nasdaq edge higher, with the tech sectoramong the leading gainers and energy the biggest decliner. * The Canadian dollar climbs to an eight-month high of1.3650 per $ after the BoC leaves interest rates unchanged at2.75%. * Treasuries rally following a batch of weak U.S. economicdata. Longer-dated yields fall 10 bps, the steepest drop inseven weeks. * Oil falls 1%, pressured by a surprisingly large build-upin gasoline and diesel inventories. Teflon stocks glide higher Financial market moves can usually be traced to, or at least reasonably explained by, a narrative or new development that changes investors' view of the value of the asset in question. But some days, they are difficult to rationalize. Wednesday was one of those days, at least in equities. Wall Street rose for a third session, the Nasdaq climbed back into the green for the year, and global stocks rose to their highest level on record. Yet the newsflow was hardly bullish, although the nonpartisan U.S. Congressional Budget Office did lower its estimate of how much President Donald Trump's tax-cut and spending bill will add to the national debt by $1.4 trillion. On the trade front, the Trump administration doubled steel and aluminum tariffs, and it became clear that trade talks with Europe and China are proving difficult. The deadline for countries to show their "best offers" to avoid other punitive import levies taking effect next month passed on Wednesday too. China's decision in April to suspend exports of a wide range of rare earths continues to wreak havoc across crucial supply chains around the world, especially in the auto industry. Some European auto parts plants have suspended production. On the economic data front, the U.S. 'stagflation' alarm bells could not have rung louder on Wednesday. Figures showed U.S. private sector employment growth in May was the slowest in more than two years, perhaps an ominous signal for Friday's non-farm payroll report. Meanwhile, the services sector contracted in May for the first time in nearly a year and input prices paid by businesses leaped to their highest in two and a half years. If gold prices took their cue from the 'flation' side of those numbers, the bond market took its cue from the 'stag' side of the equation. Treasuries prices rallied strongly, and the 10-year yield posted its biggest fall since mid-April. Trump used the weak economic data to take to social media and repeat his call for Fed Chair Jerome 'Too Late' Powell to lower interest rates, complaining that "Europe" has already cut rates nine times. If he's referring to the European Central Bank, that's not quite accurate. The ECB has cut rates seven times since June last year, but is widely expected to make that eight on Thursday. The Bank of Canada took a leaf out of the Fed's book on Wednesday, deciding against cutting interest rates and choosing to wait and see what the effects of U.S. trade policy are. It said another rate cut might be needed, however, if the economy slows sufficiently. Aside from the ECB, the biggest market-moving event on Thursday could be China's 'unofficial' services sector PMI report for May. Signs of renewed weakness might be the cue for a 'risk-off' tone to world markets on Thursday, although the evidence of Wednesday shows that's no guarantee. Disinflation is a greater force right now than inflation Investors, consumers and policymakers may justifiably fear the specter of tariff-fueled inflation later this year and beyond, but it's powerful global disinflationary forces that are weighing most heavily right now. The OECD said on Tuesday it expects collective annual headline inflation in G20 economies to moderate to 3.6% this year from 6.2% last year, cooling further in 2026 to 3.2%. But the United States is an "important exception," the OECD argues, and it sees inflation there rising to just under 4% later this year and remaining above target in 2026. While annual PCE consumer inflation in the U.S. cooled to 2.1% in April, the slowest rate in four years and virtually at the Fed's 2% target, consumer inflation expectations are the loftiest in decades. The Fed has paused its easing cycle as a result, and U.S. bond yields are higher than most of their G10 peers. Economists at Goldman Sachs share the OECD's view that U.S. inflation will pick up to near 4% this year, with tariffs accounting for around half of that. Many others also agree that the U.S. appears to be the exception, not the rule. The world's next two largest economies, China and the euro zone, find themselves trying to stave off disinflation. Deepening trade and financial ties between the two may only intensify these forces, keeping a lid on price increases. SPECTER OF DEFLATION Annual inflation in the euro zone cooled to 1.9% in May, below the European Central Bank's 2% target, essentially setting the seal on another quarter-point rate cut later this week. More easing appears to be in the cards. As economists at Nomura point out, inflation swaps are priced for inflation undershooting the ECB's target for at least the next two years. This, combined with weakening growth due to U.S. tariffs and disinflationary pressure from China, could force the ECB to cut rates another 50 basis points to 1.5% by September. China's war on deflation is, of course, well-known to investors, but it has appeared to slip off their collective radar given how protracted it has become. The last time annual inflation in China eclipsed 1% was more than two years ago, and it has remained near zero, on average, ever since. China's 10-year bond yield remains anchored near January's record low below 1.60%, reflecting investors' skepticism that price pressures will accelerate any time soon. They have reason to be doubtful. Deflation and record-low bond yields continue to stalk the economy despite Beijing's fiscal and monetary stimulus efforts since September. And punitive tariffs on exports to the U.S., one of its largest export markets, are generating massive uncertainty about the country's economic outlook moving forward. REER-VIEW MIRROR This is where the exchange rate becomes important. On the face of it, Beijing appears to have resisted mounting pressure on the yuan thus far, with the onshore and offshore yuan last week trading near their strongest levels against the dollar since November. But when considering the yuan's broad real effective exchange rate (REER), an inflation-adjusted measure of its value against a basket of currencies, the Chinese currency is the weakest since 2012. Robin Brooks at The Brookings Institution reckons it may be undervalued by more than 10%. With China's goods so cheap in the global marketplace, China is essentially exporting deflation. And the yuan's relative weakness could put pressure on other Asian countries to weaken their currencies to keep them competitive, even as the Trump administration potentially encourages these governments to do the exact opposite. Countries in Asia and around the world, especially in the euro zone, may also be nervous that China could dump goods previously bound for the U.S. on their markets. If anyone wants confirmation that the "tariffs equal inflation" view is too simplistic, they got it this week from Switzerland, where deflation is back and potential negative interest rates may not be far behind. True, Trump's threatened tariffs could throw everything up in the air. But the Swiss example is a warning to markets and policymakers that global disinflationary forces may be spreading. What could move markets tomorrow? * Australia trade (April) * South Korea GDP (Q1, revised) * China Caixin services PMI (May) * European Central Bank interest rate decision * Canada trade (April) * Canada PMI (May) * U.S. weekly jobless claims * U.S. trade (April) * Fed officials speaking at various events include: FedGovernor Adriana Kugler, Kansas City Fed President JeffreySchmid, and Philadelphia Fed President Patrick Harker Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Jamie McGeever; Editing by Nia Williams) Sign in to access your portfolio
Yahoo
28-04-2025
- Business
- Yahoo
Here's White Falcon's Views on Grifols, S.A. (GRFS)
White Falcon Capital Management, an investment fund manager, released its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund's performance for the recent quarter was below expectations, as the gains from gold and silver royalty holdings were unable to cover the losses in some of the larger positions. On a positive note, the portfolio company, Converge Technologies (CTS), was acquired at a significant premium during this time. In the quarter, the fund returned -6.7% compared to a -4.4% return for the S&P 500 (CAD), -1.2 % for the MSCI All Country (CAD), and 1.5% for the S&P TSX TR. In addition, please check the fund's top five holdings to know its best picks in 2025. In its first-quarter 2025 investor letter, White Falcon Capital Management highlighted stocks such as Grifols, S.A. (NASDAQ:GRFS). Grifols, S.A. (NASDAQ:GRFS) is a plasma therapeutic company. The one-month return of Grifols, S.A. (NASDAQ:GRFS) was 1.41%, and its shares gained 11.27% of their value over the last three months. On April 25, 2025, Grifols, S.A. (NASDAQ:GRFS) stock closed at $7.21 per share with a market capitalization of $5.914 billion. White Falcon Capital Management stated the following regarding Grifols, S.A. (NASDAQ:GRFS) in its Q1 2025 investor letter: "In the appendix of this letter, you will find our investment thesis on Grifols, S.A. (NASDAQ:GRFS), a family-owned Spanish multinational and a leading player in the oligopolistic plasma-derived therapies market. Years of mismanagement and poor corporate governance, exacerbated by COVID-19 challenges and high debt, have weighed on its performance. However, we now see the business inflecting due to an operational improvement plan implemented by a new management team. Sid Kapur, an investment analyst intern with White Falcon, authored this report. He has been instrumental in supporting our research efforts and has played a key role in moving many files forward. A state-of-the-art manufacturing facility, with robotic arms and conveyor belts for drug production. Grifols, S.A. (NASDAQ:GRFS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held Grifols, S.A. (NASDAQ:GRFS) at the end of the fourth quarter, compared to 19 in the third quarter. While we acknowledge the potential of Grifols, S.A. (NASDAQ:GRFS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. In another article, we covered Grifols, S.A. (NASDAQ:GRFS) and shared the list of best low price pharma stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks. Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
