The World Geopolitical Forum; Strong Showing by U.S. Shoppers By James Christie
Good day. Hot and cold wars, fragmenting trade and key elections are fueling anxiety at the annual World Economic Forum in Davos, turning it into a de facto world geopolitical forum, Greg Ip of The Wall Street Journal writes. He notes political events that were once peripheral to business leaders' concerns are now central, especially with optimism high that major economies will lower inflation without recession. In the U.S., December retail sales posted a larger-than-expected gain, while holiday sales during November and December reached a record $964.4 billion, not adjusting for inflation, the National Retail Federation said Wednesday.
Now on to today's news and analysis.
Top News War, Politics Eclipse Business on Davos Leaders' Minds
Never mind interest rates, inflation or recession. The economic concerns that usually preoccupy the global elite at their annual gathering in Davos are taking a back seat to hot war in Ukraine and the Middle East, cold war between the West and China and watershed elections from India to the U.S.
For government and business leaders, it is a disorienting departure from a world in which fortunes were mainly driven by financial forces. The World Economic Forum, which hosts the meeting, is now the de facto world geopolitical forum .
U.S. Economy Consumers Start 2024 on Strong Footing After a Jolly Holiday
Americans spent more at stores, auto dealerships and online to close out last year, suggesting consumers can continue to drive economic growth headed into 2024.
U.S. retail sales rose a seasonally adjusted 0.6% in December from a month earlier, the Commerce Department said Wednesday. It was a larger gain than economists expected and came after a 0.3% increase in November. The combined figures point to a solid holiday season for retailers.
Beige Book Finds Signs of Cooling Labor Market Across Most of U.S.
There were signs the labor market was cooling in nearly all regions of the country, according to the Federal Reserve's Beige Book survey of anecdotes collected from business contacts. They spoke of larger applicant pools, lower turnover rates, more selective hiring by firms and easing wage pressures. At the same time, the contacts seemed optimistic about future growth. Expectations were positive, had improved, or both, the survey found. ( MarketWatch )
Why the Economy's Health Isn't as Uncertain as You Might Think
Economic risk is merely average right now. I point this out to counter the many stock market analysts who have warned in their 2024 forecasts that the U.S. economy's current risk level must be at or near a record high. And many of you are convinced they're right. The problem with this narrative is in thinking that risk isn't always high. ( MarketWatch )
The $8.8 Trillion Cash Pile That Has Stock-Market Bulls Salivating
Rising rates drew trillions of dollars into money-market funds and other cash-like investments in the past two years. Investors are optimistic that with rates poised to fall, people will redirect that money and fuel markets' next leg higher.
Stocks Fall on Rate-Cut Pessimism Key Developments Around the World Argentina's Milei Urges Leaders in Davos to Embrace Free Market
Argentine President Javier Milei, speaking at the World Economic Forum, assailed what he sees as the growing risk of socialism and state intervention in Western nations while defending the free market as the only model for prosperity.
China's Property Market May Keep Struggling Despite Stimulus
It's becoming clearer that China's stimulus policies for its beleaguered property sector aren't enough to lift its fortunes early this year, with disappointing monthly sales data the latest sign that a recovery is some time away.
China Goes All In on Green Industry to Jolt Ailing Economy Taiwan's New Leader Says He Will Maintain Status Quo
The White House worries Lai Ching-te is more likely than Taiwan's departing president, Tsai Ing-wen, to provoke Beijing with envelope-pushing rhetoric and draw the U.S. into a dangerous confrontation, according to officials.
The Rare Earths Mine That Won't Need a Single Shovel
Rare-earth minerals aren't actually that rare, but it is unusual to find them in sufficiently high concentrations that would make mining them economical. Having a massive pile of them above ground is even rarer.
Financial Regulation Roundup Wealth Giant Pursues Goldman Sachs, Others Over SVB Collapse
Norges Bank Investment Management, manager of Norway's $1.5 trillion wealth fund, and other former Silicon Valley Bank shareholders in a legal filing accused SVB and its executives of concealing the lender's ailing health .
Judge Questions SEC's Claim to Regulate Coinbase
A federal judge on Wednesday questioned whether allowing the Securities and Exchange Commission to impose its regulations on Coinbase would give the agency sway over markets it doesn't have authority to supervise.
Future FinTech CEO Denies SEC's Manipulative-Trading Allegations
The chief executive of Future FinTech Group, Shanchun Huang, denied allegations from the U.S. Securities and Exchange Commission that he artificially inflated the company's share price before taking over as CEO.
U.S. Likely to Levy Higher Penalties for Export-Control Violations
A top U.S. official said businesses should expect much higher penalties for violations of export controls, the use of which has expanded as the U.S. seeks to curb the ability of Russia and China to obtain certain technology.
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. housing starts for December; U.S. weekly jobless claims; Philadelphia Fed Manufacturing Survey
10:15 a.m.: ECB's Lagarde at "Uniting Europe's Markets," World Economic Forum in Davos
Friday
4:30 a.m.: ECB's McCaul at Institute for Law and Finance Conference on the Future of the Financial Sector in Frankfurt
5 a.m.: ECB's Lagarde at "The Global Economic Outlook," World Economic Forum in Davos
10 a.m.: University of Michigan consumer survey, preliminary for January; U.S. existing home sales for December
Research Past Bursts of Inflation to Keep Fed Cautious
Experience with flare-ups of inflation could keep the Federal Reserve from cutting interest rates as fast as markets are pricing, says Mark J. Higgins, a financial historian and senior vice president at Index Fund Advisors. "This is precisely what happened during the Great Inflation of 1965-1982," he notes. At that time, Higgins says, the Fed "abandoned monetary tightening efforts prematurely, and each time inflation returned at progressively higher levels," denting the central bank's credibility and leading to elevated, entrenched inflation expectations. Higgins says Fed officials are likely to keep that precedent in mind and cut interest rates with caution. FOMC members "know that they cannot abandon tight monetary policy prematurely," Higgins says.
-Paulo Trevisani
U.K. Inflation Could Take Longer to Reach BOE's Target
Inflation in the U.K. could take longer before falling to the Bank of England's 2% target, Scope Markets chief market analyst Joshua Mahony writes in a note after U.K. inflation data for December showed an unexpected rise in annual CPI to 4.0%. Mahony points in particular to a 0.6% month-on-month rise in core CPI, the strongest gain in seven months, which he writes is "further delaying the expected return to target." The above-forecast reading has caused markets to lower their expectations of future BOE interest-rate cuts, Refinitiv data show.
-Miriam Mukuru
Commentary How the American Shopper Silenced Doubters
Americans kept shopping in December, propelling the U.S. economy forward, and as long as the labor market can keep generating jobs, they are poised to keep it up this year , Justin Lahart writes.
Basis Points U.S. industrial production rose 0.1% in December from November and capacity utilization held steady at 78.6%, the Federal Reserve reported Wednesday. Motor vehicles and parts output rose 1.6%, while total output excluding autos was flat. Manufacturing output was down 0.1%, utilities output fell 1%, and mining output, which includes oil and natural gas, rose 0.9%. (MarketWatch) The U.S. import price index was unchanged in December , the Labor Department said Wednesday. Economists surveyed by The Wall Street Journal expected a 0.6% decline. Import prices had dropped two straight months prior to the December reading. (MarketWatch) U.S. mortgage applications surged as mortgage rates fell [https://www.marketwatch.com/story/u-s-mortgage-demand-jumps-10-as-rates-fall-across-the-board-d493ebbd#::text=The%20numbers%3A%20U.S.%20mortgage%20applications, home%2Dbuying%20and%20refinancing%20demand.] across the board in the last week, lifting the overall market composite index-a measure of mortgage application volume-of the Mortgage Bankers Association 10.4% to 210.5 for the week ending Jan. 12 from a week earlier. A year ago, the index stood at 239.2. (MarketWatch) Australia's unemployment rate stood at 3.9% in December, unchanged from November, but the economy shed 65,100 jobs over the month, with full-time employment down by 106,600, the Australian Bureau of Statistics said Thursday. (Dow Jones Newswires) New car registrations in the European Union-which mirror sales- fell 3.3% in December compared with a year ago, marking the first decrease in 16 months as electric-vehicle purchases slipped and the German market faltered. Registrations finished the month at about 867,000. Sales rose 14% to 10.5 million in 2023. (DJN) Global oil-demand growth slowed to 1.7 million barrels a day from 2.8 million barrels a day in the third quarter, reflecting slowing travel demand in China after a post-pandemic boom, according to the International Energy Agency. The Paris-based organization said Thursday in its monthly report that growth is projected to ease to 1.2 million barrels a day in 2024 from 2.3 million barrels a day last year, taking total demand to an average of 103 million barrels a day. (DJN) Feedback Loop
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01-18-24 0715ET
