January 30, 2024
United States:
Banks Are Hawking US Recession Hedges Tied to Both Stocks, Bonds
Investors’ lingering fears of recession have prompted Wall Street banks to hawk a complex hedge: exotic options that pay off if stocks fall and bond yields also drop.
These options are relatively cheap now, in part, because correlations between equities and rates have been low. But investors should also consider them because US stock valuations look stretched by many measures, according to banks including JPMorgan Chase & Co. and Citigroup Inc. On top of that, questions about how soon the Federal Reserve will start cutting rates could result in wild market swings.
Europe:
Euro Zone Unexpectedly Avoids Downturn But Struggles Persist
The euro zone unexpectedly avoided a first recession since the pandemic in the latter half of 2023 as firmer growth in Italy and Spain offset the malaise in Germany.
Gross domestic product stagnated in the last three months of the year — dodging a two-quarter downturn once again by the slimmest of margins following the 0.1% decline between July and September.
Asia:
IMF Urges BOJ to Prepare for Rate Hike in Case Inflation Flares
The International Monetary Fund said the Bank of Japan needs to be prepared to raise interest rates in case inflation unexpectedly flares, though its accommodative policy stance remains appropriate for now.
“The Bank of Japan needs to also prepare and be ready to raise rates if somehow inflation were to rise faster and the inflation rates would exceed significantly the central bank’s inflation target,” IMF Chief Economist Pierre-Olivier Gourinchas told reporters in an online briefing ahead of Tuesday’s release of the World Economic Outlook update.
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