October 4, 2022
United States:
Fed Pivot Trade Sparks Again as Bonds Rally, Dollar Weakens
Global bonds and stocks are rallying on hopes that the latest signs of weakness in the US economy will push the Federal Reserve to rethink the aggressive monetary policy tightening that some fear will trigger a recession.
While the so-called Fed pivot has long been hoped for, it got another jolt this week with the release of weaker-than-expected manufacturing data in the US. The dollar extended losses Tuesday, and European equities jumped, following a similar rally in the US on Monday.
Europe:
ECB Says European Banks Are Too Optimistic About Macro Risks
European banks are not taking looming economic risks seriously enough as they enjoy the revenue-boosting benefits of higher interest rates, a top European Central Bank official said.
There is “a certain reluctance on the side of banks to seriously engage in supervisory discussions” about economic risks, ECB Supervisory Board Chairman Andrea Enria said Tuesday according to prepared remarks for a speech in Vienna. That attitude is unacceptable because “the Russian invasion of Ukraine is developing into a persistent and fully-fledged macroeconomic shock,” which requires supervisors “to exercise extreme caution,” he said.
Asia:
Tokyo Inflation Accelerates Further to 2.8% in Challenge for BOJ
Inflation in Tokyo accelerated for a fourth consecutive month to rise at the fastest pace since 1992 excluding the impact of tax hikes, and adding to the challenges for the Bank of Japan in communicating its need for inflation-supporting easing.
Consumer prices excluding fresh food rose 2.8% in the capital in September, according to the ministry of internal affairs Tuesday. The gain matched economist forecasts.
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