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Central bankers dampened hopes for Santa’s rally

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Central banks on both sides of the Atlantic opened a new phase in the battle against inflation this week, but at the cost of starting a new bout of investor concerns about the global economic outlook.

The US Federal Reserve, the European Central Bank and the Bank of England slowed the rate hike, opting for a 0.5 percentage point increase, but with a side order Hardcore comments.

It was the financial markets leave “terrifying” With warnings that the policy tightening is far from over. “This is an EM-type repricing after the central bank meeting, it’s wild,” said one strategist. Hopes for a Christmas rally were dashed.

The Fed was the first to act on Wednesday, easing its tightening policy After a series of 0.75 point increases, but also the unveiling of new forecasts that showed rates reaching a higher level than previously expected and staying there for a long time. It also suggested that growth would be slower and unemployment higher.

This was despite news from the previous day which showed their consumer prices rising Slowest pace in general, which led to a rise in US stocks and bonds. A senior Federal Reserve official today reinforced the message that investors shouldn’t be too optimistic just yet, warning that interest rates may still be exceeds the level of 5.1 per cent expectations of most decision makers.

The European Central Bank followed suit on Thursday, Raise rates to 2 percent and warning of further hikes to come, with the ECB chief’s more hawkish stance Christine Lagarde Reflecting the more viscous nature of inflation in the eurozone.

On the same day, the Bank of England raised interest rates to 3.5 percent The highest level in 14 years. Bank of England Governor Andrew Bailey said the tight labor market and rising wages and prices justified a “more aggressive monetary police response”.

There were also increases in SwitzerlandAnd the NorwayAnd the Mexico and the Philippines. Russian Central Bank It has kept rates steady at 7.5 per cent after months of successive cuts from the 20 per cent emergency rate it set after the invasion of Ukraine in February.

Although factors such as low inflation and high prices in the United States may give hope for this developing marketsThe overall message from advanced economies is clear: fight against rising prices and wages is not completed yet.

Need to know: UK and European economy

Read PMI for Euro-zone It was more optimistic than the UK, which brought more signs of an upcoming recession Much milder than initially feared.

Russian crude oil is being Shipped to India on tankers insured by Western companies, in the first sign that Moscow has reneged on its pledge to block sales under the price cap imposed by the Group of Seven.

The second part of the Big Read series on The embattled Russian economy check The fate of technocrats. Once seen as modernists and a counterweight to veterans of Putin’s hard-line security apparatus, they have seen their influence wane and fail to speak out against the war. The United States imposed sanctions on Vladimir Potanina nickel tycoon and one of Russia’s richest oligarchs.

Need to know: The global economy

Despite pledges at the UN climate talks, global coal use A will arrive record level this year It will remain high until 2024 due to the war in Ukraine and increased demand in India and China.

New Zealand The economy grew by a “huge” 2 percent In the three months through September – twice the amount expected – thanks to a rebound in construction, services and tourism when the country reopened its borders. Some see the growth as vindication of the central bank’s ultra-hawkish stance on inflation.

Peru he is in state of emergency for 30 days As its fragile interim government tries to quell the protests that erupted after former President Pedro Castillo’s failed attempt last week to seize extraordinary powers.

homecomingthe new book from a Financial Times columnist Rana Forouharoffering a recipe “for a post-global era that listens less to the interests of Wall Street and more to the interests of ‘the people and the place'”. Read the review.

Need to know: business

The United States has added another 36 Chinese companies to its membership Trade blacklist Aimed at slowing down the development of Beijing Advanced microchips and technologies that can be used for military purposes. For more on chip wars, see Wed dt.

the mobile games market It is set to decrease this year due to The first time since the advent of smartphones Due to rising advertising costs, declining consumer spending, and the end of the pandemic-induced boost in gaming. The era began with the introduction of Apple’s App Store in 2008, and eventually turned into a $100 billion market that accounts for half of the gaming industry’s total revenue.

Avoid thinking about bankers Christmas this year. Wall Street is preparing for it Big discounts on rewards After a terrible year, with Goldman Sachs cutting its payments 40 percent at least and the number of its employees Almost 4,000 people.

Scientific tour

American scientists made the first energy gain in A Nuclear fusion interaction. Tom Wilson Explain what fusion is And how close are we to carbon-free fuels?

Genomics England, a British government-owned company, would be complete decode DNA From 100,000 newborn babies. The £105m research program aims to increase the number of rare, treatable genetic conditions to 200.

The $3.5 million single-dose CSL treatment for hemophilia B, Hemgenix, has sparked controversy about how to pay Revolutionary drugs.

Moderna and Merck will be launched the The first phase 3 trial From messenger RNA cancer vaccineRecent data suggests that a combination of an experimental cancer vaccine from Moderna and an immunotherapy drug from Merck could treat skin cancer.

British real estate company Canary Wharf Group submitted plans for the development of a A tower laboratory worth 500 million pounds sterling, with reduced demand for office space. The 23-storey building will be among the largest in Europe.

Silence on COP15 Biodiversity The talks that began last week are deadly, Gillian Tate writes. Species are disappearing at an alarming rate with dire economic consequences.

Covid cases and vaccinations

Total global cases: 644.2 million

Total doses administered: 13.1 billion

Get the latest worldwide image through our website Vaccine tracker

Some good news

Virgin Atlantic announced the first transatlantic flight “Net Zero” trip. And in another bit of aviation good news, the era of small toiletry items is almost over: UK airports are set to just that Relax the rules on liquids and electronics Inside cabin bags.

Virgin Atlantic plane
The first plane to fly across the Atlantic powered solely by sustainable aviation fuel will take off next year © Thomas Arnoux / ABACA / Reuters

Something for the weekend

Interactive crossword puzzles will be published for FT Weekend over here Its Saturday, but in the meantime why not try today Mysterious crosswords?

Interactive crosswords on the FT app

Subscribers can now solve FT’s Daily Cryptic, Polymath and FT Weekend crossword puzzles at iOS and Android apps

work on it Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers Editor Isabel Berwick. Participation over here

Climate chart: an explanation – Learn about the most important weather data for the week. Participation over here

Thanks for reading Disrupt Times. If this newsletter has been sent to you, please register over here to receive future issues. Please share your feedback with us at disrupttimes@ft.com. Thank you


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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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Economic

German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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