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Two Federal Reserve mandates enter, and one leaves

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The rate of inflation falls, giving the Federal Reserve the cover it needs to reduce its rate increases. But can the labor market survive?

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Coronavirus travel restrictions against discriminatory state media for Chinese visitors via Reuters

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© Reuters. A passenger speaks to a member of the media, after Italy ordered swabs of the coronavirus (COVID-19) antigens and sequence of the virus to be taken for all travelers arriving from China, where cases are increasing, at Malpensa Airport in Milan, Italy, Dec. 29, 20.

Written by Bernard Orr and David Latona

BEIJING/MADRID (Reuters) – Chinese state media said COVID-19 testing requirements imposed by a growing number of countries on travelers from China were “discriminatory” and intended to undermine China’s reopening, despite a wave of infections raging across the country. . country.

After keeping its borders nearly closed for three years, imposing a strict regime of lockdowns and draconian testing, China abruptly reversed course toward living with the virus on Dec. 7, and infections have spread rapidly in recent weeks.

Some places were surprised by the scale of the outbreak in China and expressed skepticism about Beijing’s COVID statistics, with South Korea and Spain on Friday joining the United States, India and other countries in mandating COVID tests on travelers from China.

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Malaysia said it will screen all international arrivals for fever.

“The real intention is to sabotage China’s three-year effort to control COVID-19 and attack the country’s system,” the state-run Global Times said in an article late Thursday, calling the restrictions “baseless” and “discriminatory.”

China will stop requiring inbound travelers to go into quarantine from January 8, but will still require a negative PCR test result within 48 hours before departure.

the exams

A day after European Union health officials failed to agree on a common course of action, Spain followed in Italy’s footsteps by becoming the second of 27 member states of the bloc to require tests for travelers from China.

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“Nationally, we will implement airport controls that will require all passengers arriving from China to show a negative COVID-19 test or evidence of a complete vaccination course,” said Health Secretary Carolina Darias.

Over the past days, officials in France, Germany and Portugal have said that they see no need at the present time to impose new restrictions, while Austria has stressed the economic benefits of the return of Chinese tourists to Europe.

Global spending for Chinese visitors reached more than $250 billion a year before the pandemic.

The United States has raised concerns about potential mutations of the virus as it sweeps through the world’s most populous country, as well as about data transparency in China.

The agency told Reuters that the US Centers for Disease Control and Prevention is studying wastewater sampling from international aircraft to track any emerging new variants.

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WHO Director-General Tedros Adhanom Ghebreyesus said the WHO needed more information to assess the recent increase in the number of infections in China, without taking a position on the issue of travel tests.

Meanwhile, the German ambassador to Beijing, Patricia Flor, said on Twitter that a vaccination campaign against the emerging corona virus for German citizens in China had begun its trial phase. A shipment of 11,500 doses of BioNTech’s vaccine arrived last week, enough to give one shot to every half of the 20,000 or so German citizens residing in China.

Excess mortality

The lifting of restrictions in China, after widespread protests against them in November, has flooded hospitals and funeral homes across the country, where scenes of people dripping in vein on the side of the road and hearing lines outside crematoriums sparked public alarm.

Health experts say China has been ill-prepared for the shift in policies that President Xi Jinping has long championed.

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In December, bids placed by hospitals for key equipment such as ventilators and patient monitors were two to three times higher than in previous months, according to a Reuters review suggesting hospitals were scrambling to fill shortfalls.

Experts say elderly people in rural areas may be particularly vulnerable due to insufficient medical resources. The celebration of the Lunar New Year next month, when hundreds of millions will travel to their hometowns, will raise the stakes.

China, with a population of 1.4 billion, reported one new coronavirus death Thursday, as it did the day before — numbers that don’t match the experience of other countries after they reopened.

China’s official death toll is 5,247 since the pandemic began, compared to more than 1 million deaths in the United States. Chinese-ruled Hong Kong, a city of 7.4 million people, has recorded more than 11,000 deaths.

UK-based health data company Airfinity said Thursday that about 9,000 people in China likely die each day from COVID. She added that the cumulative deaths in China since December 1 have likely reached 100,000, and the total number of infections has reached 18.6 million.

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China’s chief epidemiologist Wu Zunyu said on Thursday that the difference between the number of deaths in the current wave of infections and the death rate for the same period in epidemic-free years will be studied to calculate “excess deaths” and measure any estimate lower than expected. of deaths from COVID-19.

Economic crises

The world’s second largest economy is expected to slow further in the near term as factory workers and shoppers fall ill.

Consumers may need time to regain their confidence and willingness to spend after losing income during lockdowns, while the private sector may have used expansion funds to cover losses incurred due to restrictions.

However, it appears that Chinese airlines will be the first winners in reopening.

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Japanese banks get a shot in the arm

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Stocks of old Japanese banks are showing fresh signs of activity after the Bank of Japan’s policy change

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After $18 trillion on the run, global stocks face more hurdles in 2023

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(Bloomberg) — More tech tantrums. The spread of covid in china. Above all, there are no central banks to bail out if things go wrong. With $18 trillion wiped out, global equities must overcome all of these hurdles and more if they are to escape a second year in a row in the red.

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With a drop of more than 20% in 2022, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, as massive interest rate hikes by the Federal Reserve more than doubled 10-year Treasury yields – the average Support global capital costs.

Bulls looking forward into 2023 may find solace in the fact that two consecutive years of decline are rare for major stock markets — the S&P 500 has fallen for two consecutive years on only four occasions since 1928. But the scary thing is that when they do happen, The drops in the second year tend to be deeper than they were in the first.

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Here are some of the factors that could determine how 2023 shapes up for global stock markets:

central banks

Optimists may point out that a peak in rate hikes is looming, perhaps in March, as money markets expect the Fed to shift into rate-cutting mode by the end of 2023. A Bloomberg News survey found that 71% of large global investors expect it will rise stocks in 2023.

Vincent Mortier, chief investment officer of Amundi, Europe’s largest financial manager, recommends putting investors on the defensive at the start of the new year. He expects a bumpy ride in 2023, but believes that “doing the Fed in the early part of the year could lead to interesting entry points.”

But after a year that stunned the best and brightest of the investment community, many are bracing for more reversals.

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One risk is that inflation remains too high for policymakers’ comfort and rate cuts do not materialize. A Bloomberg Economics model shows a 100% chance of a recession by August, yet it seems unlikely that central banks will rush to ease policy when faced with cracks in the economy, a strategy they have used repeatedly in the past decade.

“Policy makers, at least in the United States and Europe, now seem resigned to weak economic growth in 2023,” Christian Nolting, global chief investment officer at Deutsche Bank, told clients in a note. He warned that recessions may be short, but they “will not be pain-free”.

Major technical problems

The big unknown is how big tech companies fare, after a 35% drop in the Nasdaq 100 in 2022. Companies like Meta Platforms Inc. and Tesla Inc. about two-thirds of its value, while losses in Amazon.com Inc. and Netflix Inc. Approached or exceeded 50%.

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High-value technology stocks suffer the most when interest rates rise. But other trends that have supported technology advances in recent years may also be reversing — an economic recession threatens to hurt iPhone demand while a slump in online advertising could hit Meta Inc. and Alphabet Inc.

In an annual Bloomberg survey, only about half of respondents said they would buy the sector — selectively.

“Some tech names will come back because they’ve done a great job convincing customers to use them, like Amazon, but others will probably never reach that peak as people move on,” said Kim Forrest, chief investment officer at Bouquet Capital Partners. for Bloomberg Television.

Earnings slump

Previously resilient corporate earnings are widely expected to collapse in 2023, as pressure on margins builds and consumer demand weakens.

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“The final chapter of this bear market is all about the trajectory of earnings estimates, which are way too high,” said Mike Wilson of Morgan Stanley, a Wall Street bear who predicts earnings of $180 per share in 2023 for the S&P 500, versus analyst expectations. $231.

He said the next earnings recession could rival 2008, and markets have yet to price it in.

delicate china

Beijing’s decision in early December to dismantle tough Covid restrictions appeared to be a turning point for the MSCI China Index, whose 24% drop was a major contributor to global stock market losses in 2022.

But a month-long recovery in mainland and Hong Kong stocks faded as a surge in Covid-19 infections threatened the economic recovery. Many countries are now requiring Covid testing for travelers from China, which is a negative for global travel, leisure and luxury stocks.

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Boom options

Technical indicators are increasingly driving daily stock moves, with the S&P 500 seeing below-average turnover in 2022, but explosive growth in very short-term options trading.

Professional traders and algorithmic institutions have piled into such options, which until recently were controlled by small investors. That could lead to bumpier markets, causing sudden swings to flare up like the big intraday swing after the hot US inflation reading in October.

Finally, with the S&P 500 failing to break out of its 2022 downtrend, the short-term speculation continues to tilt to the downside. But should the market turn around, it will add fuel to the recovery.

— with assistance from Ryan Vlastelica and Ishika Mookerjee.

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