Biden sticks with Powell as leader of the Fed. Beijing warns companies against supporting Taiwan’s independence. New Zealand is set to lift rates and signal more aggressive tightening. Here’s what you need to know today.
Jerome Powell is keeping his job. President Joe Biden nominated the Federal Reserve chair for another four-year term, and elevated Lael Brainard to vice chair, maintaining consistency as the central bank grapples with rising inflation and the lingering economic impact of the pandemic. Both are likely to be confirmed by the Senate, but not before facing at least some opposition — Powell mostly from Democrats, Brainard from Republicans. Traders are pricing in a ramp-up in tapering bond purchases by the Fed and the potential for a June liftoff on rate hikes. Here’s what the move means for crypto, hot housing and inflation.
Stocks looked set to extend declines in Asia on Tuesday after Treasury yields and the U.S. dollar jumped. Gold is losing again, and not because of Bitcoin. And sources say President Biden is preparing to announce a release of strategic oil reserves, likely in concert with India, Japan and South Korea, as soon as Tuesday — which would be an unprecedented effort by major oil consumers to tame prices.
Beijing says it will punish businesses and political donors with links to individuals supporting Taiwan's independence, and that it will never let them make a profit in the country. The announcement came in response to a query about fines leveled on mainland units of Far Eastern Group. The Taiwanese conglomerate has made donations to both the ruling Democratic Progressive Party — which Beijing views as being pro-independence — and the more China-friendly Kuomintang party. Meanwhile, as Chinese propaganda organs moved to stem international fears over tennis star Peng Shuai, censors ensured that citizens couldn’t find information on the rare political scandal.
Rather than pivot from the strict Covid Zero strategy that others have abandoned, China is doubling down despite rising costs to its people and economy. Germany's latest virus surge is worse than anything the country has experienced so far, Angela Merkel says, calling for tighter restrictions. Pfizer-BioNTech reports vaccine efficacy of 100% in adolescents aged 12 to 15 in a longer-term analysis. Australia will open its international borders next month to fully vaccinated foreign students and skilled workers. The U.K. adds China and India’s vaccines to its list of approved shots for fully immunized travelers looking to enter the country.
How might Asia’s richest man pass on his $208 billion empire to heirs? The Indian tycoon is eyeing a blueprint that seeks to avert the succession warfare that’s torn apart so many wealthy clans — including his own. Sources say Mukesh Ambani’s favored plan shares elements with that of Walmart’s Walton family, including putting his family’s holdings into a trust-like structure.
What We’ve Been Reading
What’s caught our eye over the past 24 hours:
And finally, here’s what Tracy’s interested in today
What just happened? On Monday, the air was seemingly let out of the tires of a bunch of very-high-priced technology stocks. As my colleague Lu Wang reports, Farfetch and Snowflake fell 14% and 9.2% respectively, helping to drive a basket of software and internet companies that have yet to earn any money down more than 5%, the biggest decline since March. Many of these stocks are beloved by retail investors and hedge funds who are either betting on further inflows or future growth or both.
That makes them vulnerable to any changes in the perception of their popularity or their respective growth narratives, as Goldman’s David Kostin suggested in research published late last week. “While many of these high growth, low-profit companies have attractive outlooks, the dependence of their current valuations on long-term future cash flows makes them particularly vulnerable to the risks of rising interest rates or disappointing revenues,” he said.
Healthy markets tend to be composed of a multitude of opinions and positions, yet Kostin also points out that short interest for the average stock is at its lowest since the tech bubble in 2000, declining from 2.2% of market value at the start of 2020 to 1.5% currently. Hedge funds have been burned repeatedly this year by retail mania and seem to have taken an “if you can’t beat ‘em, join ‘em” approach to trading. It means when there is a speed bump — as we saw on Monday — the exits can get crowded.
You can follow Tracy Alloway on Twitter at @tracyalloway.
— With assistance by Tracy Alloway
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November 23, 2021 at 06:40AM
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