Latest news with #LouBrien
Business Recorder
28-06-2025
- Business
- Business Recorder
Dollar lower against euro
NEW YORK: The dollar hit a fresh three-and-a-half-year low against the euro on Friday as traders bet that the Federal Reserve will cut rates more times and possibly sooner than previously expected as some US data points to a weakening economy. A report on Friday showed that US consumer spending unexpectedly fell in May as the boost from the pre-emptive buying of goods like motor vehicles ahead of tariffs faded, while monthly inflation increases remained moderate. A weekly jobs report on Thursday showed that continuing unemployment claims rose to the highest level since November 2021 while gross domestic product figures for the first quarter reflected a sharp downgrade to consumer spending. 'Some of the data that we've had has not been particularly good over the last few days,' said Lou Brien, strategist at DRW Trading in Chicago. Fed Chair Jerome Powell's testimony to US Congress this week was interpreted as dovish after he noted that rate cuts are likely if inflation doesn't increase this summer as he expects. Reports that US President Donald Trump could also appoint a replacement for Powell in the coming months have added to dollar weakness. The new Fed chair is expected to be more dovish and an early appointment could undermine Powell's influence by acting as a shadow chair before Powell's term ends in May. Trump has not decided on Powell's replacement and a decision isn't imminent, a person familiar with the White House's deliberations said on Thursday. The dollar index fell 0.15% to 97.23 while the euro was last up 0.21% to $1.1723. The single currency reached $1.1754, the highest since September 2021. The euro got a small uplift after data showed French consumer prices rose more than expected in June, while Spain's 12-month EU-harmonised inflation also inched higher. Fed rate cuts would reduce the interest rate advantage of the dollar relative to peers. Traders are pricing in 65 basis points of cuts by year end, up from 46 basis points a week ago. The long-term outlook for the dollar is also seen as challenging as foreign investors reevaluate the 'American exceptionalism' that has drawn investment to the country. Brien said that the impact of the Biden administration's policies was also still weighing on the currency. Former President Joe Biden cut off Russia's access to the US dollar, froze its assets and imposed sanctions following the country's invasion of Ukraine in 2022, which analysts say led other countries to accelerate shifts away from US dollar reliance. Against the Japanese yen, the dollar strengthened 0.19% to 144.65. Core consumer inflation in Japan's capital slowed sharply in June due to temporary cuts to utility bills but stayed well above the central bank's 2% target, keeping alive market expectations for further interest rate hikes. In cryptocurrencies, bitcoin fell 1.13% to $106,594.
Yahoo
24-06-2025
- Business
- Yahoo
Why stocks are up and oil is down as the US and Iran trade strikes
The US bombed three Iranian nuclear facilities on Sunday. Iran retaliated by striking a US base in Qatar. Traders expected lower stocks and higher oil after the initial attack. The opposite has happened. This is because Iran's response was seen as less aggressive than some expected. Investors were bracing for a wild day of trading on Monday after the US bombed Iran on Sunday. What transpired was volatile, but not in the way traders expected. The traditional risk-off response to the US attack on Iran would've amounted to selling in stocks and a spike in oil prices. That's initially what happened in overnight trading. But in the morning, shortly before the US equity market opened, stocks started coming back. Oil prices pared earlier losses as well. Those moves extended as the day progressed, especially in the afternoon when Iran announced retaliatory measures. The strikes on a US air base in Qatar were viewed as a half-measure that actually calmed nerves, at least somewhat. "Iran responded to the US attack because Iran needed to respond, not necessarily because they wanted to respond, and potentially have their country hit once again with US bombs, without any realistic ability to trade punches," Lou Brien, economic strategist at DWR Holdings, said in a client note. Brien described the response as "a matter of saving face, not a matter of going toe-to-toe." It's also possible that President Donald Trump's plea for oil prices to stay low helped spur the downward move in the commodity. Here's where the major market moves stood as of the 4 p.m. stock-market close in New York: S&P 500: 6,025.17, up 1% Dow Jones Industrial Average: 42,581.78, up 0.9% Crude oil: $68.63, down 7% This embedded content is not available in your region. "There wasn't much in the way of escalation so markets breathed a sigh of relief," Paul Hickey, cofounder of Bespoke Investment Group, told Business Insider. "But we were also trading sideways for the two weeks leading up to the event, and I don't think it was ever considered a major concern." After Iran's limited retaliatory strikes, further options appear limited. The country relies on oil revenue from the Strait and may not want to anger additional oil-exporting neighbors, and has fewer proxies and allies willing or able to help than in the past. Investors have also been pricing in geopolitical risks for months, especially given the Israel-Hamas conflict and Israel's recent attacks on Iranian military leaders and Tehran's proxies such as Hezbollah. However, Trump has raised the prospect of "regime change" and suggested further strikes aren't off the table, meaning the possibility of escalation remains. The president's tariffs have already muddied the outlook for global growth, and the renewed possibility of America getting roped into a military campaign in the Middle East once again gives investors plenty to chew over. Disruptions to the global oil supply could fuel inflation and curb growth, meaning the economic stakes are high for much of the world. "The situation is evolving rapidly, and the ultimate consequences remain uncertain, requiring investors to stay alert as new developments arise," Hakan Kaya, senior portfolio manager at Neuberger Berman, said in a morning note. It's clear a negative market panic hasn't taken hold as yet, but the US strikes have created a dust cloud of uncertainty and raised additional risks to market watchers. Read the original article on Business Insider Sign in to access your portfolio
Yahoo
24-06-2025
- Business
- Yahoo
Why stocks are up and oil is down as the US and Iran trade strikes
The US bombed three Iranian nuclear facilities on Sunday. Iran retaliated by striking a US base in Qatar. Traders expected lower stocks and higher oil after the initial attack. The opposite has happened. This is because Iran's response was seen as less aggressive than some expected. Investors were bracing for a wild day of trading on Monday after the US bombed Iran on Sunday. What transpired was volatile, but not in the way traders expected. The traditional risk-off response to the US attack on Iran would've amounted to selling in stocks and a spike in oil prices. That's initially what happened in overnight trading. But in the morning, shortly before the US equity market opened, stocks started coming back. Oil prices pared earlier losses as well. Those moves extended as the day progressed, especially in the afternoon when Iran announced retaliatory measures. The strikes on a US air base in Qatar were viewed as a half-measure that actually calmed nerves, at least somewhat. "Iran responded to the US attack because Iran needed to respond, not necessarily because they wanted to respond, and potentially have their country hit once again with US bombs, without any realistic ability to trade punches," Lou Brien, economic strategist at DWR Holdings, said in a client note. Brien described the response as "a matter of saving face, not a matter of going toe-to-toe." It's also possible that President Donald Trump's plea for oil prices to stay low helped spur the downward move in the commodity. Here's where the major market moves stood as of the 4 p.m. stock-market close in New York: S&P 500: 6,025.17, up 1% Dow Jones Industrial Average: 42,581.78, up 0.9% Crude oil: $68.63, down 7% This embedded content is not available in your region. "There wasn't much in the way of escalation so markets breathed a sigh of relief," Paul Hickey, cofounder of Bespoke Investment Group, told Business Insider. "But we were also trading sideways for the two weeks leading up to the event, and I don't think it was ever considered a major concern." After Iran's limited retaliatory strikes, further options appear limited. The country relies on oil revenue from the Strait and may not want to anger additional oil-exporting neighbors, and has fewer proxies and allies willing or able to help than in the past. Investors have also been pricing in geopolitical risks for months, especially given the Israel-Hamas conflict and Israel's recent attacks on Iranian military leaders and Tehran's proxies such as Hezbollah. However, Trump has raised the prospect of "regime change" and suggested further strikes aren't off the table, meaning the possibility of escalation remains. The president's tariffs have already muddied the outlook for global growth, and the renewed possibility of America getting roped into a military campaign in the Middle East once again gives investors plenty to chew over. Disruptions to the global oil supply could fuel inflation and curb growth, meaning the economic stakes are high for much of the world. "The situation is evolving rapidly, and the ultimate consequences remain uncertain, requiring investors to stay alert as new developments arise," Hakan Kaya, senior portfolio manager at Neuberger Berman, said in a morning note. It's clear a negative market panic hasn't taken hold as yet, but the US strikes have created a dust cloud of uncertainty and raised additional risks to market watchers. Read the original article on Business Insider
CNBC
06-05-2025
- Business
- CNBC
Wobbling economy will push the Fed to cut interest rates later this year, CNBC survey finds
Amid a decidedly stagflationary forecast, including higher inflation and unemployment and surging odds of recession, respondents to the May CNBC Fed Survey still believe the Federal Reserve will cut interest rates this year and next. Asked how the Fed will respond to not only persistently higher prices from tariffs but also weakening growth and employment, 65% of say the Fed will cut rates to address the economic weakness despite the inflation. That's up from 44% in the March survey when the majority thought the Fed would hold in that scenario. Only 26% say the Fed will hold rates when faced with the stagflation dilemma and just 3% believe the Fed will hike rates. The 31 respondents, who include fund managers, analysts and economists, see the Fed funds rate declining to 3.71% by year end and 3.36% by the end of 2026 for a near 100-basis point decline over the period from the current level of 4.33%. The odds of recession in the next year rose to 53%, up from 22% in January for the biggest two-survey increase since 2022. That's when the Fed was just beginning its sharp rate hikes to battle inflation. The consumer price index is seen ratcheting up from the current level of 2.4% to 3.2% by year end, but declining next year back to 2.6%. At the same time, the unemployment rate is expected to rise from 4.2% to 4.7% and hold at about that level in 2026. GDP is forecast at just 0.8% on average for this year, down from last year's 3.1% growth rate. "The Fed must project an inflation fighting stance, but in most circumstances they will react more quickly to labor market weakness," said Lou Brien, strategist with DRW Trading Group. "So, in the current circumstance, when the unemployment rate rises a few more tenths, and/or payrolls decline, the Fed will lower rates and suggest economic weakness will dampen inflation." But those cuts, said Richard Bernstein of Richard Bernstein Advisors, would mean the Fed "giving up on the 2% inflation target, perhaps permanently." Fed officials have insisted they would not adjust the 2% target. The average respondent sees growth rebounding to around 2% in 2026. Some say that's because other, more positive parts of the Trump administration's economic policies will kick in. "By the second half of 2026, we expect that the tax and deregulation policies pursued by the administration will return the economy to a better trajectory of growth," said Thomas Simons, chief U.S. economist at Jefferies. Respondents do not believe stocks are currently priced correctly for the more downbeat outlook this year with 45% saying equities are not priced for a recession and 52% saying they are only somewhat correctly priced. Overall, 69% believe the stock market is significantly or somewhat overpriced, up from 56% in the March survey. The average forecast sees the S&P finishing flat on the year relative to current levels but rising nearly 11% by the end of 2026. "Although equity prices are undervalued, the level of stock market optimism remains too high. Most likely there are further declines ahead," said Hugh Johnson of Hugh Johnson Economics. Some of the increased bearishness on the economy looks linked to the increasing belief that some form of a high tariff regime will be permanent. A 63% majority of respondents to the CNBC Fed Survey believe across-the-board 10% tariffs will likely remain on all U.S. imports after the completion of new trade deals. Strong majorities see tariffs as a negative for the US growth, employment and inflation. "Uncertainty surrounding tariff policy and objectives are weighing on planned investment and new orders," said Constance Hunter, chief economist at the Economist Intelligence Unit. Jack Kleinhenz, chief economist at the National Retail Federation adds, "Everyone is worried, not yet sure that anyone can predict the storm path of tariffs and their impact on the economy given so much uncertainty. Hopefully, price sensitive consumers can withstand the potential threatening nature of tariffs." Complicating the outlook: 74% of those who see tariffs as negative for the economy do not believe that promised deregulation and tax cuts from the administration will offset the negative impact of tariffs. Drew Matus chief market strategist at MetLife Investment Management says, "Tariffs should have been sequenced post tax cuts so the negative shock was following a positive shock." Meanwhile, 73% say the combination of the administration's tariff, immigration and foreign policies have damaged the U.S. brand in a way that is negative for the image of companies overseas and 83% say they are a negative for the attractiveness of U.S. assets.
Reuters
04-03-2025
- Business
- Reuters
Parts of US Treasury market show concern about Fed rate-cutting pause
NEW YORK, March 4 (Reuters) - Parts of the U.S. Treasury yield curve are reflecting increasing concerns that the Federal Reserve will wait too long before resuming interest rate cuts as economic growth slows. That will draw even more focus to February's jobs data, due on Friday, for signals on whether the economy is cooling faster than the U.S. central bank has anticipated. The spread between yields of two-year and five-year notes is trading at around 3 basis points after very briefly turning negative last week for the first time since mid-December. This part of the curve is worth watching because durable inversions have preceded major economic contractions and stock market declines for the past 35 to 40 years, said Tom Fitzpatrick, head of global market insights at R.J. O'Brien. 'You've got to pay attention to this curve again because it never got it wrong.' These inversions occurred in 1989, 2000 and 2006, in each case preceding a recession. The curve also inverted in 2019, before a short economic downturn in 2020, though in this instance the Fed was quick to cut rates in 2020 to tackle economic disruption from COVID- related closures. Another worrying sign is that benchmark 10-year yields last week fell back below the fed funds rate. The 10-year yields reached 4.12% on Tuesday, while the fed funds rate held steady at 4.33%. 'That is indicative of the economy essentially saying that the Fed is missing out here. It's behind the curve,' said Lou Brien, strategist at DRW Trading. While the curve can invert for different reasons, it often reflects a concern over Fed policy when longer-dated debt yields decline faster than shorter-dated ones. This is because longer-dated yields react to growth fears, while shorter-dated debt yields will reflect Fed interest rate expectations, and the possibility that the U.S. central bank will hold rates too high for too long. The closely watched spread between yields on three-month bills and 10-year notes also reinverted last week for the first time since mid-December. An inversion in this part of the curve is seen as an indicator that a recession is likely in the next 12-to-18 months. The gap between two-year and 10-year yields, also a closely watched recession indicator, has flattened back to 25 basis points, from a peak of 48 basis points in January, but has not reinverted. GROWTH WEIGHS ON LONG-END YIELDS Longer-dated debt yields have been dragged lower by increasing concerns about U.S. economic growth, in part due to government job layoffs by Elon Musk's Department of Government Efficiency. Uncertainty over the impact of trade tariffs and other government policies is also weighing on consumer sentiment and dampening risk appetite. 'Markets went from over-exuberance about the economy, that things are doing so well, to activity might fall off a cliff again,' said Jan Nevruzi, U.S. rates strategist at TD Securities. For two-year yields, 'it's a little bit more pinned because of the limited reaction function by the Fed.' Optimism on Treasury supply has supported the decline in longer-dated debt yields, with the U.S. Treasury maintaining supply levels. Two-year yields caught up a bit on Tuesday as traders boosted bets that the Fed may cut rates sooner. It came after new tariffs on Mexico and Canada took effect, while levies on Chinese goods increased. Fed funds futures traders are now pricing in a roughly 50/50 chance of a rate cut now in May, with a move not fully priced in until June. The Fed cut rates by 100 basis points last year, starting in September, before pausing in January. "The market wants to price in some greater likelihood of some Fed activity to a greater degree this year," said Michael Lorizio, head of U.S. rates trading at Manulife Investment Management. To cut rates, however, the Fed will wait to see weakness in several economic metrics, he said. For now, the market moves are not fully signaling a slowdown. Fitzpatrick says the shift in the 2/5 yield curve has reached a "code orange" level of caution. If it inverts decisively with drops in longer-dated yields leading the move it may constitute a "code red," especially if it drops to around minus 20 basis points. For benchmark 10-year yields, Brien says further drops would be a stronger sign that the Fed may need to reconsider its policy. 'If the 10s fall to 4% and the fed funds are still up at 4.5%, then it starts to look very suspect about the Fed having missed the turn and falling behind the curve." JOBS DATA KEY Clues about whether the United States is facing a more sustained downturn are likely to be in the jobs market, where hiring has slowed though layoffs remain relatively subdued. That could change quickly, said Brien. 'When it actually turns, it's going to turn sharply because the layoffs will come.' Friday's jobs report for February is expected to show employers added 160,000 jobs during the month, while the unemployment rate stayed steady at 4.0%, according to economists polled by Reuters. Inflation will also remain a key focus that could keep the Fed on hold for longer if it reaccelerates. The risk with the Fed is that it will wait too long to cut rates because it is 'fighting yesterday's battle,' said Fitzpatrick.
