Final UK interest rate hike expected in May; profits drive up inflation, ECB warns; Unemployment claims in the United States increase as it happened | Business

[ad_1]

Michael Saunders: Another UK interest rate hike likely in May

Michael Saunders, a former Bank of England policymaker, predicts inflation will force a further rise in UK interest rates next month.

Saunders told Radio 4s Today Program that soaring energy prices were the predominant factor driving up inflation, driving up household bills, business costs and food production prices.

But Saunders hopes we are now, pretty much, finally at the turning point, and that inflation will fall quite sharply over the rest of this year.

The BoE’s objective is to keep inflation at 2% over the medium term.

Saunders predicts the bank’s monetary policy committee will vote to raise interest rates in May, for the 12th consecutive time, from 4.25% to 4.5%. But that could be a final hike, he predicts, followed by a long period of fairly flat interest rates.

He says:

I think they’re probably almost done by now.

The big cycle of tightening, interest rates going up meeting after meeting, I think is largely over.

Money markets, however, show that investors expect rates to be close to 5% by the end of this year.

Updated at 09:44 BST

Key events

Show only key events

Please enable JavaScript to use this feature

Yellen calls for constructive and fair economic relations with China

US Treasury Secretary Janet Yellen is expected to call for a constructive and fair economic relationship between China and the United States.

In a sign that Washington wants to strengthen its ties with Beijing, Yellen is expected to say later in the day that the United States wants to cooperate with China on global issues such as climate change, debt relief and macroeconomic stability.

But Yellen will also warn that the United States will continue to resist unjust economic policies, amid ongoing tensions between the world’s two largest economies.

She is expected to tell Johns Hopkins Universitys School of Advanced International Studies that:

More than resources or geography, our country’s success can be attributed to our people, our values ​​and our institutions. American democracy, though imperfect, protects the free exchange of ideas and the rule of law that is the foundation of sustainable growth.

Summary of the afternoon

Time for a recap, here are today’s top stories:

Sales of existing homes in the United States fell 2.4% in March, according to new figures.

Sales of existing homes fell to a seasonally adjusted annual rate of 4.44 million units last month, reports the National Association of Realtors, as rising mortgage rates deterred potential buyers.

“Existing home sales fell 2.4% from February’s downwardly revised annualized pace of 4.55 million to 4.44 million. Sales were 22.0% lower than the same month last year. Remarkably, sales of homes in all price ranges fell at double-digit rates.” @GeorgeRatiu pic.twitter.com/KG35KVGzno

— The KCM Crew (@KCMcrew) April 20, 2023 Seagate fined $300 million for continuing relationship with Huawei

Hard drive maker Seagate has been hit with a $300 million fine for maintaining a business relationship with Chinese tech company Huawei after the company was added to a US trade blacklist.

Seagate has reached an agreement with the US Department of Commerce to resolve allegations that Seagate broke the rules by selling millions of hard drives to Huawei between August 17, 2020 and September 29, 2021.

It is the largest stand-alone sanction in the history of the Commerce Department’s Office of Export Controls, according to CNBC.

Seagate says it settled after considering the risks and cost of protracted litigation involving the U.S. government, as well as the magnitude of the potential penalty.

In 2019, Donald Trump’s administration banned Huawei from buying US components without official approval. Export control rules were later changed to block all unlicensed shipments of chips and components to the company, even from non-US vendors, if they included US machinery or technology.

Dave Mosley, CEO of Seagates, says:

Integrity is one of our core values, and we have a strong commitment to compliance, as evidenced by our global team of compliance and international trade law professionals, complemented by external experts and outside counsel.

While we believe we complied with all relevant export control laws at the time we made the hard drive sales at issue, we have determined that the best course of action is to engage with BIS and resolve this matter. We are now moving forward with full focus on executing our strong technology roadmap to meet the growing demand for mass data storage solutions.

Seagate fined $300m for continuing billion dollar relationship with blacklisted Huawei, despite US export controlshttps://t.co/KZP9LgsD4E

— CNBC (@CNBC) April 20, 2023

Updated at 3:26 p.m. BST

Wall Street opened in the red as stocks dragged down on economic concerns and jitters over the US debt ceiling.

The Dow Jones industrial average fell 153 points, or 0.45%, to 33,743 points, while the broader S&P 500 index lost 0.55%.

The increase in unemployment insurance claims in the United States last week will add to concerns that the United States could fall into recession.

Shares of Teslas fell 7% after missing Wall Street forecasts last night as price declines ate away at its profit margins.

Updated at 2:47 p.m. BST

Investment bank Jefferies also believes the Bank of England is near the end of its rate hike cycle.

They expect the last hike to be in May, with rates peaking at 4.5% (from 4.25% currently).

Jefferies says:

The market is currently pricing a peak just below 5%.

Recent inflation releases confirm our negative bias for inflation in the UK – it is likely to stay higher for longer than in other economies. However, a slowdown in growth and the fact that mortgages are tied to the start of the curve would limit the BoE.

While most of the US macro talk this morning focuses on Initial Jobless Claims which rose slightly to 245,000, above the consensus forecast of 240,000, the data exerting downward pressure on yields comes from the Fed. of Philadelphia indicating, albeit partially, a slowdown in the #economy (price and volume)

— Mohamed A. El-Erian (@elerianm) April 20, 2023

The US dollar plunged in the currency markets.

Rising jobless claims and a slowing Philadelphia manufacturing sector could prompt the Federal Reserve to end its interest rate hikes soon.

The disappointing Philly Fed index and unemployment insurance claims data are weighing on dollar demand here. The first fully reversed PM gains in DXY pic.twitter.com/YR6EEkQqQA

— Joshua Mahony (@JoshuaMahony) April 20, 2023

Manufacturing activity in and around Philadelphia continued to decline overall in April, at the fastest pace since the pandemic began.

The latest manufacturing business outlook survey, compiled by the Federal Reserve Bank of Philadelphia, found that prices charged and paid by factories in the district have fallen again.

Business expectations for growth over the next six months remain subdued, although new orders and shipments indices have increased.

This pulled the current general activity index down 8 points to -31.3 in April. It is the eighth consecutive negative reading and the lowest reading since May 2020.

U.S. unemployment insurance claims rise

The number of Americans filing new claims for unemployment assistance rose again, to its highest level in three weeks.

Last week, 245,000 initial claims for unemployment support were filed in the United States, an increase of 5,000 from the previous week.

Initial claims are an indicator of job losses, which may suggest U.S. businesses have been laying off more staff as rising interest rates and the banking crisis in recent months have cooled the economy,

Initial claims rose last week to 245,000 from 240,000. Continuing claims rose more significantly to 1,865m from 1,804m, reaching the highest level since November 2021.

Continuing claims continue their steady increase, now near pre-recession levels (defined here as the February 20 average) pic.twitter.com/FgItv1nPlT

— Daniel Zhao (@DanielBZhao) April 20, 2023

[ad_2]