Business

LONDON — Stock markets retreated on Friday as US retail sales and bank earnings disappointed and investors worried the Fed may hike interest rates aggressively.

A pledge by Fed chief Jerome Powell earlier this week to rein in surging prices while also nurturing recovery in the world's top economy provided a much-needed lift to investor sentiment and helped propel a rally across equities.

Data showing US inflation appeared to be stabilising added to the positivity and tempered fears about the end of the ultra-loose monetary policies, which have been key to a near two-year markets rally and global economic rebound.

But the mood darkened on Thursday after the officials' comments.

Lael Brainard, in her Senate hearing to become Powell's deputy, said rates could rise as early as March, a move supported by Fed Bank of Philadelphia chief Patrick Harker, who also raised the possibility of another three before the end of the year.

The heads of the Chicago and St Louis Feds saw a similar number of hikes, while Raphael Bostic of Atlanta was open to a March move.

Minutes from the bank's December policy meeting showed officials were keen to act quickly to tame prices, and speed up the taper of its massive bond-buying programme, then begin offloading its Treasury holdings — measures that have been used to keep rates at all-time lows.

"The possibility of four rate hikes this year is growing," said Oanda senior market analyst Edward Moya.

"With four [policy board] voters now expecting to hike in March, financial markets can't rule out it is possible that they could deliver five rate hikes this year."

The comments helped lead to steep losses across Wall Street on Thursday, with the Nasdaq dropping more than 2 per cent, as tech firms are more susceptible to higher borrowing costs.

The selling continued on Friday in Asia and Europe, where official data showed Germany's economy grew modestly last year and likely shrank in the final months.

Wall Street fell further on Friday with a lacklustre set of bank earnings failing to help sentiment. 

Shares in JPMorgan Chase were 5.3 per cent lower after the bank reported a 14 per cent drop in fourth quarter profits amid higher costs for employee compensation.

Sentiment was also hit by data showing retail sales dropped 1.9 per cent month-on-month in December.

"The key takeaway from the report is that total retail sales, which are not adjusted for inflation, contracted at their fastest pace since last February in the face of broadly higher prices," said Patrick O'Hare at Briefing.com. 

"This suggests that inflation is weighing down consumer spending," he added.

Meanwhile, oil prices hit the highest levels for more than two months.

"Crude oil prices have continued to look resilient with concerns about geopolitical risk and a Russian incursion into Ukraine raising the stakes, as well as keeping a floor under prices," said Michael Hewson at CMC Markets.

"With some OPEC+ members already struggling to lift production to meet the new output targets, concern over supply shortfalls has been growing," he added.

SAN FRANCISCO — A federal judge on Tuesday ruled that US regulators' re-worked anti-trust case against Facebook can go ahead, saying the complaint was more robust and detailed than the version denied last year.

The US Federal Trade Commission has alleged the social media giant, which has renamed itself Meta, holds an illegal monopoly by acquiring potential competitors that it now owns like Instagram and WhatsApp.

Judge James Boasberg's ruling is a blow to Facebook, which faced renewed scrutiny last year after a whistleblower leaked documents showing executives knew the harm their services could cause to teens, democracy and users' well-being. 

The FTC "may well face a tall task down the road in proving its allegations," but the case will not be dismissed, ruled Boasberg, who last year tossed out the original suit.

His ruling on Tuesday denied a push by Facebook, which did not reply to a request seeking comment, to also dismiss the re-worked complaint.

"The Commission continues to allege that Facebook has long had a monopoly in the market... and that it has unlawfully maintained that monopoly," Boasberg wrote.

"The facts alleged this time around to fortify those theories, however, are far more robust and detailed than before," he added.

The judge also rejected Facebook's argument that the case should be dismissed because the commission's decision to amend and refile was fueled by a bias against the company by FTC chairwoman Lina Khan.

That contention missed the mark, the judge reasoned, because Khan is a prosecutor, not a judge bound to neutrality.

"Ultimately, whether the FTC will be able to prove its case and prevail at summary judgment and trial is anyone's guess," the judge said in the ruling.

In the amended complaint, the FTC said Facebook's dominance "is protected by high barriers to entry," and that "even an entrant with a superior product cannot succeed against the overwhelming network effects enjoyed by an incumbent personal social network."

The lawsuit, which could take years to go through the courts without a settlement, calls for the court to order "divestiture of assets," including WhatsApp and Instagram, to restore competition.

Boasberg said in his dismissal ruling last year that the agency's initial lawsuit lacked evidence, notably in defining the market that Facebook was allegedly monopolising.

LONDON — Stock markets rose and the dollar fell against most currencies on Wednesday despite figures showing US inflation rising at its fastest pace since June 1982.

The US consumer price index (CPI) jumped 7 per cent in 2021, the highest increase since June 1982, adding pressure on authorities to tame surging inflation wave brought on by the pandemic and response efforts.

But investors appeared to take the data in their stride after Federal Reserve chief Jerome Powell indicated on Tuesday he was ready to raise interest rates while trying to preserve the US recovery from the COVID-19 crisis.

US and European stocks all pushed higher after the inflation data, with the tech-rich Nasdaq, which had been particularly jittery at the start of the year, rising 1 per cent at the start of trading.

"It looks like the market had prepared for even hotter inflation, which obviously didn't materialise. So the reaction can best be described as relief," said Fawad Razaqzada, an analyst at ThinkMarkets. 

Fears of an abrupt end to the ultra-loose monetary policies, which have helped power a two-year market rally, made for a torrid start to trading this year. But on Wednesday, the mood appeared resolutely upbeat.

European and US markets appeared sanguine about the price rises in the world's biggest economy after Powell's reassurances on Tuesday.

Oil prices also rose on Tuesday whereas the dollar was down.

While most observers expect equities to endure some tough times in the near future, they remain broadly upbeat about the outlook for this year.

"It would appear relentless optimism is perhaps returning to the markets and dip buyers are diving back in, Craig Erlam, senior market analyst at Oanda, wrote in a note to clients.

NEW YORK — Boeing delivered more than twice as many commercial aircraft in 2021 as the year earlier, according to figures released on Tuesday.

However, it still lagged its archrival Airbus in the closely-watched industry benchmark, the figures showed.

Boeing, the US aviation giant, benefitting from the return of its 737 MAX jet in most leading markets, delivered 340 planes last year, up from 157 in 2020.

But that level is still below Airbus' 611 deliveries in 2021. Deliveries are tied to company revenues and closely monitored by investors.

The figures are the latest to point to Boeing's partial recovery from both the lengthy grounding of its 737 MAX model following two fatal crashes, and the downturn in the commercial plane business during COVID-19 that halted many new plane orders for more than a year.

Boeing executives have said they expect passenger traffic to return to pre-pandemic levels in 2023 or 2024, and for the company to recover its long-term growth trends a few years after that.

In early December, China cleared the MAX to resume service, the last major market to reauthorise the single-aisle airplane after its grounding.

But Boeing over the last year ran into trouble with its 787 Dreamliner, halting deliveries of the jet in May following quality issues and cutting production levels. Boeing delivered just 14 Dreamliner planes in 2021, down from 53 the prior year. 

Boeing has seen some $1 billion in added production costs due to the 787 problems. The company is engaged in "detailed discussions" with federal aviation regulators about resuming deliveries, Boeing said in a quarterly securities filing. 

On the positive side, Boeing had net orders of 535 commercial planes for 2021, meaning its contracts for new planes more than offset cancelations for the first time in three years.

The aviation giant also scored a record number of new freighter orders, reflecting additions by UPS, FedEx and others in response to rising e-commerce demand.

LONDON — Europe's major equity markets rebounded on Tuesday from recent falls as investors fished for bargain shares on the eve of key US inflation data, dealers said.

In afternoon deals, London stocks added 0.5 per cent, Paris gained 0.8 per cent and Frankfurt won 0.9 per cent, after all three began the week in negative territory.

Wall Street opened lower ahead of a Senate confirmation hearing of Jerome Powell following his renomination as chief of the US Federal Reserve (Fed). 

In his prepared remarks released ahead of his appearance, Powell indicated that the bank is ready to act to prevent inflation from becoming entrenched, reinforcing expectations of interest rate hikes. World oil prices recovered from Monday's drop but the dollar traded mixed.

Bitcoin advanced close to $42,000, one day after the world's most popular cryptocurrency sank below $40,000 on fears of reduced liquidity as a result of US monetary policy tightening.

Richard Hunter, head of markets at Interactive Investor, pointed to "some tentative buying activity... as investors sought to benefit from the recent dips".

However, he cautioned that markets remain overshadowed by surging inflation — and central bank efforts to contain it.

"The backdrop remains unchanged, with the pace and amount of [US] interest rate rises likely to become clearer over the next few sessions in the face of persistent inflation," Hunter added.

On the downside, most Asian indices retreated on lingering concern about the Fed's plans to wind back its financial support measures and lift interest rates within months in order to tackle surging inflation.

Markets are now cautiously awaiting the release of US inflation figures on Wednesday, which could play a major role in the Fed's thinking.

"I'm not sure the inflation data tomorrow is going to put investors' minds at ease, with CPI [consumer price index] seen hitting a multi-decade high above 7 per cent," said market analyst Craig Erlam at Oanda. 

"A higher reading could spook investors once again just as equity markets appear to be stabilising," he added.

While the fast-spreading Omicron coronavirus variant plays on nerves, traders are now coming to terms with the imminent end to the pandemic era of ultra-cheap cash, which helped the economic recovery and fanned a global rally for nearly two years.

A pick-up in consumer activity, surging wages, supply chain problems and rising energy costs are combining to push inflation in several countries to highs not seen for a generation, ramping up pressure on central bankers to act before it gets out of control.

Fed ready to act 

Several global central banks have already started hiking borrowing costs, including the Bank of England.

All eyes are now on the US Fed as it tees up its first move, with commentators predicting it will come in March, after it has finished winding up its bond-buying programme.

That could be followed by two or three more by the end of the year, according to analysts.

"Although Jerome Powell has already released his text for the confirmation hearing there will still be chance for him to reveal more at the subsequent Q&A session," said analysts at Moneycorp.

LONDON — US and European stock markets fell on Monday as investors are concerned that a looming interest rate hike awaits all-important US inflation numbers later in the week.

Traders have been on the edge since the US Federal Reserve (Fed) signalled last week that it was ready to raise interest rates sooner than expected to tame runaway prices.

"Risk sentiment has been pressured by concerns surrounding rising rates and the Fed's indication to tighten policy more aggressively," said a note by market analysts Briefing.com.

Investors will now be keeping a watch on inflation readings out of both the United States and China this week as they try to assess the outlook for the global economy with rocketing energy costs and supply snarls compounding problems caused by the fast-spreading Omicron COVID variant.

"With a quiet start to the week for big corporate and economic announcements, markets could remain in a holding pattern until Wednesday when US inflation figures will reveal just how acute inflationary pressures are in the world's largest economy," said AJ Bell investment director, Russ Mould.

Wall Street opened lower, with the Dow Jones Industrial Average down 0.4 per cent, the S&P 500 shedding 0.7 per cent and the tech-heavy Nasdaq sinking 1.2 per cent.

Europe's main markets — London, Paris and Frankfurt — were all down in afternoon trading, but Asia finished the day higher.

Stock markets had mostly fallen on Friday after US data showed fewer new jobs than expected were created last month even as wages saw strong gains.

The closely watched non-farm payrolls figure on Friday came in well short of forecasts, marking a disappointing end to the year.

Fed officials are now faced with the problem of having to adjust monetary policy to rein in prices while at the same time avoid damaging the economic recovery and causing a panic on markets as the cheap cash that has fuelled a near-two year rally dries up.

The bank has already started tapering its vast bond-buying programme put in place at the start of the pandemic and has signalled it could start lifting interest rates from record lows from March, with some observers predicting three hikes this year.

There were also indications officials were considering reducing its massive bond holdings, putting further upward pressure on lending costs.

The yield on 10-year Treasuries, a key indicator of future interest rates, climbed last week at its fastest pace in almost a year.

Bitcoin down 

In other markets, oil prices were slightly lower as traders mulled the supply-side impact of ongoing unrest in Kazakhstan, which is a member of the enlarged OPEC+ producers' grouping.

Following a record year in 2021, Bitcoin — the world's biggest cryptocurrency — fell below the $40,000 mark on Monday, its lowest level since September. 

After taking a tumble on Monday, it recovered some ground, rising to $41,198. 

Its recent decline meanwhile continues to drag down other cryptocurrencies.

"The main culprit behind the slump in crypto prices is the Fed's decision to withdraw massive liquidity, which has been pumped into markets since the onset of the coronavirus pandemic," Naeem Aslam, chief market analyst at Avatrade, said.

In corporate news, video game publisher Take-Two announced a $12.7 billion to acquire Zynga in a transaction that will combine the creators of "Grand Theft Auto" and "Farmville".

By Daniel Hoffman, Ali Bekhtaoui
Agence France-Presse

PARIS — After limping its way back from the COVID pandemic last year, the global economic recovery has been rattled by the Omicron variant's rapid rise.

Economic Growth

Last month, the head of the International Monetary Fund (IMF), Kristalina Georgieva, warned that global economic growth forecasts may have to be slashed following the emergence of Omicron.

The IMF has previously banked on growth of 5.9 per cent for 2021 and 4.9 per cent this year, but it could now revise its estimates later this month.

To soften the blow on the economy, US health authorities have cut the isolation period for asymptomatic cases by half to five days.

Mark Zandi, chief economist at Moody's, said he expects US growth of 2.2 per cent in the first quarter, more than half lower than a previous estimate of 5.2 per cent.

"Omicron is already doing economic damage, as is clear from weaker credit card spending, a decline in restaurant bookings, air flight cancelations, and many schools going back to online learning," Zandi said.

"However, I do expect Omicron to pass through quickly and for growth to rebound in the second quarter, and growth for the year to be unaffected," he added.

"Broadly, I think each wave of the virus is doing less damage to the healthcare system and economy than the previous wave."

In the eurozone, tighter restrictions, consumer caution and absenteeism will reduce economic activity in the next few weeks, but the economy will rebound in February, according to Andrew Kenningham, chief Europe economist at Capital Economics.

Countries with lower vaccination rates, which are mainly developing economies, face greater uncertainty, and a zero-COVID policy in China could put a brake on growth in the world's second biggest economy as it locks down entire cities.

Will tourism suffer? 

The travel industry was looking forward to a rebound in 2022 after it was devastated by border closures and lockdowns.

But the emergence of Omicron during the key winter holiday season caused thousands of flight cancellations, cruises to be forced to dock and fewer hotel bookings.

Investors, however, have been optimistic, as shares of airline and cruise companies have risen in recent weeks.

"The markets seemed to be looking at the post-Omicron period," said Alexandre Baradez, analyst at IG France.

Will inflation worsen? 

The economic recovery has had an adverse side effect: Inflation that has soared to decades-high levels in the United States and Europe as energy prices soared and rising demand faced supply shortages.

Central banks have insisted that high inflation is only temporary and prices will eventually fall, but it has hurt consumers and businesses.

Could it get worse?

"Little is certain about Omicron's impact on consumer demand, but people who stay at home because of the variant are more likely to spend their money on retail goods rather than services like dining out or in-person entertainment," said Jack Kleinhenz, chief economist at the US National Retail Federation.

"That would put further pressure on inflation since supply chains are already overloaded across the globe," he said.

Supply chain bottlenecks caused shortages of a slew of materials last year, driving up prices of many products. Higher demand for products on goods on supply could further fuel price increases.

The Federal Reserve rattled markets this week as minutes from its December meeting showed that the US central bank was ready to tighten monetary policy more aggressively to tame inflation.

Elsewhere, inflation is eroding purchasing power after running into double digits in Brazil and Nigeria.

In Britain, the British Chambers of Commerce said 58 per cent of firms expect their prices to increase in the next three months.

End of stimulus? 

Governments deployed massive stimulus programmes in 2020 to save their economies, piling up $226 trillion of debt, according to the IMF.

Furlough schemes to keep people employed "made sense" when there was so much uncertainty and entire industries shut down, said Niclas Poitiers, research fellow at Bruegel, a Brussels-based think tank.

"I don't see yet the necessity for massive funds to the economy," Poitiers said.

The United States and Europe are instead investing in structural programmes, such as President Joe Biden's $1.75 trillion "Build Back Better" social and climate spending plan.