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Following inflation data showing worse-than-expected price increases in June, bond markets are now flashing signs of deeper investor concerns about recession.On Wednesday, the U.S. 10-year note yield slipped as much as 0.21% lower than the yield on the 2-year, the largest negative spread between the two securities since 2000.A yield curve inversion, in which short-dated bonds yield more than longer-dated ones, shows a reversal in typical risk attitudes, as investors usually expect more compensation in exchange for holding onto a security for longer.This same yield curve inversion happened in 2019, prior to the pandemic, and flashed again in April of this year. The 2-year/10-year spread has inverted before each of the last six U.S. recessions.The spread between the yield on the U.S. 10-year Treasury fell deeply below the yield. on the U.S. 2-year Treasury this month. Source: U.S. Treasury, Federal Reserve Bank of St. LouisBecause the U.S. 2-year yield generally tracks short-term rates, the recent rip higher in yields illustrates market pricing on more aggressive-than-expected interest rate increases from the Federal Reserve.The 2-year/10-year spread is the most closely watched among investors as these are among the most traded durations along the Treasury curve, but other tenors along the yield curve have also inverted: the 3-year and the 5-year Treasuries both have yields higher than the 7-year.After the curve briefly inverted in April 2022, the curve then re-steepened as the Fed began its process of raising interest rates, which had the impact of lifting longer-term rates.Now, however, that picture has reversed.Inflation data out this week showed a 9.1% year-over-year increase in consumer prices last month, which cast more uncertainty over the Fed’s ability to avoid recession without abruptly slamming the brakes on economic activity.“I don’t see an off-ramp to a soft landing anymore,” wrote SGH Macro Advisors Chief U.S. Economist Tim Duy on Wednesday. Duy described June’s Consumer Prince Index (CPI) as a “disastrous” report for the Fed, adding the central bank may have to get more aggressive on raising borrowing costs to depress demand — even if it risks job loss.“The deepening yield curve inversion is screaming recession, and the Fed has made clear it prioritizes restoring price stability over all else,” Duy added.Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System testifies before the House Committee on Financial Services June 23, 2022 in Washington, DC. (Photo by Win McNamee/Getty Images)The central bank had originally said it was debating between a 0.50% and a 0.75% move at the conclusion of its next meeting. But the hot inflation prints led to market repricing that risk, and as of Thursday afternoon placed a 44% probability on a 1.00% move on July 27.Fed trying to ‘rapidly catch up’Another read on inflation Thursday morning from the Producer Price Index (PPI) painted a similar picture as consumer data out Wednesday, with producer prices increasing by 11.3% year-over-year in June.Fed Governor Christopher Waller on Thursday said data so far had supported the case for a 0.75% move, but added that he could change his call depending on data from retail sales — which are due Friday morning — and housing.“If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down,” Waller said.Although Waller said markets appeared to show Fed “credibility” on addressing the economic challenge, the deepening yield curve inversion illustrates the tough task ahead as the Fed attempts to raise rates without squeezing companies to the point of layoffs.Christopher Waller testifies before the Senate Banking, Housing and Urban Affairs Committee during a hearing on their nomination to be member-designate on the Federal Reserve Board of Governors on February 13, 2020 in Washington, DC. (Photo by Sarah Silbiger/Getty Images)“The business cycle risks rise when the Fed is moving rapidly to catch up,” MKM Chief Economist Michael Darda told Yahoo Finance on Thursday.Darda added that recession risks could be “dramatically amplified” if yields on T-Bills, the shortest-dated U.S. Treasuries, start to show signs of inversion as well.“It’s a bit of a dicey situation,” Darda said.Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.Click here for the latest economic news and economic indicators to help you in your investing decisionsRead the latest financial and business news from Yahoo FinanceDownload the Yahoo Finance app for Apple or AndroidFollow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube Continue reading →

JPMorgan (JPM) Chief Executive Jamie Dimon doubled down on his earlier warning about the possibility of an economic downturn in comments on Thursday.The leader of the nation’s largest bank cautioned risks to the U.S. economy appear “nearer than they were before” in a call with reporters following the bank’s most recent quarterly report.“I’m simply saying, there’s a range of potential outcomes from a soft landing to a hard landing, driven by how much interest rates go up, the effectiveness of quantitative tightening, and defective, volatile markets,” Dimon said in a separate call with Wall Street analysts Thursday.The bank reported a wider-than-expected drop in profit of 28% during the second quarter to $8.6 billion, or $2.76 per share share. Analysts surveyed by Bloomberg anticipated the figure to come in at $8.9 billion. Meanwhile, trading revenue rose 15% to $7.8 billion, slightly below the 17% increase analysts expected.Dimon’s comments come as the Federal Reserve moves forward with its most aggressive monetary policy in decades and war in Ukraine continues to disrupt global markets.JP Morgan Chase CEO Jamie Dimon is seen on the video screen as U.S. President Joe Biden arrives for a hybrid virtual meeting with business leaders and CEOs about the debt limit at the White House in Washington, U.S., October 6, 2021. REUTERS/Kevin LamarqueThe remarks also come as JPMorgan readies its own balance sheet for a potential recession.Last quarter, the bank temporarily suspended share buybacks and set aside an additional $428 million in credit reserves to cover potential loan losses, pointing to “modest deterioration in the economic outlook.”The source of that deterioration comes from “two conflicting factors,” Dimon said in the company’s earnings release. While the U.S. economy continues to grow and the labor market and consumer spending hold up despite a backdrop of macroeconomic headwinds, geopolitical tensions caused by war in Ukraine, deteriorating consumer confidence, and “never-before-seen quantitative tightening” are expected to have negative consequences down the line.JPMorgan reported earnings one day after June inflation data showed consumer prices climbed at the fastest pace of the current inflation cycle, stoking fresh worries U.S. central bank officials may take even more aggressive action as economic growth shows signs of moderating.U.S. Federal Reserve Board Chair Jerome Powell testifies before a House Financial Services Committee hearing in Washington, U.S., June 23, 2022. REUTERS/Mary F. CalvertThe JPMorgan chief was among the first of Wall Street heavyweights to hint at a possible recession, sending a shockwave through financial markets last month when he predicted an economic “hurricane” was underway.Despite warnings, however, Dimon fell short of formally calling for a recession.“You can put any percentage you want on it — I’ve never changed my view,” he told reporters. “I’m not guessing what it is, I’ve always spoken about possibilities and probabilities, not about a single-point forecast.”Dimon and JPMorgan CFO Jeremy Barnum also emphasized the health of U.S. consumers, pointing to still solid savings accounts and higher discretionary spending on dining and experiences.Speaking to analysts, Dimon said consumers are in “great shape” if we enter a recession and hold far less leverage, particularly compared to the 2008 financial crisis and in 2020 when the coronavirus pandemic upended the economy.Morgan Stanley (MS) CEO James Gorman, in a slight contrast, appeared more relaxed in a call following the firm’s results Thursday morning, indicating a “deep and dramatic recession” is unlikely for the U.S and noting the threat of an economic contraction is a greater concern for Europe.Morgan Stanley revealed results that missed analyst expectations, dragged down primarily by a slump in investment banking revenue due to volatile market conditions.—Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnycClick here for the latest stock market news and in-depth analysis, including events that move stocksRead the latest financial and business news from Yahoo FinanceDownload the Yahoo Finance app for Apple or AndroidFollow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube Continue reading →

(Kitco News) The gold market tumbled $40 Thursday and briefly fell below the $1,700 an ounce level as markets began to price in an oversized 100-basis-point rate hike from the Federal Reserve at the July meeting.
Rate hike expectations were quickly re-priced after the latest U.S. inflation numbers shocked the markets, with the annual CPI number coming in at 9.1% and the yearly PPI rising 11.3% in June.
Before inflation data, markets were looking for a nearly 100% chance of a 75-basis-point hike at the Fed’s July 27 meeting, according to the CME FedWatch Tool. However, within 24 hours after the numbers were released, the expectations shifted to an 80.9% chance of a 100-basis-point hike. This would take the fed funds rate to a range of 2.50%-2.75%.
“Only yesterday morning, the market had just finally priced in a full 75bp rate hike in July for the first time. In a few hours, an above-consensus U.S. CPI reading and a surprise 100bp rate hike by the Bank of Canada changed the whole picture again. After these two events, markets have moved to seriously consider a 1.0% rate increase by the Fed in two weeks,” said Francesco Pesole, FX strategist at ING.
The Bank of Canada surprised the markets with a 100-basis-point hike on Wednesday, warning that inflation will remain elevated for the next three months. 
“The Bank of Canada made the leap into triple-digit hikes shortly after the U.S. CPI release, acknowledging in the process that it had underestimated inflation since Spring last year,” said Craig Erlam, senior market analyst at OANDA.
Gold faces many obstacles, but recession fears could help
The precious metal plunged below $1,700 an ounce Thursday, hitting 11-month lows and approaching pre-pandemic levels.
“A major capitulation event may be unfolding in gold,” said Daniel Ghali, senior commodity strategist at TD Securities. “Gold bugs are falling like dominoes. With prices challenging pre-pandemic levels, risks of a significant capitulation event in precious metals are growing.”
At the time of writing, August Comex gold futures were trading at $1.712.00, down 1.35% on the day.
“The yellow metal is feeling the heat from the inflation data and aggressive tightening in response. We could see its popularity improve once we see the peak in the inflation data, which we may now have in the U.S., but its tendency for upside surprises will leave investors cautious,” said Erlam.
BREAKING: #Gold extends losses to trade sharply down and at 11-mo. low as USDX, bond yields sharply up today and crude oil solidly down, at 3-mo. low. August gold down $37.50 at $1,698.00. #kitconews pic.twitter.com/LoJ42QVa93— Kitco NEWS (@KitcoNewsNOW) July 14, 2022
Downward price pressures have been rising in gold as the U.S. dollar index continues to trade at 20-year highs, yields advance, and oil sells off, according to analysts.
“Volatility around EUR/USD parity (which was hit yesterday) should continue to be elevated and to impact other USD crosses. We think that the current re-pricing higher in Fed rate expectations can – along with other factors – keep the dollar supported at this stage, and the risk of a more decisive break below 1.000 in EUR/USD can strengthen the greenback across the board,” Pesole added.
A break below $1,700 is still very likely, with the next support level at $1,680 an ounce, added Erlam. “[But] once the peak is in place and we see signs of inflation pressures retreating, we could see gold back in favor as the economy drifts into recession.”
Ghali noted that a drop below pre-pandemic levels, which is between $1,650 and $1,700 an ounce, could trigger even a bigger selloff in the precious metal.
“Pressure is building towards a capitulation if prices trade below their pandemic-era entry levels. In a liquidation vacuum, these massive positions are most vulnerable, which suggests the yellow metal remains prone to further downside still,” he said. Continue reading →

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(Kitco News) – The paper gold market has struggled to find consistent bullish momentum as prices dropped nearly 7% between April and June. However, the physical market saw solid growth, according to the latest report from the Royal Mint.
Thursday, the British mint said that sales of its gold bullion coins increased by 8% quarter-over-quarter. At the same time, silver bullion sales increased 47% compared to the sales in the first three months of 2022.
The mint added that it continues to see strong international sales, with specific demand growing among American consumers.
“Internationally, growth has also been seen in all three metals, with a 52% increase in the amount of gold ounces being sold, a 58% increase in silver ounces sold, and a 67% increase in platinum,” the Royal Mint said in a statement.
“We are famous in the U.K. for making coins and bars from precious metals and have developed a strong international base of investors. It’s encouraging to see such strong international sales, particularly from the U.S. and we look forward to expanding globally, providing a range of products to appeal to investors,” added Andrew Dickey, director of precious metals at The Royal Mint.
The latest report from the British mint appears to be bucking the trend of slowing sales among significant mints. The U.S. Mint sold 315,000 ounces of gold during the second quarter, down 26% from the first quarter.

The U.S. Mint saw a demand drop sharply in June as it sold 52,000 ounces, according to the mint’s revised data.
Meanwhile, the Perth Mint sold 244,737 ounces of gold in the second quarter, down 6% from 261,357 ounces sold in the first quarter.
Some analysts have said that the drop in bullion demand reflects nuances in the marketplace as higher premiums are pricing consumers out of the market. Premiums are high because of a supply and demand imbalance as bullion investors are holding on to the physical metal.
At the same time, analysts have said that the sharp drop in gold prices is expected to lead to an increase in physical demand. Thursday, gold prices dropped below $1,700 an ounce, hitting a nearly one-year low. Continue reading →

Angela Weiss/AFP via Getty Images

First-time unemployment claims continued to creep up last week, rising to their highest level since November. Initial jobless claims rose by 9,000 to 244,000 in the week ended July 9, coming in well above economists’ expectations of 235,000 claims, according to FactSet.

The four-week moving average was 235,750, an increase of 3,250 to the previous week’s average. The average has been gradually inching up since April, as the Federal Reserve moves to tighten monetary policy in a bid to curb inflation. “While we think the risk is for further increases in claims as economic growth slows, we don’t anticipate a sharp rise in new claims any time soon,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. Continuing claims, or the number of people already receiving unemployment benefits, were 1.331 million for the week ended July 2, a decrease of 41,000 from the previous week. This figure was below consensus estimates for 1.355 million, suggesting that while the labor market may be loosening up, it remains fairly strong. And indeed, the unemployment rate held steady at 3.6% in May for the fourth straight month, according to the Labor Department. The economy added 372,000 jobs in June. The ongoing strength of the labor market likely will encourage the Fed to keep aggressively hiking rates, especially given that inflation has soared the most in four decades. The consumer price index rose at a 9.1% annual pace in June, prompting 83% of Wall Street traders to speculate that the Fed could raise interest rates by as much as 100 basis points, or 1%, at the central bank’s July 27 meeting, according to the CME FedWatch Tool. Write to Sabrina Escobar at sabrina.escobar@barrons.com Continue reading →

Cryptocurrencies have suffered a brutal comedown this year, losing $2 trillion in value since the height of a massive rally in 2021.
While there are parallels between today’s meltdown and crashes past, a lot has changed since the last major bear market in crypto.
The crypto market has been flooded with debt thanks to the emergence of centralized lending schemes and so-called “decentralized finance.”
The collapse of the algorithmic stablecoin terraUSD and the contagion effect from the liquidation of hedge fund Three Arrows Capital, highlighted how interconnected projects and companies were in this cycle.

There’s something about the latest crypto crash that makes it different from previous downturns.
Artur Widak | Nurphoto | Getty Images

The two words on every crypto investor’s lips right now are undoubtedly “crypto winter.”
Cryptocurrencies have suffered a brutal comedown this year, losing $2 trillion in value since the height of a massive rally in 2021.

Bitcoin, the world’s biggest digital coin, is off 70% from a November all-time high of nearly $69,000.
That’s resulted in many experts warning of a prolonged bear market known as “crypto winter.” The last such event occurred between 2017 and 2018.
But there’s something about the latest crash that makes it different from previous downturns in crypto — the latest cycle has been marked by a series of events that have caused contagion across the industry because of their interconnected nature and business strategies.

From 2018 to 2022

Back in 2018, bitcoin and other tokens slumped sharply after a steep climb in 2017.
The market then was awash with so-called initial coin offerings, where people poured money into crypto ventures that had popped up left, right and center — but the vast majority of those projects ended up failing.

“The 2017 crash was largely due to the burst of a hype bubble,” Clara Medalie, research director at crypto data firm Kaiko, told CNBC.
But the current crash began earlier this year as a result of macroeconomic factors including rampant inflation that has caused the U.S. Federal Reserve and other central banks to hike interest rates. These factors weren’t present in the last cycle.
Bitcoin and the cryptocurrency market more broadly has been trading in a closely correlated fashion to other risk assets, in particular stocks. Bitcoin posted its worst quarter in more than a decade in the second quarter of the year. In the same period, the tech-heavy Nasdaq fell more than 22%.
That sharp reversal of the market caught many in the industry from hedge funds to lenders off guard.

As markets started selling off, it became clear that many large entities were not prepared for the rapid reversal

Clara Medalie
Research Director, Kaiko

Another difference is there weren’t big Wall Street players using “highly leveraged positions” back in 2017 and 2018, according to Carol Alexander, professor of finance at Sussex University.
For sure, there are parallels between today’s meltdown and crashes past — the most significant being seismic losses suffered by novice traders who got lured into crypto by promises of lofty returns.
But a lot has changed since the last major bear market.
So how did we get here?

Stablecoin destabilized

TerraUSD, or UST, was an algorithmic stablecoin, a type of cryptocurrency that was supposed to be pegged one-to-one with the U.S. dollar. It worked via a complex mechanism governed by an algorithm. But UST lost its dollar peg which led to the collapse of its sister token luna too.
This sent shockwaves through the crypto industry but also had knock-on effects to companies exposed to UST, in particular hedge fund Three Arrows Capital or 3AC (more on them later).

“The collapse of the Terra blockchain and UST stablecoin was widely unexpected following a period of immense growth,” Medalie said.

The nature of leverage

Crypto investors built up huge amounts of leverage thanks to the emergence of centralized lending schemes and so-called “decentralized finance,” or DeFi, an umbrella term for financial products developed on the blockchain.
But the nature of leverage has been different in this cycle versus the last. In 2017, leverage was largely provided to retail investors via derivatives on cryptocurrency exchanges, according to Martin Green, CEO of quant trading firm Cambrian Asset Management.
When the crypto markets declined in 2018, those positions opened by retail investors were automatically liquidated on exchanges as they couldn’t meet margin calls, which exacerbated the selling.
“In contrast, the leverage that caused the forced selling in Q2 2022 had been provided to crypto funds and lending institutions by retail depositors of crypto who were investing for yield,” said Green. “2020 onwards saw a huge build out of yield-based DeFi and crypto ‘shadow banks.'”
“There was a lot of unsecured or undercollateralized lending as credit risks and counterparty risks were not assessed with vigilance. When market prices declined in Q2 of this year, funds, lenders and others became forced sellers because of margins calls.”

Read more about tech and crypto from CNBC Pro

A margin call is a situation in which an investor has to commit more funds to avoid losses on a trade made with borrowed cash.
The inability to meet margin calls has led to further contagion.

High yields, high risk

At the heart of the recent turmoil in crypto assets is the exposure of numerous crypto firms to risky bets that were vulnerable to “attack,” including terra, Sussex University’s Alexander said.
It’s worth looking at how some of this contagion has played out via some high-profile examples.
Celsius, a company that offered users yields of more than 18% for depositing their crypto with the firm, paused withdrawals for customers last month. Celsius acted sort of like a bank. It would take the deposited crypto and lend it out to other players at a high yield. Those other players would use it for trading. And the profit Celsius made from the yield would be used to pay back investors who deposited crypto.
But when the downturn hit, this business model was put to the test. Celsius continues to face liquidity issues and has had to pause withdrawals to effectively stop the crypto version of a bank run.
“Players seeking high yields exchanged fiat for crypto used the lending platforms as custodians, and then those platforms used the funds they raised to make highly risky investments – how else could they pay such high interest rates?,” said Alexander.

Contagion via 3AC

One problem that has become apparent lately is how much crypto companies relied on loans to one another.
Three Arrows Capital, or 3AC, is a Singapore crypto-focused hedge fund that has been one of the biggest victims of the market downturn. 3AC had exposure to luna and suffered losses after the collapse of UST (as mentioned above). The Financial Times reported last month that 3AC failed to meet a margin call from crypto lender BlockFi and had its positions liquidated.
Then the hedge fund defaulted on a more than $660 million loan from Voyager Digital.
As a result, 3AC plunged into liquidation and filed for bankruptcy under Chapter 15 of the U.S. Bankruptcy Code.

Three Arrows Capital is known for its highly-leveraged and bullish bets on crypto which came undone during the market crash, highlighting how such business models came under the pump.
Contagion continued further.
When Voyager Digital filed for bankruptcy, the firm disclosed that, not only did it owe crypto billionaire Sam Bankman-Fried’s Alameda Research $75 million — Alameda also owed Voyager $377 million.
To further complicate matters, Alameda owns a 9% stake in Voyager.
“Overall, June and Q2 as a whole were very difficult for crypto markets, where we saw the meltdown of some of the largest companies in large part due to extremely poor risk management and contagion from the collapse of 3AC, the largest crypto hedge fund,” Kaiko’s Medalie said.
“It is now apparent that nearly every large centralized lender failed to properly manage risk, which subjected them to a contagion-style event with the collapse of a single entity. 3AC had taken out loans from nearly every lender that they were unable to repay following the wider market collapse, causing a liquidity crisis amid high redemptions from clients.”

Is the shakeout over?

It’s not clear when the market turbulence will finally settle. However, analysts expect there to be some more pain ahead as crypto firms struggle to pay down their debts and process client withdrawals.
The next dominoes to fall could be crypto exchanges and miners, according to James Butterfill, head of research at CoinShares.
“We feel that this pain will spill over to the crowded exchange industry,” said Butterfill. “Given it is such a crowded market, and that exchanges rely to some extent on economies of scale the current environment is likely to highlight further casualties.”
Even established players like Coinbase have been impacted by declining markets. Last month, Coinbase laid off 18% of its employees to cut down on costs. The U.S. crypto exchange has seen trading volumes collapse lately in tandem with falling digital currency prices.
Meanwhile, crypto miners that rely on specialized computing equipment to settle transactions on the blockchain could also be in trouble, Butterfill said.
“We have also seen examples of potential stress where miners have allegedly not paid their electricity bills, potentially alluding to cash flow issues,” he said in a research note last week.
“This is likely why we are seeing some miners sell their holdings.”
The role played by miners comes at a heavy price — not just for the gear itself, but for a continuous flow of electricity needed to keep their machines running around the clock.

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(Bloomberg) — Federal Reserve officials may debate a historic one percentage-point rate hike later this month after another searing inflation report piled pressure on the central bank to act.Most Read from Bloomberg“Everything is in play,” Atlanta Fed President Raphael Bostic told reporters in St. Petersburg, Florida, on Wednesday after US consumer prices rose a faster-than-forecast 9.1% in the year through June. Asked if that included raising rates by a full percentage point, he replied, “it would mean everything.Investors bet that the Fed is more likely than not to raise interest rates by 100 basis points when it meets July 26-27, which would be the largest increase since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s. Americans are furious over high prices, and critics blame the Fed for its initial slow response.Cleveland Fed President Loretta Mester, speaking Wednesday evening in an interview on Bloomberg Television, declined to say if she favored going bigger at the July meeting, noting there were important data releases between now and then. But she said there was “no reason” for raising rates by less than the 75 basis points that policy makers delivered last month.“What I take from the report, and it was uniformly bad — there was no good news in that report at all — is that inflation remains at an unacceptably high level,” she said. “We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner.”San Francisco Fed chief Mary Daly, speaking in a separate interview with the New York Times late Wednesday, said that “My most likely posture is 0.75, because of the data I’ve seen,” adding that she had expected the CPI number to be high: “I saw that data and thought: This isn’t good news. Wasn’t expecting good news.”The Fed has turned aggressively against inflation, after being blamed for its initially slow response, roiling financial markets and increasing the risk that its actions could tip the US economy into recession. Both Bostic and Mester pushed back against the idea of a trade-off between inflation and employment, arguing that they had to deliver price stability, even if that hurts the labor market.What Bloomberg Economics Says…“The Fed is right to worry about the unmooring of inflation expectations — and this report raises the chance of an even larger rate hike than 75 basis points down the line.”– Anna Wong and Andrew Husby, economistsFor the full note, click hereGiven the acceleration in monthly inflation, economists at Nomura Securities International now expect a full percentage-point increase in the Fed’s benchmark rate at the upcoming policy meeting.“Incoming data suggests the Fed’s inflation problem has worsened, and we expect policy makers to react by scaling up the pace of rate hikes to reinforce their credibility,” Nomura’s Aichi Amemiya, Robert Dent and Jacob Meyer, said in a note.Fed Chair Jerome Powell told reporters last month after the central bank raised rates by 75 basis points, to a range of 1.5% to 1.75%, that either a 50 or 75 basis-point increase was likely in July. A majority of his colleagues since then have either echoed his line or endorsed the bigger move.Fed Governor Christopher Waller is scheduled to speak on Thursday, while Bostic and his St. Louis colleague James Bullard both have events on Friday. After that officials enter their pre-meeting blackout period.Global TighteningCentral banks globally are confronting unprecedented inflation, prompting historic rate hikes from Hungary to Pakistan. The Bank of Canada on Wednesday increased rates by a surprise full percentage point amid fears that decades-high price pressures are becoming entrenched.Brett Ryan, senior US economist at Deutsche Bank AG, said it made sense to price in some risk of a larger Fed move, but saw it as unlikely without explicit communication from the central bank.“The hawks had to have agreed to the guidance of 50 to 75, with the understanding that if we got an upside print, 75 would be the number,” he said. “They have time to communicate if they want to put that message out there.”The US central bank has pivoted to aggressive policy tightening to confront the highest inflation in 40 years. They raised rates by 75 basis points last month — the largest increase since 1994 — despite previously signaling that they were on track for a smaller half-point move.“You have to put 100 on the table for July,” said Andrew Hollenhorst, Citigroup chief US economist. “Everybody should be quite cautious about calling peak inflation — a few months ago the peak was supposed to be 8.3%.”Fed officials have said they want to push policy into restrictive territory, to a range of 3.25 to 3.5% by the end of this year, according to the median projection from the quarterly economic projections released in June. Futures markets Wednesday showed investors pricing in an even higher 3.5% to 3.75% range by year end.The Fed’s abrupt change to a 75 basis-point increase last month came on the back of a preliminary survey showing consumer expectations for future inflation were rising.Subsequent updates to the data, which came after the Fed’s meeting, erased most of that uptick, but preliminary July figures, expected Friday, may provide policy makers with more ammunition to super-size this month’s hike.Inflation expectations are particularly concerning to Powell and his colleagues, who are trying to avoid a 1970s-style price spiral.“After what happened in June, I do not rule anything out,’ said Stephen Stanley, chief economist at Amherst Pierpont Securities. “I had been thinking that the Fed would decelerate to a 50-basis-point-per-meeting pace beginning in September, but if the next two monthly inflation numbers look like May’s and June’s, all bets are off.”(Updates with Daly comment in sixth paragraph.)Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. 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(Bloomberg) — Big hedge funds like Moore Capital Management and Tudor Capital Corp. were so important to JPMorgan Chase & Co. that its precious-metals traders routinely manipulated gold and silver markets to get the best prices on client orders, a former trader for the bank told a Chicago jury.Most Read from Bloomberg“They brought in a huge volume of trading, which made the bank a lot of money and our team a lot of money,” John Edmonds, a former trader on JPMorgan’s precious metals desk, said Wednesday when asked about Tudor. He made similar statements about Moore Capital. “Knowing that they’re trading in the market and what they’re doing” was valuable information for the bank, he said.Edmonds worked on the JPMorgan precious-metals desk for more than a decade and pleaded guilty in 2018 to conspiracy and commodities fraud related to “spoof” trading. He is testifying against his former boss, Michael Nowak, the longtime head of the trading desk, gold trader Gregg Smith and hedge funds salesman Jeffrey Ruffo. They’re accused of thousands “spoof” trades in which huge orders were placed and quickly canceled in the hope of moving prices up or down so they could complete desired trades.Prosecutors allege the traders were influenced by the needs of hedge fund clients, whom at times were looking to buy or sell millions of dollars in gold or silver in a matter of seconds or minutes. Edmonds said that when a client needed an order filled, everyone on the desk would stop trading so as not to “get in the way” of filing that order. Edmonds said he’d regularly watch Nowak or Smith use spoof trades to fill those order.Read More: JPMorgan Gold Desk ‘Spoofing’ Cheated Market, Ex-Trader SaysJurors were shown instant messages between Ruffo and traders at Moore Capital and Tudor, as well as Smith’s trading records around those communications as evidence of improper trading in gold and silver futures.Edmonds, who sat near Ruffo and Smith, said the hedge fund clients were “price sensitive” and concerned about even small differences in prices of gold and silver given the massive size of their orders.One example from prosecutors was an order on Dec. 12, 2011 by Moore Capital, which sought to sell 1 million ounces of silver at $31 an ounce. Smith placed orders to buy 1,190 futures contracts, each for 5,000 ounces of silver, data presented to the jury showed. Edmonds said that was consistent with a spoof trade designed to drive the price higher, where Smith wanted to sell. Minutes later, Smith sold 200 contracts, which is the equivalent to 1 million ounces, and canceled his buy orders.The jury also heard about a Jan. 18, 2012, gold trade on behalf of Tudor where Ruffo was asked to unload more than 900 contracts. As the price of gold decreased around 8 a.m., Tudor’s James Phelan wrote to Ruffo, “tell Gregg to wake up,” according to a chat log. Shortly thereafter, Smith started entering orders on the buy side. “He was trying to move the market higher so he can sell at a higher price for an important client,” Edmonds said.Edmonds has been on the witness stand since Tuesday. He was being cross-examined by defense lawyers late Wednesday afternoon.The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago)Spoofing Is a Silly Name for Serious Market Rigging: QuickTakeMost Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →

“Staggering.” “Ugly.” “Brutal.” And …. “out-of-date.”Those are some of the words that investors, analysts — and even President Joe Biden — used to sum up the June consumer price index report released on Wednesday. The report produced a 9.1% annual headline rate, an almost 41-year high, that surprised financial markets by coming in even hotter than either economists or inflation-derivatives traders had expected. Falling gasoline prices since mid-June still give some in financial markets and the administration hope that July’s inflation data won’t look nearly so bleak, but there’s a major caveat: Even after factoring… Continue reading →

LONDON (Reuters) – Stocks slipped on Wednesday and the euro lurked just above parity against the dollar, as traders waited to see if U.S. inflation data later bolsters the case for another supersized Federal Reserve rate hike this month. Recession worries meant Europe stumbled out the blocks after a relatively steady session in Asia Pacific where South Korea and New Zealand had jacked up their rates again.Germany’s DAX and Italy’s FTSEMIB were both down over 1.2% early on. London’s FTSE was not far behind (EU), while the euro teetered at $1.0025 as gas and oil prices rose again. [/FRX][O/R]Copper, which is attuned to global growth, had hit a 20-month low too. [MET/L] UK economic growth data delivered an unexpected rise but investors were far more focused on whether the U.S. inflation numbers later show it pushing toward 9%, which would be its highest since 1981. “Markets have been held up a bit in terms of parity in euro-dollar but we still have an incredible number of moving parts,” Societe Generale (OTC:SCGLY)’s Kit Juckes said, explaining that the higher the U.S. inflation numbers, the clearer it will be that the Fed will crack on with rate hikes. It increased them by a supersized 75 basis points at its last meeting, its first move of that scale since 1994. “If that (high inflation reading) happens today, that could get the bond market a bit nervous again, invert the U.S. yield curve more and send the euro decisively through parity,” Juckes said.Underscoring the global inflation concerns, South Korea’s central bank on Wednesday raised rates by 50 basis points, the biggest increase since the bank adopted its current policy system in 1999, and New Zealand’s central bank also increased rates by the same amount for the third time in a row to 2.5%. It left fixed income markets in a holding pattern. German government bond yields edged up to 1.15%, after falling sharply for two days, while 10-year U.S. Treasuries hovered at 2.97% as they also digested the IMF’s latest U.S. growth forecast cut. Bond market recessionary warning signs are now flashing “with growing alarm” Deutsche Bank (ETR:DBKGn)’s Jim Reid said. One in particular is the 2 year/10 year U.S. Treasury curve, which has inverted before every one of the last 10 U.S. recessions, and remains near its most inverted of this cycle so far at -8.5 bps. Graphic: Euro pulled towards parity, https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnegjwvq/Pasted%20image%201657616294404.png PARITY WATCHWall Street futures were pointing to marginally higher starts for the main S&P 500, Nasdaq and Dow Jones indexes after a late slump on Tuesday.Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5%, snapping two straight days of losses and having slumped to its lowest in two years the day before. Taiwanese stocks led the gains after Taiwan’s finance ministry said on Tuesday evening it would activate its stock stabilisation fund. The market had fallen to a 19-month low that day. Japan’s Nikkei finished up 0.5% after it had lost nearly 2% the previous day.”Sharp (OTC:SHCAY) weakness in oil prices in July suggests that June’s (inflation) may mark a peak, however. If so, the most dynamic phase of Fed tightening could conclude with a 75bps rate rise on 27 July,” analysts at ANZ said. “However, our expectation is that underlying strength in core inflation and still deeply negative real policy rates means 50bps rate rises will still be appropriate after the summer.” Worries that higher rates could bring the global economy to a standstill, or even worse into recession, has been the key driver behind both the 20% slump in world stocks this year and the surge in the safe-haven U.S. dollar.The euro, which is down over 11% since January was last at $1.0025, as investors remained focused on whether it would fall below one U.S. dollar for the first time since 2002. It dropped to just a whisker away on Tuesday, falling as low as $1.00005. The dollar was also firm on other peers, and its index measure against major rivals was holding solidly at 108.27. Oil prices paused their overnight declines. Brent crude was little changed at $99.60 a barrel with U.S. West Texas Intermediate crude at $95.89. Leading cryptocurrency bitcoin was up 0.23% and looked on track to snap a three-day losing streak, though at $19,478.89 was still trading below the key psychological $20,000 mark. Continue reading →

Investing.com — China’s exports grew at their fastest rate this year in June, as the easing of lockdowns in the key hub of Shanghai eased the bottlenecks around the world’s largest port and allowed producers to restore operations to normal.Exports were up 17.9% on the year, an acceleration from 16.9% in the year through May and well ahead of consensus forecasts for 12.0% growth. Imports, by contrast, grew only 1.0% on the year, and have now effectively stagnated in year-on-year terms for the last four months. The data point to an improvement in the conditions for global supply chains that have played such a large part in driving inflation to 40-year highs in Europe and North America this year. They are consistent with a sharp fall in other proxies for supply chain pressures, including the Baltic Dry Index for freight shipping, which has fallen some 40% since late May as Shanghai lifted its COVID-19 restrictions. Shanghai’s foreign trade alone rose 36% from May, the Global Times quoted customs official Li Kuiwen as saying.However, the import numbers point to a continued cooling off of activity: base metal imports, which drive the key manufacturing and industrial sectors,  were broadly lower – as were imports of fossil fuels, against a backdrop of surging prices. Iron ore imports fell 3.8% on the year to 89 million tons, while copper ore imports fell 5.9%, and Coal imports fell 7.6%. Crude oil imports were down over 21%. The construction and real estate development sectors, which account for the largest part of base metal demand, remain in crisis, as the country’s real estate bubble slowly deflates. In recent weeks, more Chinese developers have missed payments on their debts, while Bloomberg on Wednesday cited Citigroup research saying that homebuyers in some 22 cities have decided to stop paying their mortgages, protesting against project delays and a drop in property prices.Nor has the threat of renewed lockdowns entirely vanished. Shanghai authorities have ordered two rounds of mass testing for most of the city’s 25 million residents this week in response to signs of a new outbreak. Wednesday’s data, however, suggested that the number of cases may be leveling out, reducing the need for more extreme restrictions on business life. All the 55 new local cases reported for July 12 were discovered among people already under isolation orders, Reuters reported. As such, the danger of community spread appears to have receded. Continue reading →

Investing.com – Gold was down on Wednesday morning in Asia. U.S. strengthened ahead of U.S. inflation data for June, which is expected to hit a record high.Gold futures inched up 0.06% to $1,726.00 by 11:36 PM ET (3:36 AM GMT). The dollar, which normally moves inversely to gold, edged up on Wednesday morning.Benchmark U.S. 10-year Treasury yields rose, denting the demand for non-yielding gold.Investors now await U.S. Consumer Price Index (CPI) for more clues on the U.S. Federal Reserve’s monetary policy path, which is due later in the day. Analysts predicted that the print would hit a pandemic peak in June from a year earlier, the largest jump since 1981.The CPI data could fuel investors’ expectations for a 75-basis-point interest rate hike by the U.S. Federal Reserve later this month, as the U.S. central bank seeks to tame inflation.SPDR Gold Trust (P:GLD), the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.17 to 1,021.52 tons on Tuesday from 1,023.27 tons on Monday.In Asia Pacific, South Korea’s central bank joined its global peers and delivered earlier in the day a historic half-point interest rate hike to bring down soaring prices.In other precious metals, silver fell 0.30%. Platinum jumped 0.36% while palladium edged down 0.11%. Continue reading →