Fed's Trading Probe Clears-But Criticizes-Kaplan and Rosengren; Bank of Japan Gov. Ueda Hints at Policy Change By James Christie
Good day. A Federal Reserve inspector general's report said Monday that the central bank had closed its investigation of former Dallas Fed President Robert Kaplan and former Boston Fed President Eric Rosengren. They resigned from their positions in September 2021, weeks after their 2020 financial disclosures were made public. The disclosures prompted Fed Chair Jerome Powell to announce an overhaul of personal-finance conduct for Fed officials, and new rules took effect in 2022 that barred senior officials from trading in individual stocks. The probe into the trading practices of Kaplan and Rosengren cleared them of violating policies or laws, but said their trading practices had created appearances of conflicts of interest. Elsewhere, the Bank of Japan this morning k ept its rate targets unchanged, but Gov. Kazuo Ueda hinted the central bank was getting closer to a policy shift . "The likelihood of achieving our inflation target is gradually rising," he said, adding fuel to expectations for a policy change in coming months.
Now on to today's news and analysis.
Top News Fed Review Clears Central Bank Officials of Violating Rules
A two-year-long investigation into the trading practices of two presidents of Federal Reserve banks who resigned in 2021 cleared them of violating policies or laws.
But the report, released Monday by the Fed's inspector general, found that the presidents hadn't properly filed their financial disclosures, and that if they had, the appearances of conflicts of interest posed by their personal investments in 2020 would likely have been worse than they initially appeared.
U.S. Economy To Inflate Values, Office Landlords Offer Cash Gifts, Discounted Loans
Office landlords are increasingly relying on cash gifts, veiled discounts and other financial engineering to prop up property values, raising questions over whether publicly available property valuations are inflated.
For Property Investors, the Price of Homes Is Still Not Right
Investor purchases of single-family homes tumbled 29% last year to 570,000 homes from 802,000 in 2022, as higher interest rates and record home prices compelled even deep-pocketed investment firms to pull back.
The Labor Union That Defeated Amazon Is Fighting for Survival
Nearly two years ago, the Amazon Labor Union was thriving. The startup labor group had persuaded workers at a Staten Island warehouse to form the first U.S. union at Amazon.com. Now the labor organization is fighting to survive .
Few Companies Are Following New York's AI Hiring Law
It has been six months since New York City began enforcing the first law in the U.S. requiring companies to disclose how algorithms influence their hiring decisions. So far, disclosures are rare .
Key Developments Around the World Yen Gains Against Dollar After Bank of Japan Hints at Policy Change
Bank of Japan Gov. Kazuo Ueda said Tuesday he would consider discontinuing aspects of the BOJ's monetary easing, including negative short-term interest rates and its stock-buying program, when he feels assured that the central bank's 2% inflation target can be stably achieved. He added, however, that it was difficult to measure how close that point is.
He suggested any policy shift would be gradual , saying financial conditions would remain accommodative even if the bank ends negative rates.
BOJ Keeps Rates Unchanged as It Examines Wage, Price Trends Record-High Australian Property Rents Likely to Keep RBA on Edge
Australian property rents have hit a record high , data from Property research group CoreLogic shows, deepening fears the surge upward over recent years will continue to add to inflation and maintain upward pressure on interest rates.
Chinese Property Developers Resort to Bizarre Marketing Tactics
China's real-estate crisis has dragged down the economy, caused massive layoffs and pushed multibillion-dollar companies to the point of collapse. Economists think it's about to get worse .
China's Stock-Market Rout Has Become a Political Problem Financial Regulation Roundup U.S. Seeks to Shut Down Hamas-Linked Exchanges, Citing Crypto
The U.S. levied a fifth round of sanctions against alleged Hamas financing networks since the group's Oct. 7 attack on Israel, targeting currency exchanges as key funders for the group and citing cryptocurrency transfers.
Grayscale Led the Fight for Bitcoin ETFs. Now Its Fund Is Bleeding.
The crypto asset manager that forced U.S. regulators' hand in approving bitcoin ETFs has lost billions from their launch . Investors cashed out $2.8 billion from the Grayscale Bitcoin Trust after it converted into an ETF on Jan. 11.
Billionaire Howard Lutnick Is Taking On Exchange Giant CME
Howard Lutnick, the chairman and CEO of Cantor Fitzgerald, is taking on one of the biggest powerhouses in finance with a plan, approved by regulators, to introduce a new market for interest-rate futures.
Tougher Enforcement of China Labor Ban Needed, Lawmakers Say
Bipartisan leaders of an influential congressional committee have urged the Biden administration to do more to crack down on the import of goods linked to Chinese forced labor, including by potentially ramping up criminal prosecutions.
Fed Pushes Back Comment Deadline for Debit-Fee Reductions
The Federal Reserve is extending until May the public comment period for a plan to lower by about 30% the fees merchants pay to many banks when consumers shop with debit cards. Comments on the proposed debit-fee reductions are now due May 12 instead of the original Feb. 12.
Forward Guidance Tuesday (all times ET)
10 a.m.: FCCI Flash Consumer Confidence Indicator for January; Richmond Fed Survey of Manufacturing Activity
Wednesday
4 a.m.: Eurozone Flash PMI for January
9:45 a.m.: Bank of Canada interest-rate decision and monetary policy report
10:30 a.m.: Bank of Canada interest-rate decision press conference
Research ECB Rate Cuts Starting in Summer Make Sense, Vanguard Says
A summer start for European Central Bank interest-rate cuts makes sense to Vanguard, "as this is consistent with the ECB's historic reaction function," says Shaan Raithatha, senior economist at Vanguard Europe. A limited deterioration in the labor market so far, despite a likely recession in the second half of last year, "also gives the ECB room to ease relatively gradually as things stand," Raithatha writes in a note. Vanguard expects the ECB to deliver 75 basis points of rate cuts in 2024, starting in either June or July, but sees the risks skewed toward earlier, and more significant rate cuts this year. Markets are pricing in a cumulative 130 basis points of ECB rate cuts this year, according to Refinitiv.
-Emese Bartha
Markets Not Appreciating Worsening Geopolitical Backdrop
The world's largest investment manager BlackRock has warned of further deterioration in the geopolitical backdrop for financial markets in 2024, adding that asset markets aren't fully appreciating the risks. "We expect deeper fragmentation, heightened competition and less cooperation between major nations in 2024," BlackRock said in a note to clients. "Yet as broad stocks and other assets move on quickly from geopolitical events, we worry they may not be appreciating that we have entered a new geopolitical regime. The old playbook no longer applies, in our view," it added. The warning comes as the Dow industrials finished Monday above 38000 for the first time, while the S&P 500 also clinched another record close. "Geopolitical fragmentation's economic and market impact will depend, in part, on if changes to the global order are managed or disorderly," it said.
-James Glynn
Commentary Investors Fleeing China Are Going Big in Japan
Foreign investors who parked a lot of cash in China need somewhere else for their international allocations, and a lot of Chinese domestic capital is eyeing the exits , Jacky Wong writes.
Basis Points Inflation is likely to stay closer to 3% as the world increasingly splits itself into competing blocs, according to investment giant BlackRock Inc. "Geopolitical fragmentation, one of five mega forces or structural shifts we track, is playing out in recent events in Asia and the Middle East," a BlackRock Investment Institute note says. "Fragmentation is a key reason we see persistent inflation pressures-keeping policy rates above pre-Covid levels." (MarketWatch) U.S. economic activity looks set to weaken further but at a slower pace than earlier, as weak manufacturing and consumer sectors continue to suggest recession in 2024. The Conference Board said Monday its Leading Economic Index fell 0.1% in December after a 0.5% drop in November, marking 21 months of unceasing decline. (Dow Jones Newswires) Canada moved to cap growth in the number of foreigners entering the country, as the Liberal government faces widespread criticism about how population growth is putting a strain on housing and healthcare. Canada said it would reduce the number of temporary student visas issued in 2024 by about 35%. (DJN) The number of U.K. businesses in a critical situation rose 26% on quarter in the last three months of 2023, according to a snapshot of British corporate health compiled by Begbies Traynor. The total surged to 47,477, the business recovery consultancy said Monday in its Red Flag Alert report. Around 539,900 U.K. businesses are now in significant financial distress, up 13% on-quarter and up 5.6% on-year. (DJN) Australian consumer confidence was unchanged last week but a slow drift higher over the last month remains evident in the data amid rising confidence that interest rates have finally peaked and talk will soon shift to the prospect of cuts later in the year. (DJN) A big fall in Australian real wages over the last two years looks like it is ending with advertised wage increases outstripping inflation in December. Advertised salaries rose by 0.3% month-on-month in December, the same growth rate as October and November, according to employment
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01-23-24 0715ET
