WORLDWIDE: HEADLINES 

Fed officials say ‘temporary’ inflation surge may last longer than thought 

A period of high inflation in the United States may last longer than anticipated, two U.S. Federal Reserve officials said on Wednesday, prompting one to pull forward his views on when the central bank should start raising interest rates. 

Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed’s 2% target, he now expects interest rates will need to rise in late 2022. 

“Given the upside surprise in recent data points I pulled forward my projection,” Bostic said, placing him among seven Fed policymakers who at the central bank’s meeting last week projected the overnight policy rate may need to lift from the current near zero level sometime next year. 

That marked a decisive shift from the end of 2020, when 12 Fed policymakers felt that crisis levels of interest rates would need to remain in place into 2024. 

The difference in the meantime: Vaccines that have driven back the spread of the coronavirus, and an economic reopening that has proceeded faster, and driven inflation higher, than Fed officials anticipated. 

Both Bostic and Fed Governor Michelle Bowman on Wednesday said that while they largely agree recent price increases will prove temporary, they also feel it may take longer than anticipated for them to fade. 

“Temporary is going to be a little longer than we expected initially … Rather than it being two to three months it may be six to nine months,” Bostic said in an interview on National Public Radio’s “Morning Edition.” 

Full coverage: REUTERS 

U.S. House panel still to vote on data portability bill in Big Tech session 

The U.S. House of Representatives Judiciary Committee voted to approve a bill to give antitrust enforcers more money in a lengthy session on Wednesday, but had still to vote on four bills aimed at reining in Big Tech. 

U.S. Representative Jerrold Nadler, the Democratic chairman of the Judiciary Committee, called the bills a “historic package of bipartisan legislation” aimed at “reining in anticompetitive abuses of the most dominant firms online.” 

After approving bills to sharply increase the budgets of the agencies enforcing antitrust law and to ensure that antitrust cases brought by state attorneys general remain in the court they select, debate began on a bill that would require platforms to allow users to transfer their data elsewhere. 

There has been a flurry of opposition to the most sweeping reform bills, including from the powerful U.S. Chamber of Commerce, Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O), Facebook Inc (FB.O) and Alphabet Inc’s (GOOGL.O) Google. 

Debate on the portability bill initially focused on whether the legislation was written to ensure it would not affect Microsoft, a long-time Google antagonist. 

Asked whether any bills were changed to exclude Microsoft, Representative David Cicilline, chair of the committee’s antitrust panel and the driving force behind bills aimed at the four tech giants, responded: “Absolutely not.” 

Representative Pramila Jayapal said that it was possible that Microsoft would be covered by the four Big Tech bills, all of which have the same definition of which companies they affect. 

Lawmakers voted overwhelmingly to change that definition to say that all online platforms, not just mobile platforms, were covered by the bill. 

The four tech giants spent the past two years under federal, state and congressional investigation into how they use their clout to extend their dominance into adjacent markets or abuse their dominance. 

Full coverage: REUTERS 

WORLDWIDE: FINANCE / MARKETS 

Tesla lifts Nasdaq to record-high close as dollar gains on Fed comments 

Wall Street shares were mixed on Wednesday, with the Nasdaq closing at a record high, while other major U.S. indexes ended lower alongside European stocks as traders eyed the latest statements from Federal Reserve officials. 

The market has whipsawed over the last week, feeling the aftereffects of the Fed’s surprise projection last week for rate increases as soon as 2023, which knocked stocks, boosted the dollar and led to the flattening of the U.S. bond yield curve.  

The dollar ended higher, reversing earlier losses on Wednesday as two Fed officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures. 

Powell on Tuesday reassured markets by saying the central bank will watch a broad set of job market data to assess the economic recovery from COVID-19, rather than rush to raise rates on the basis of fear of inflation.  

Ten-year Treasury yields inched higher but remained below 1.5% in muted trading. 

Strong manufacturing data and a rally in Tesla Inc (TSLA.O) lifted the Nasdaq (.IXIC), which gained 0.13 percent. The Dow Jones Industrial Average (.DJI) fell 0.21 percent and the S&P 500 (.SPX) lost 0.11 percent. 

“The market is caught between not knowing what to believe about the coming few quarters, whether a slowdown will emerge,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “We’re going back and forth depending on thoughts about interest rates and whether they are going to need to go up faster than expected or not.” 

Flash U.S. manufacturing PMI climbed to a record high in June, supporting Wall Street shares in early trade. But manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.  

Full coverage: REUTERS 

Dollar rally sputters as Fed sends mixed signals on inflation 

The U.S. dollar vacillated below an 11-week high versus major peers on Thursday as traders attempted to navigate conflicting signals from Federal Reserve officials on the timing of a withdrawal of monetary stimulus. 

The dollar index, which measures the greenback against six rivals, stood at 91.806 early in the Asian session after dipping to 91.509 on Wednesday. It was at 92.408 at the end of last week, the highest since April 9. 

The U.S. currency got some support overnight as two Fed officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures. 

Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed’s 2% target, he now expects interest rates will need to rise in late 2022. 

Both Bostic and Fed Governor Michelle Bowman said that while they largely agree recent price increases will prove temporary, they also feel it may take longer than anticipated for them to fade. read more 

The dollar index jumped as much as 2.1% last week after the Fed surprised markets on June 16 by saying that policymakers are forecasting two interest rate hikes in 2023. 

But the index gave up about a third of those gains after Powell on Tuesday said that inflation is climbing due to a “perfect storm” as the economy reopens from the COVID-19 pandemic, and that those price pressures should ease on their own. 

Six Fed officials are due to speak on Thursday, including New York Fed President John Williams, who on Tuesday said any conversation about when to adjust interest rates is still far off. 

“The market has shifted back into price discovery mode, reflecting the Fed’s recent shift and the need to fine-tune the taper lift-off date,” Mark McCormick, the global head of foreign-exchange strategy at TD Securities, wrote in a client note. 

Full coverage: REUTERS 

Oil climbs as draw in U.S. crude stocks boosts optimism about demand 

Oil prices climbed on Thursday after a sharp drawdown in U.S. crude and gasoline stocks reinforced optimism of a quick recovery in fuel demand and on doubts about the future of the 2015 Iran nuclear deal that could end U.S. sanctions on Iranian crude exports. 

Brent crude futures rose 9 cents, or 0.1%, to $75.28 a barrel by 0103 GMT, after increasing 0.5% on Wednesday. 

U.S. West Texas Intermediate (WTI) crude futures gained 6 cents, or 0.1%, to $73.14 a barrel, after rising 0.3% on Wednesday. 

Both benchmarks hit their highest since October 2018 on Wednesday, but they pared gains later in the session as energy traders locked in profit after the U.S. inventory report, Edward Moya, senior market analyst at brokerage OANDA, said in a report. Prices resumed climbing in Asia trade on Thursday. 

U.S. crude inventories (USOILC=ECI) fell by 7.6 million barrels in the week to June 18 to 459.1 million barrels, their lowest since March 2020, the U.S. Energy Information Administration said. The drawdown was nearly double analysts’ expectations in a Reuters poll for a 3.9-million-barrel drop.  

U.S. gasoline stocks (USOILG=ECI) fell by 2.9 million barrels in the week, against analysts’ expectations for an 833,000-barrel rise.  

“Oil prices were lifted by the U.S. inventory data which confirmed the strong outlook for higher fuel demand in the second half of this year, backed by a recovery in road and air travel,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities. 

“Behind the rally is also a view that there are still gaps in the talks over the 2015 Iran nuclear deal,” he said. 

Iran said on Wednesday the United States had agreed to remove all sanctions on Iran’s oil and shipping but Washington said “nothing is agreed until everything is agreed” in talks to revive the 2015 Iran nuclear deal.   

The Organization of the Petroleum Exporting Countries and its allies (OPEC+), which meet on July 1, have been discussing a further unwinding of last year’s record output cuts from August but no decision has been made, two OPEC+ sources said on Tuesday.  

Full coverage: REUTERS