It’s been a while since trading hinged on events in the U.K., but the sudden twists in Bank of England bond market intervention are reverberating globally. Many countries could soon be facing a similar battle between fiscal and monetary policy and traders said the Bank of England’s credibility could be on the line amid conflicting reports.
Pound sterling (FXB) continues its volatile trading Wednesday morning. It had moved higher against the dollar after the FT reported that the BoE told bankers it could extend its bond purchases beyond Friday. Those gains quickly disappeared after a BoE spokesman reaffirmed the Oct. 14 end date. Last night, BoE Governor Andrew Bailey sent not just sterling, but U.S. equities (SPY) (QQQ) and Treasury prices (SHY) (TBT) (TLT) lower when he declared a hard deadline on QE. S&P futures (SPX) are up 0.5%, but pared larger gains after the BoE dismissed the FT report.
Bailey bumble: Speaking after U.K. market hours in Washington on Tuesday, the Bank of England head spooked markets as he warned pension funds that have been struggling to meet margin calls to act fast. “And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done,” Bailey said.
But if the liability-driven investment managers, which help pension funds hedge, can’t shore up cash by Friday, another U-turn could be coming. Given that the BoE’s measured gilt purchases (it bought a much smaller amount than authorized) and expansion on types of purchases was quelling a surge in yields, Bailey’s comments looked like a fumble at the goal line (or closer to home, sending the ball over the bar with an empty net). His remarks are likely to go down as an “all-time central banking gaffe,” Bloomberg contributor John Authers wrote.
I “would say with the announcement by Bailey that help ends Friday his future now more in question,” economist Danny Blanchflower, a former member of the BoE’s Monetary Policy Committee, tweeted. “What if they have to step in again he looks like a fool again.” “Where are the MPC what is the point if they are nowhere to be seen in the midst of this crisis?” he said. “Groupthink means they are utterly irrelevant so no point in having them as they are all clones and have nothing to say just appoint 8 sheep cheaper and you get more wool.”
Fed standing firm: Across the pond, the message from Fed officials isn’t wavering from the hawkish stance. The market is still pricing in more than an 80% chance that the FOMC boosts rates by another 75 basis points in November.
Cleveland Fed President Loretta Mester said yesterday that the Fed has more hikes to go before the fed funds rate becomes restrictive, even at the expense of growth. “With growth well below trend over the next couple of years, it is possible that a shock could push the U.S. economy into recession for a time,” she said.
While a surge in gilt yields could translate to higher Treasury yields, that aids the Fed in its primary mission to bring down inflation. Global attention should turn to U.S. prices today with September PPI and especially tomorrow with CPI. (3 comments)
The Cambria headset is here, branded the Meta Quest Pro. “Quest Pro is the first in our new line of advanced headsets, built to expand what’s possible in VR,” Meta CEO Mark Zuckerberg said. “It takes what people love about Quest and adds a bunch of new technologies to help you do more in the metaverse.”
The Pro looks like a more streamlined version of the Quest headset, and features an open periphery to make it easier to see the world outside, though it comes with attachable light blockers for a more immersive approach. The headset’s displays have 37% more pixels per inch than the Meta Quest, and 75% more contrast, Zuckerberg said. (199 comments)
Hedge fund manager David Einhorn said the days of value investing may be a thing of the past. “I don’t know that it ever comes back,” Greenlight Capital founder Einhorn said in a Bloomberg TV interview on Tuesday. “There have been serious changes to the market structure and pretty much most of the value investors have been put out of business.” Einhorn explained that value investing has gone away as investors have moved to passive investing and many strategies are based on quants or algorithms. (96 comments)
Uber Technologies (UBER) and Lyft (LYFT) fell sharply on Tuesday after the Biden Administration issued a proposal that could result in gig economy workers becoming full-time employees.
The Labor Department unveiled the new proposal that would require companies to give workers such as janitors, home-care and construction workers, as well as ride-share drivers, employee classification and not independent contractors. (130 comments)
President Biden is re-evaluating the U.S. relationship with Saudi Arabia after OPEC+ announced plans to cut oil production, White House national security spokesman John Kirby said Tuesday, as the move “benefited Russia at a time when nobody in any capacity should be trying to benefit Vladimir Putin.”
Biden administration officials urged Saudi officials to delay the decision on a production cut by another month, warning that a cut would weaken support in Washington for the kingdom, the Wall Street Journal reported. (141 comments)
Walt Disney (DIS) has made a shift to its extensive Marvel film release schedule, delaying a range of them starting with its remake of Blade.
Blade (a new take starring Mahershala Ali as the vampire-killing hero) was the impetus for the shifts, amid the news that Marvel parted ways with the film’s director, Bassam Tariq. That production is on hold as the company looks for a new director. So, Blade moves from a Nov. 3, 2023, release to Sept. 6, 2024. And as the Marvel Cinematic Universe is increasingly made of interconnected stories, that means more delays. (14 comments)
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