Quoteworthy: "Well, I do stand by my prediction that, before the year is out, there’ll be a rate cut" –— US President Joe Biden after higher-than-expected US inflation data put rest to hopes that the US Fed will start to cut rates in June
US inflation refuses to bend, fanning fears it will stick
A key US price gauge topped forecasts for a third straight month on gains in rents and transportation costs, spurring concerns that inflation is becoming entrenched and likely further delaying Federal Reserve interest-rate cuts.
The so-called core consumer price index (CPI), which excludes food and energy costs, increased 0.4% from February, according to government data on April 10. The y-o-y rate was unchanged at 3.8%, defying expectations for a downtick.
Financial markets were roiled by the numbers, which ignited the US dollar and Treasury yields and sent the stock market tumbling. Paired with recent reports showing the labour market and economic activity have also been stronger than expected, investors no longer see much chance that the Fed will feel a need to start easing anytime soon.
“The sound you heard there was the door slamming on a June rate cut. That’s gone,” David Kelly, JPMorgan Asset Management’s chief global strategist, said on Bloomberg Television.
See also: BOK surprises with rate cut as Trump win boosts trade risks
The Bureau of Labor Statistics report on April 10 revealed ongoing strength in rents, the largest components of the CPI. Forecasters have long been awaiting a deceleration based on leading indicators, but progress has more or less stalled over the past nine months.
Services inflation, meanwhile, accelerated — largely thanks to categories tied to transportation like car insurance and repairs, as well as healthcare. Core goods prices were a bright spot, resuming a downward trend that helped drive disinflation in the second half of 2023.
One important caveat: Many of the sources of strength in the March CPI data, like rents and auto insurance, will be more muted in the Fed’s preferred gauge, known as the personal consumption expenditures (PCE) price index. That is because they are weighted less heavily in that report, which comes out later this month.
See also: ECB’s Schnabel sees only limited room for further rate cuts
Still, the numbers were enough to completely reorder bets on the timing of Fed rate cuts. Before the report, traders were assigning roughly even odds to a first cut in June, according to futures. The chances of such a move dropped to about one in five afterward, and December is now the first month showing better-than-even odds of a cut.
Chicago Fed President Austan Goolsbee said on April 10 policymakers still have a way to go on cooling inflation. He noted that the trade-offs between bringing prices down and keeping employment high are going to be heightened in 2024.
Higher-for-longer interest rates may pose fresh challenges to President Joe Biden’s re-election campaign. Higher gasoline prices will not help either.
While economists see the core gauge as a better indicator of underlying inflation than the overall CPI, the latter measure climbed 0.4% from the prior month and 3.5% from a year ago, marking an acceleration from February that was boosted by rising energy costs.
A separate report on April 10, combining the inflation data with figures on wages published last week, showed real earnings growth decelerated, rising at the slowest annual pace since May.
Fed officials will see one more PCE report, as well as another look at the producer price index, before their next policy meeting concludes on May 1, though they have already effectively ruled out a rate cut then. — Bloomberg
Temasek opens Paris office to gain better access to EMEA deal flows
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Temasek Holdings has opened its third office in Europe, as Singapore’s state investment agency sees further growth and opportunities in the EMEA region where the value of its portfolio has increased almost 5 times since 2011 to $47 billion as at March 31, 2023.
The Paris office, which opened on April 11, will complement London and Brussels in boosting Temasek’s global network that now consists of 13 offices across nine countries.
Via this office, Temasek can have better access to deal flow and partnership opportunities, and grow its talent pool across EMEA, the acronym for Europe, the Middle East and Africa.
“The Paris office opening signifies the importance of the EMEA region to Temasek, as we seek to advance our 2030 strategy to expand our global network and construct a resilient and forward-looking portfolio, with sustainability at the core of what we do,” says executive director and CEO Dilhan Pillay.
Temasek chairman Lim Boon Heng recalls how the organisation opened London, its first office in Europe just a decade ago, when the continent was still facing economic uncertainty coming out of the Global Financial Crisis as well as the debt crises that had hit Portugal, Ireland, Italy, Greece, and Spain.
“Even then, I said that Temasek saw a deeper purpose in providing a bridge between Europe and Asia and partnering European companies, both inside and outside Europe,” says Lim.
Temasek’s portfolio of companies in EMEA include Element Materials and Busy Bees in the UK, Boortmalt in Belgium, Topsoe in Denmark, BioNTech in Germany, and Adyen in The Netherlands.
Specifically in France, Temasek’s investments include Alan, a digital health insurer; ManoMano, an e-commerce marketplace; Tikehau Capital, an alternative asset manager; Ceva and InnovaFeed in sustainable agriculture; and PASQAL in quantum computing.
There is also Schneider Electric, which is partnering Temasek to expand its presence in India.
According to Temasek, its investment activities are aligned to four structural trends, with a direct bearing on how the portfolio is constructed for the long term.
These include digitisation and sustainable living, as well as the future of consumption and longer lifespans.
Nagi Hamiyeh, Temasek’s Head of EMEA, recognises the lead secured by some of Europe’s leading firms in sectors such as sustainable solutions, pharmaceuticals, consumer, financial services, technology and transportation and logistics.
“We expect to deploy significant capital into globally leading companies as well as promising emerging enterprises in these areas,” he adds — The Edge Singapore
Jack Ma cheers Alibaba’s latest overhaul plan in rare missive
Jack Ma took to an internal Alibaba forum to voice his support for the company undergoing a turbulent restructuring, emerging from seclusion for the second time in months to try and shore up sagging morale at the Chinese e-commerce pioneer he had co-created.
The billionaire, who has retreated from the public spotlight in recent years, penned a lengthy memo in which he blessed efforts by new leaders Joseph Tsai and Eddie Wu to revive the stalled company. He said Alibaba Group Holding is now on the right track and urged staff to stay the course.
Ma, who is still revered by many of the company’s 200,000-plus employees, struck a markedly more upbeat tone than just four months ago, when he spoke up for the first time in years only to criticise its direction and laud a rival.
This time, he reiterated calls to think outside the box and escape the “big company trap”. But he emphasised growth was returning and Alibaba was moving forward despite flip-flops over the past year, for instance on first pushing then nixing the listings of its Cainiao logistics arm and US$11 billion ($15 billion) cloud business.
“We are starting to operate on the diseases of a big company, returning again from an organisation that makes decisions slowly back to the highest levels of efficiency and a market-first approach, to once again allow the company to be simple and agile,” Ma wrote in the memo.
Alibaba, which is grappling with the aftermath of bruising regulatory crackdown and Covid-era turmoil, is trying to revitalise a sprawling empire that spans e-commerce and cloud services. Since taking over from former CEO Daniel Zhang, Tsai and Wu have focused on trying to integrate its separate parts while shedding marginal assets to focus on core businesses.
Ma’s first memo in November was viewed as a signal of a gradual return to public life, breaking about two years of silence after clashing with Beijing. For many Alibaba employees, it was a welcome change at a time the company is struggling with direction.
Alibaba is still bleeding market share to rivals such as PDD Holdings Inc and ByteDance. At the same time, the likes of Baidu Inc are pushing forward into the potentially transformative AI arena. Alibaba posted a lower-than-projected 5% rise in December quarter revenue — well off the pace of previous years.
In response, the company green-lit a US$25 billion buyback programme to appease investors. Tsai has said Alibaba will focus on integrating its various businesses and regaining its market dominance, rather than on working through major deals or IPOs.
Since Zhang’s leaving, the company has reshuffled the managers at most of its major divisions and explored the sale of non-core assets such as physical retail operators.
“This path of reform and innovation has never been accompanied by applause, because what we are changing are the bad habits we love the most and what we are reforming is our vested interest,” Ma wrote. He closed with a common refrain of encouragement in Chinese: “Add oil, Alibaba!” — Bloomberg
