Powell, chairman of the Fed, lets go of the bulls

Higher for (not much) longer

The everything rally has turned global, sending stocks and bonds soaring in Asia and Europe and U.S. stock futures surging after investors got their clearest signal yet that the Fed would soon start cutting rates the interest. Hopes are also growing on Thursday that other central banks will follow suit.

The Fed issued an unexpectedly dovish forecast on Wednesday: plan three interest rate cuts next year. These measures are expected to lower Fed interest rates to 4.6 percent, a notable decline from the central bank’s last estimate in September.

The revision sent the Dow Jones industrial average to a record high. According to Deutsche Bank analysts, the S&P 500 also achieved this indicator on a so-called total return basis – which would take dividends into account. Government bonds also rose, with 10-year bond yields falling below 4 percent on Thursday, the lowest level since July. (Yields fall as prices rise.)

That’s good news for borrowers because many common long-term loans, including mortgages, tend to track the yield on the 10-year Treasury bond.

It appears that the higher financing costs will decrease. Over a 16-month period ending in July, the Fed raised interest rates to a 22-year high to combat inflation. This aggressive approach forced companies and households to cut back on lending. It also cooled global merger and acquisition activity and roiled the commercial real estate market.

Economists at Goldman Sachs have now revised their forecast for 2024. to predict that the Fed’s first rate cut would occur in March.

The European Central Bank could add to the momentum, with a rate decision scheduled for 8:15 Eastern. Earlier on Thursday, the Bank of England left its key interest rate unchanged.

Future traders do this on Thursday were betting that the ECB would implement the equivalent of six interest rate cuts of a quarter of a percentage point.

Will the Fed act aggressively during an election year? Mark Zandi, the chief economist at Moody’s Analytics, said he sees the central bank making two cuts next year. Beyond that, he told CNBC“I’m a little skeptical in the context of what the election could mean,” adding that Fed Chairman Jay Powell would be “desperate to avoid any suggestion” that the central bank’s policy is either political parties would help.

The economic prospects are not so rosy. On Wednesday, Powell painted a picture of a cooling economy and labor market. That slowdown has helped curb inflation in recent months, but, he added, “the path forward is uncertain.” Inflation is not expected to reach the Fed’s 2 percent target until 2026. And rate hikes could be on the table again if inflation were to rise again, Powell noted.

Investors are looking past Powell’s warning. “Powell played Santa Claus early,” he said Diane Swonkchief economist at KPMG.

HERE’S WHAT’S HAPPENING

The Senate passes an $886 billion defense bill despite objections from some Republicans. The legislation would help the Pentagon’s ability to develop hypersonic weapons and provide military aid to Ukraine and Israel. Far-right lawmakers had tried to include provisions limiting access to abortions and transgender health care. A separate bill that would provide Ukraine with additional aid remains stalled amid a fight over border security.

Apple is reportedly facing heavy antitrust fines from the European Union. Regulators are preparing a decision on Apple’s efforts to prevent music services like Spotify from directing iOS users to payment systems outside the App Store to avoid paying high fees to the iPhone maker. according to Bloomberg. It would be the latest blow to major app stores after a jury ruled that Google violated antitrust laws with its tight control over its Play Store.

Tesla is recalling more than two million vehicles via Autopilot software. The automaker said it would update the driver assistance program in nearly every car it has produced in the U.S. since 2012 to help prevent abuse. Tesla remains under investigation by federal regulators over safety concerns.

Media startups will expand their offering. Punchbowl News agreed Buy Electro Analytics, a legislative analysis provider, in an equity deal that values ​​the Washington-focused media at more than $100 million, The Times reports. And Semafor is working with former Commerce Secretary Penny Pritzker and Carlyle Group co-founder David Rubenstein on a conference in Washington that will take place during the spring IMF-World Bank meetings.

COP28 in numbers

The landmark agreement reached Wednesday at the United Nations climate summit in Dubai called for an explicit pledge to transition the world away from fossil fuels. Now comes the hard part: turning that into reality.

The costs of accelerating efforts to decarbonize the economy are enormous. The pact calls for tripling renewable energy capacity by 2030, limiting methane emissions and ending carbon emissions by mid-century. According to scientists and climate activists, these measures are necessary to prevent global temperatures from rising by more than 1.5 degrees Celsius and to prevent a climate crisis.

The United Nations estimates that developing countries will need roughly $5.9 trillion in climate financing this decade to transition to greener energy sources such as wind, solar and nuclear energy.

Private investments will be crucial to achieving climate goals, analysts note. The United Arab Emirates said it would partner with investment giants BlackRock, Brookfield and TPG on a $30 billion climate fund. And Vice President Kamala Harris announced $3 billion for a similar fund to help poorer countries make the transition. Nevertheless, the amounts that have been committed fall well short of what is necessary.

That shortage could be one reason why investors shrugged off the COP28 news. The S&P 500’s energy sector index rose nearly 1.3 percent on Wednesday amid a broader market rally, even as oil demand seems to weaken.

Oil industry executives seemed unfazed by the headlines from Dubai. Sultan Al Jaber, president of COP28 and chairman of Abu Dhabi National Oil Company, praised the pact, noting that “many said this was not possible.” But Adnoc plans to spend at least $150 billion over the next five years to expand drilling.

The COP28 deal could revive the market’s enthusiasm for green investments. “We expect a recovery in investor confidence around many climate and emissions-related investment themes,” UBS analysts wrote to investors on Wednesday. They specifically pointed to the opportunities for investments in clean air and carbon reduction as particularly promising.

One such technology mentioned in the COP28 agreement was carbon capture, a technology supported by oil states such as the UAE and Saudi Arabia. The process, which sucks carbon dioxide from the air and buries it deep underground, has attracted billions in investment in recent years, even as skeptics question its economics.

Former Vice President Al Gore welcomed the final agreement, but added that “the influence of the oil states is still clearly visible in the half-measures and loopholes in the final agreement.”

£32.4 million (approximately $40 million)

– The compensation that Bernard LooneyBP’s former CEO, faces forfeiture after he was forced out for ‘knowingly’ misleading the board about his relationships with colleagues. The energy giant officially fired him on Wednesday, even though he had resigned in September, further depriving him of his salary and pension benefits.

A media giant makes a truce with OpenAI

As media publishers spar with tech companies over the use of their content by artificial intelligence systems, OpenAI has struck a potentially transformative deal: a broad licensing agreement with Axel Springerthe parent company of Politico, Business Insider and Bild, the German newspaper.

It’s the media’s latest attempt to tackle the rise of AI – and put a price on content that tech companies are desperate to train their models on.

What’s in the deal: OpenAI will be able to summarize articles from Springer publications, including content behind paywalls, in products like ChatGPT, with links to the original websites. The tech company will also be able to train its AI models on Springer’s content; Technology companies like to use news articles because of their higher editorial quality than other online information.

It’s a more expansive deal than the one OpenAI struck with The Associated Press this summer, which gave the ChatGPT parent access to the publisher’s archives for training purposes only. “This partnership with Axel Springer will help provide people with new ways to access high-quality, real-time news content through our AI tools,” said Brad Lightcap, COO of OpenAI, said in a statement.

It is not clear how much OpenAI will pay Springer, although The Wall Street Journal reports that it is expected to pay the media company “substantial income.” Springer could make similar deals with other AI companies.

The breakthrough comes amid a larger fight over AI’s use of content. A trade group representing more than 2,000 US media companies (including The Times) has argued that tech companies train their AI models on their output without permission or compensation. And IAC’s Barry Diller has urged publishers to sue under copyright laws to protect their content, or “there will be no publication.”

Authors have also objected to their work being used to train AI models without compensation, with prominent writers such as John Grisham and Jodi Picoult suing OpenAI.

There is another potential benefit for OpenAI. Springer has been outspoken in policy circles, bending the ears of lawmakers on issues such as tech giants paying to summarize news content and Google’s plans to drop trackers from his Chrome browser. (Such pressure succeeded in Germany, to which Google acquiesced pay millions annually to republish the media content there.)

READING THE SPEED

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