The inflation rally is going global

Good news for global markets

Yesterday’s impressive rally in US stocks and bonds continued globally this morning, as investors see central banks making gains in their battle against inflation. In addition to the good news, there was also a breakthrough in the House of Representatives last night that could prevent a government shutdown.

S&P 500 futures signal further gains at the opening bell. The question now is whether this represents a false dawn on inflation, or the start of a sustained decline in rising costs – and interest rates.

This is what investors find interesting: Yesterday’s cooler-than-expected consumer price index data has shifted the markets’ discussion from possible rate hikes to rate cuts, and what that could mean for stocks. President Biden, whose poll numbers have been hurt by inflation, also cheered the numbers.

Other promising data points emerged this morning. Inflation in Britain has fallen to its lowest level in two years. And consumer spending and industrial production in China recovered last montha hopeful sign for the world’s second-largest economy.

Market optimists have raised their expectations for interest rate cuts. Futures markets indicated this morning that the Fed will start cutting borrowing costs from May, ahead of previous estimates that were closer to the end of 2024.

Less aggressive is Mohit Kumar, chief financial economist at Jefferies, who wrote today that major rate cuts would begin after the presidential election next year. Jefferies predicts that the Fed’s interest rate will rise to 3 percent by the end of 2025, from the current level of 5.25 to 5.5 percent.

Others are more cautious. Pessimists note that “core” inflation data in yesterday’s CPI reading, which excludes volatile energy and food prices, was only a tenth of a percentage point below estimates. ‘I’m afraid inflation won’t go away so quickly’ Jamie Dimon of JPMorgan Chase told Bloomberg Television.

Washington gave markets another reason to cheer. The House of Representatives’ passage of an emergency spending bill appears to remove the risk of a shutdown, which is seen as a potential drag on the US economy.

But even here, political tensions in Congress — including some threats of physical violence — provide reason for caution. (Recall that Moody’s last week downgraded its U.S. credit outlook to negative, citing “ongoing political polarization” in Congress that stymied the legislation.) The House financing bill required Democratic support to pass, and Politico reports that far-right Republicans can hold the House hostage with a flood of procedural votes.

As a reminder, David Zaslav of Warner Bros. Discovery, JPMorgan Chase’s Jamie Dimon and others will appear at the DealBook Summit on November 29; apply here to attend.

HERE’S WHAT’S HAPPENING

The US and China sign a climate agreement. The countries pledged to boost their use of wind, solar and other renewable energy sources in the hope of displacing fossil fuels, ahead of a meeting between President Biden and Chinese leader Xi Jinping today in San Francisco. Below the American CEOs are going to meet with Xi are Elon Musk of Tesla, Jane Fraser of Citigroup and Darren Woods of Exxon Mobil.

The FDIC chairman is facing tough questions about the agency’s culture. Senators asked Martin Gruenberg yesterday how the regulator is doing handles allegations of harassment and discrimination after The Wall Street Journal reported on toxic working conditions there. (“What the hell is going on at the FDIC?” asked Senator John Kennedy, Republican of Louisiana.) Gruenberg said he was “personally disturbed” by the report and was conducting an internal investigation.

The Times takes a closer look at David Zaslav. The Times Magazine published an in-depth profile of the CEO of Warner Bros. Discovery, while another article details his tumultuous oversight of CNN. One question raised by the filings: Will debt-laden Warner Bros. Discovery will be available for sale soon? “It’s up for grabs,” Barry Diller, the media mogul, told The Times. “Whether that happens depends on whether someone wants to take over. Saudi Arabia? Do not laugh.”

Rory McIlroy resigns from the PGA Tour board. The professional golfer stepped down five months after the tour announced a deal with the Saudi sovereign wealth fund, the backer of LIV Golf, to try to create a joint company that would end the money-driven battle for supremacy in the sport . McIlroy was one of LIV’s most vocal critics of that effort. Meanwhile, the PGA Tour said it would give players equity in that combined company when it is formed.

The AI ​​leaders and laggards of banking

As the promises of artificial intelligence and its transformational potential grow, banks are among the companies rushing to integrate the technology into almost everything they do.

But in its latest ranking of how the industry is adopting AI, data start-up Evident found a growing gap between the leaders and everyone else. The founders shared the new report first with DealBook.

The methodology: Evident rates institutions in four key areas – talent, innovation, leadership and transparency – using publicly available data such as press releases, research papers and job data. The company has nearly doubled the number of banks it rates to 50, expanding eligibility to institutions with total assets of $200 billion, including lenders in the Asia-Pacific region.

Here are the top 10 banks:

Early adopters have increased their lead. While all banks have committed to AI – “I don’t think there’s a single bank in the index that hasn’t doubled down on AI,” says Alexandra Mousavizadeh, CEO of Evident – ​​​​some are clearly leading the way. JPMorgan, which led the latest survey, was again at the top, ranking first or second on each of the four main criteria.

But Capital One, a smaller US rival and newcomer to the list, came out strong. It ranked first in talent, with the highest percentage of AI developers and engineers in the total workforce of any institution. And in May it was accepted Prem Natarajana former executive at Amazon’s Alexa business, as chief scientist and head of enterprise AI

Other notable developments:

• Banks are taking several steps to demonstrate their AI credentials. JPMorgan and the Royal Bank of Canada are leaders in research, while Capital One and Bank of America (15th) are among the most prolific in patent searches.

• Europe has some strong performers, including UBS, which retained much of Credit Suisse’s AI talent when it bought its Swiss rival. But many of the region’s lenders are still prioritizing specific solutions over comprehensive plans, said Annabel Ayles, co-CEO of Evident.

• Canadian lenders continue to punch above their weight and score highly in talent, leadership, transparency and ethical criteria. “Some of the highest quality patents come from Canada,” Ayles said.

Haley’s rising fortunes could attract more big money backers

Things are looking good for Nikki Haley in the Republican presidential primary (relatively speaking, given Donald Trump’s dominance). Her poll numbers have risen in recent weeks thanks to strong performances in the Republican debates, while rivals like Tim Scott are dropping out of the race.

Now reports suggest Haley may be gaining ground in another key area: support from major corporate donors.

Citadel’s Ken Griffin is about to decide whether to support her. “We are at the finish line about that choice,” the billionaire financier told Bloomberg Television yesterday. Griffin, who has said he would not support Trump, is one of the most prolific Republican donors, having donated about $72.7 million in the 2022 election cycle alone.

His support could provide Haley with crucial financial ballast as she battles Ron DeSantis to become the leading candidate for anyone but Trump.

And Haley has reportedly impressed Jamie Dimon, according to Axios. An unnamed source told the publication that the CEO of JPMorgan Chase — who has given to both Democrats and Republicans during recent election cycles — liked her positions about the economy and the role of business in governance.

Haley already has support from notable wealthy donors, included the oil magnate Harold Hamm, Jim Haskel of the hedge fund Bridgewater Associates and the dealmaker Aryeh Bourkoff.

How Microsoft’s 1990s case could apply to Google

A two-month antitrust trial against Google is nearing its end in Washington as the search giant faces a separate legal challenge in a San Francisco courtroom, where it is accused of exercising monopolistic power over the running of its app store.

One of the government’s last major victories against Big Tech was against Microsoft in the 1990s. That fight has loomed large in the Google lawsuit, Steve Lohr writes for The Times: The Justice Department and a group of states say Google is using something similar to the Microsoft monopoly playbook in dominating the search market. Google rejects that analogy.

These cases have these things in common:

Digital platform economy: The Microsoft case highlighted the power of the “network effect,” where a digital product becomes more valuable the more people use it. In the Google case, the government argues that the enormous search use provides Google with more data to train and improve its search algorithms.

That, in turn, attracts more users and advertisers. Google has argued that its internal innovation and investments explain its market leadership.

Contracts with competitors: At Microsoft, deals with personal computer manufacturers and Internet providers were central. Some of those partners believed they had to make a deal with Microsoft to gain access to its Windows desktop software, its prime virtual real estate in the early days of the Internet.

Google’s case involves large payments (known as pay-for-default contracts) to Apple, Samsung, Mozilla and others to make Google the featured search engine on their devices and browsers.

A possible outcome: If the government and states prevail in the Google case, one possible solution could be banning pay-for-default deals. That would also reflect the outcome of the Microsoft case, in which the company was not allowed to enter into exclusive deals that worked against competition.

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