💡Quote of the week
“The Fed’s higher [interest rates] for longer – now targeting over 5% over 18 months – is enough to keep the $2,000 lid on gold prices. At the same time, the US data is weakening but not collapsing like in other countries… This ‘higher for longer' purgatory certainly raises hard landing risks, which makes precious metals surprisingly one of the only safe places to hide out in.” - Nicky Shiels, Head of Metals Strategy, MKS PAMP
Investment news
1️⃣ One last time. The Fed has kept interest rates steady but has signalled one more rate hike in 2023 before pausing. In a statement released on Wednesday, the U.S. central bank outlined plans to raise rates to a median of 5.6% by the end of 2023, a slight bump from the current range of 5.25% to 5.5%. (CNBC)
While twelve Fed officials support this additional hike, seven oppose it. The Fed's move is seen as a reflection of their optimism about the economy's growth trajectory rather than concerns about persistent inflation, as noted by Fed Chair Jerome Powell in a press conference.
The Federal Open Market Committee (FOMC) anticipates two rate cuts in 2024, a reduction of two compared to its June forecast. This would place the funds rate around 5.1%.
🤔 Peak or pause? In a significant policy shift, the Bank of England has put the brakes on its 14-month-long spree of interest rate hikes following unexpectedly muted inflation data. The central bank, which had steadily increased rates since December 2021, had reached a 15-year high of 5.25% in August. (CNBC)
“Our previous increases in interest rates are working, but let me be clear that inflation is still not where it needs to be, and there is absolutely no room for complacency. We’ll be watching closely to see if further increases are needed, and we will need to keep interest rates high enough for long enough to ensure that we get the job done,” Bank of England Governor Andrew Bailey said in a statement.
📉 Losing streak. The Dow Jones Industrial Average on Thursday saw a decline of 370.46 points, or 1.08%, as Treasury yields reached multiyear highs. (CNBC)
Meanwhile, the S&P 500 slid 1.64% to 4,330, and the Nasdaq Composite retreated 1.82% to 13,223.98. It's been a tough three days for the stock market. The S&P 500 had its worst day since March, and both the Dow and S&P 500 looked set to finish the week down over 1% and 2%, respectively. Meanwhile, the Nasdaq seemed on track for a more than 3% decline for the week.
🦾 Resilient in stressful times. Gold prices dropped for the third straight day on Thursday due to the Fed's commitment to higher interest rates, which strengthened the U.S. dollar and increased treasury yields. But despite this decline, gold has managed to remain resilient above the psychologically significant $1,900 level.
Traders and investors see gold as a hedge in case the Federal Reserve fails to achieve a soft economic landing in the coming months.
Meanwhile, silver experienced a 0.7% decline to $23.41 per ounce, platinum slipped 0.7% to $922.17, and palladium dropped 1.6% to $1,254.34, marking its worst session since August 30th.
😫 “A tough slog”. Turkey's central bank has made a bold move by increasing its key interest rate to 30%, marking a significant jump from the previous 25%. This decision comes as the country grapples with persistent double-digit inflation. The Turkish lira slightly weakened in response to this news. (CNBC)
Over the last year, Turkey has witnessed a series of rate hikes aimed at addressing years of surging inflation and a severely weakened currency, largely due to the Ankara government's loose monetary policy.
The Turkish lira has depreciated by 30% against the dollar so far this year, and it has lost a staggering 78% of its value against the greenback over the last five years.
🪄 Put your dreams on hold. At the height of the 2020 stock market boom, Apple and Goldman Sachs were quietly cooking up a feature that would allow iPhone users to buy and sell stocks, according to insiders. However, as the market took a downturn, the project was shelved. (CNBC)
This initiative would have expanded Apple's suite of financial products, which includes a credit card and high-yield savings account, all powered by Goldman Sachs. The two companies first partnered in 2019. Representatives for both Apple and Goldman Sachs declined to comment on the matter.
📸 Image of the week
Opinion
🗻 Rates are like mountains. “They tend to spike and fall like a Patagonian precipice, but now there’s a Table Mountain theory of a long, flat plateau.” (Bloomberg Opinion)
“The analogy works all the better because hills shaped like Table Mountain, with a wide flat top, aren’t that common. Triangular peaks are more usual. And if we look at the course of history, we tend not to see Matterhorns, so much as moves more reminiscent of the Torres del Paine, at the southern tip of Chile,” Bloomberg’s John Authers writes.
What else is happening
⚔️ Friends feud. A recent dispute between Poland and Ukraine over grain exports has raised concerns about Poland's commitment to its eastern neighbor. Polish Prime Minister Mateusz Morawiecki hinted at halting weapons donations to Ukraine, and there are doubts about extending support to Ukrainian refugees beyond 2024. (FT)
President Andrzej Duda, aligned with Poland's ruling Law and Justice party, made controversial comments likening Ukraine to a drowning man pulling down his rescuer.
The dispute began when the European Commission lifted a ban on Ukrainian grain exports to five EU states, including Poland. The ban was introduced in response to unilateral curbs imposed by Poland, Slovakia, and Hungary, which Brussels deemed illegal. The EU concluded that price distortions had disappeared and the ban was no longer needed as long as Ukraine implemented an export licensing regime. Poland, Slovakia, and Hungary, however, refused to comply and introduced their own curbs.
👑 Succession. Media magnate Rupert Murdoch is stepping down from his position as chairman at Fox and News Corp. after 70 years in charge. At the age of 92, the billionaire will assume the position of chairman emeritus, while his son Lachlan takes over as the sole leader of both companies. (WSJ)
Murdoch launched Fox News Channel in 1996, which has since become a leading cable network. In his note to employees, he mentioned that he would continue to engage with news and ideas but in different roles.
🌳 A major climate U-turn. Britain's Prime Minister Rishi Sunak has announced a shift in the nation's climate policies, including a delay in the ban on the sale of new gasoline and diesel cars from 2030 to 2035. Sunak cited the need for more time for households to transition away from gas boilers and announced a 50% increase in cash grants for boiler upgrades. (The Guardian)
In his speech, he emphasized the importance of not imposing excessive costs on working people, although he denied watering down climate targets. The move, criticized for causing uncertainty in the automotive industry, comes as the UK gears up for the transition to electric vehicles.
Critics argue that weakening climate policies could hinder economic growth and leave households vulnerable to volatile fossil fuel prices.
And finally…
🪵 Smarter than you think. In a remarkable discovery along Zambia's Kalambo River, archaeologists have unearthed evidence of ancient humans using wood in construction nearly half a million years ago. These findings, which represent the earliest-known example of wooden structure-building by our prehistoric ancestors, challenge the notion that they were solely nomadic hunters and gatherers. (Reuters)
"The finds from Kalambo Falls indicate that these hominins, like Homo sapiens, had the capacity to alter their surroundings, creating a built environment. Use of wood in this way suggests the cognitive ability to these early humans was greater than we have believed based on stone tools alone,” archaeologist Larry Barham of the University of Liverpool said.
See you next week!
