Connect with us

Economy

CPI Reaction: Inflation Heats up to a 39-year High, Stocks Rally as Rate Hike Expectations Get Pushed Back

Published

on

Dow

By Edward Moya

US stocks rallied after the latest inflation report did not come in as hot as many were expecting. Wall Street did not see inflation with a 7-handle and that allowed risky assets to rise, while the dollar turned negative as traders anticipate the Fed won’t be forced to deliver a rate hike well before summer.

The stock market rally did not stick as economists still mostly agree that this is not the peak for inflation and that pricing trends will continue to track higher. The preliminary University of Michigan sentiment report showed modest rebounds across sentiment, current conditions, and expectations. Inflation expectations over both the next year remained anchored at 4.9% and the 5-10 year at 3.0%.  Despite today’s rebound, consumer sentiment still looks vulnerable and will likely struggle if these widespread price increases continue.

CPI

November’s headline month-over-month CPI reading increased 0.8% was higher than the 0.7% estimate but lower than the prior month’s reading of 0.9%.  Some of the inflation is moderating but the year over year reading came in at 6.8%, the hottest since 1982.

Broad based price increases had groceries (meat, poultry, fish, and eggs) skyrocket 12.8%, airline prices were up 4.7%, energy costs were 3.5% higher (gasoline delivered another 6.1% increase), new vehicles rose 1.1%, while used cars increased 2.5% and apparel climbed 1.3%.

Appetite for equities remains undeterred as traders appear to be confident that eventually at some point in the middle of next year a lot of these pricing pressures will fade.

Peloton (**Spoilers below for HBO’s Sex and the City premier)

2021 has been a rough ride for Peloton shares as they appear to be headed back to pre-pandemic levels. The latest slide could be attributed to another downgrade, this time from Credit Suisse, but some traders are in shock over how Peloton played a major role in the Sex and the City premier. The fitness equipment maker was dealt another potential PR crisis (earlier in the year, they had a tragic treadmill accident).

Death by Peloton was all over social media after Carrie Bradshaw, the protagonist in HBO franchise Sex and the City lost her husband to a heart attack shortly after he had an intense workout on his Peloton bike.

Peloton was aware HBO was planning on using the bike but was unaware of the larger context surrounding the scene. Peloton Spokesperson Kelly emailed a statement from a member of their health and wellness advisory council that blamed Mr. Big’s heart attack on his “extravagant lifestyle” and history of heart disease.

Peloton shares have gone from a pandemic favorite trade to a stock no one wants to touch.

Oil

WTI crude seems to be following US stocks more so than stockpile data. This is ending up being a rather good week for crude prices as the crude demand outlook hit from Omicron might be limited.  OPEC+ continues to have a firm handle on the direction of prices and can disrupt any selloffs with a quick reverse of their output increase.

Once Europe gets beyond this wave of restrictive movements and the north stops seeing milder weather, the rally in oil prices could easily make a run towards the highs seen last month.

Gold

Gold is slowly getting its mojo back after a hot inflation report mostly matched estimates.  A lot of the inflation is stickier than anyone wants and that should keep gold’s medium- and- long-term outlooks bullish. Gold just needs to survive a firm consensus on how many rate hikes the Fed will start off with next year.  An accelerated rate hiking cycle is a big risk and could trigger panic selling that could prove troublesome for gold in the short-term, but that still seems unlikely to happen.

Gold’s recent trading range of $1760 and $1800 might continue to hold up leading into next week’s FOMC decision.

Bitcoin

Before the US inflation report, many traders were noticing that Ethereum dominance is settling in. This has been a tough week for cryptos and Ethereum mostly outperformed. The global crypto market cap is around $2.2 trillion and while Bitcoin is still king with 39% dominance, Ethereum has now earned 20%. There is still a lot of motivation for more crypto products to be created and the growth outlook next year should limit whatever selling pressure enters.

Bitcoin prices initially after US inflation hit a 39-year high, but the rally stalled after reaching the $50,000 level. Given what happened last weekend, some leveraged traders are thinking twice about holding positions into this weekend. Some traders are anticipating a sideways market until the FOMC policy decision on Wednesday, so hesitancy to hold over the weekend might grow. Hodlers will likely remain unfazed and feel mostly confident as need for inflation hedges will grow given the widespread rising pricing trends.

 

Continue Reading
Comments

Economy

NLNG Boosts Cooking Gas Production to 1.5 Million Metric Tonnes Annually

Published

on

cooking gas cylinder

Nigeria Liquefied Natural Gas Limited (NLNG) has announced a significant milestone in its operations, boosting its annual production of liquefied petroleum gas (LPG), commonly known as cooking gas, to over 1.5 million metric tonnes.

This surge in production underscores NLNG’s commitment to meeting the rising demand for clean cooking energy in Nigeria.

The entirety of NLNG’s 1.5 million tonnes production is now being sold domestically within Nigeria.

Moreover, the company has initiated a landmark shift by starting to supply LPG in naira, moving away from the traditional practice of trading in United States dollars.

This move aligns with calls from stakeholders in the oil and power sectors advocating for naira transactions, especially amidst the challenges posed by currency fluctuations.

During a panel session at the 7th Nigeria International Energy Summit in Abuja, NLNG’s General Manager of Finance, Fatima Adanan, highlighted the company’s dedication to enhancing LPG penetration across the country.

Adanan emphasized NLNG’s vision to make Nigeria a better place by promoting the use of cleaner energy sources like gas.

While NLNG’s production surge is commendable, Adanan acknowledged that Nigeria’s LPG requirements surpass the current output, necessitating imports to bridge the gap.

However, NLNG remains committed to expanding its production capacity to meet the nation’s energy needs and drive increased adoption of LPG as a cleaner cooking fuel.

Continue Reading

Economy

CBN Raises Benchmark Interest Rate by 400 Basis Points to 22.75%

Published

on

Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 400 basis points to a record 22.75%.

The decision made by the Monetary Policy Committee (MPC) comes amidst rising inflationary pressures and growing uncertainty in Africa’s largest economy.

Nigeria’s inflation rate rose to 29.90% in January 2024, the highest in over two decades while the nation’s unemployment rate quickened to 5% in the third quarter of 2023. Suggesting that the rising costs have continued to drag on both new job creation and the existing ones.

This coupled with a series of policy adjustments implemented by President Bola Ahmed Tinubu has plunged economic productivity and eroded consumer spending as citizens grapple with high fuel prices, electricity tariffs, a record-high foreign exchange rate, and insecurities.

Therefore, it is surprising that the Monetary Policy Committee (MPC) led by the CBN will further increase borrowing costs by 400 basis points at a time when job creation is paramount.

While the economy reportedly grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, this growth is yet to crystalise as businesses and citizens have taken to the street protest against the harsh economic situation.

Economic experts have started questioning the data from the National Bureau of Statistics (NBS) given its lack of correlation between the data and economic reality.

 

Continue Reading

Economy

President Tinubu Unveils Geometric Power Plant in Aba After 20-Year Wait

Published

on

Geometric Power Plant

After two decades of anticipation, President Bola Tinubu, through his representative Vice President Kashim Shettima, inaugurated the long-awaited Geometric Power Plant in Aba, a significant milestone in the city’s quest for reliable electricity supply.

The event, which also saw the commissioning of three rehabilitated roads by Abia State Governor Alex Otti, symbolizes the culmination of years of perseverance and determination to transform Aba’s power landscape.

Addressing the audience, Vice President Shettima hailed the project as a testament to the power of visionary leadership and unwavering commitment to progress.

He said the Geometric Power Plant exemplifies the transformative impact of strategic infrastructure investments on local communities.

Governor Otti echoed similar sentiments, emphasizing the importance of the power project in positioning Aba as a hub for national and international business ventures.

He commended the efforts of Geometric Power Limited while urging them to uphold transparency and avoid exploiting consumers.

The inauguration of the Geometric Power Plant comes amidst growing concerns over Nigeria’s power infrastructure and the need for sustainable solutions to address electricity shortages.

The project, with a capacity of 188MW, holds promise for significant improvements in power supply across Abia State, benefitting nine out of seventeen local government areas.

The Managing Director of Geometric Power Limited, Ben Caven, underscored the scale of investment involved, totaling $800 million.

He highlighted the comprehensive nature of the project, which includes the installation of new power substations and a 27km natural gas pipeline, signaling a comprehensive approach to enhancing Aba’s energy infrastructure.

In conclusion, the inauguration of the Geometric Power Plant represents a transformative moment for Aba, offering renewed hope for economic growth and prosperity powered by reliable electricity supply.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending