Per reporter: Tan Yuhan Zhang Lingxiao Per reporter: Tan Yuhan, Sun Zhicheng
This week, the Fed announced a 50 basis point rate hike for the first time in 22 years, and the Dow recorded its largest one-day gain and the largest one-day decline since 2020 in one week. Will the U.S. stock market experience more turmoil? The Daily Economic News interviewed Joel Prakken, co-head of the U.S. economy at S&P Global Market Intelligence.
The situation in Russia and Ukraine remains the focus of attention. Recently, the Ukrainian side said that it destroyed the Russian landing ship and sank the frigate "Admiral Makarov" of the Russian Black Sea Fleet on Snake Island. For the former, the Russian side has no response. For the latter, the Russian side said that it did not have relevant information for the time being. Zelenskiy said all diplomatic channels of communication with Russia have been disrupted.
In terms of the epidemic, the positive detection rate of new crown in South Africa is close to the record high in recent days, and the variants BA.4 and BA.5 are likely to become the leaders of the new wave of the epidemic in the country. The United States has reported another new subtype of Omilon, BA.2.12.1, which has led to an increase in infections. In addition, 109 cases of unexplained hepatitis in children and 5 deaths were detected in the United States.
The Twitter acquisition also made new progress this week, with Musk receiving another $7.1 billion in financing commitments. In the first quarter, global oil prices were running at a high level, and many oil companies reported bright Q1 earnings, why did BP oil lose $20.4 billion? More content, all in the week of international finance.
The Fed raised interest rates by 50 basis points in 22 years rare
Analyst: The stock market will remain volatile for years to come
Image source: Visual China
On May 4, local time, the Federal Reserve announced a 50 basis point rate hike for the first time in 22 years, raising the federal funds rate to 0.75% to 1.0%, which also became the first time since 2006 that the agency raised interest rates at two consecutive FOMC meetings.
At the same time, the Fed also announced that it will launch a balance sheet reduction program to reduce its balance sheet by $47.5 billion per month from $9 trillion from its balance sheet starting in June and $95 billion per month after three months.
After the release of the Fed's plan, Fed Chairman Powell held his first offline press conference since March 2020 in the early morning of May 5, local time, and basically denied the possibility of a subsequent 75 basis point rate hike.
The current pressures on the surge in inflation facing the United States still show no signs of easing. On May 5, local time, the U.S. Bureau of Labor Statistics released a report saying that the U.S. non-farm productivity fell by 7.5% in the first quarter of 2022, the largest decline since the third quarter of 1947. Meanwhile, U.S. unit labor costs soared 11.6 percent, bringing the increase in the past four quarters to 7.2 percent, the largest increase since the third quarter of 1982.
In response to the Fed's interest rate hike policy, several Fed officials released "hawkish" remarks on Friday. Thomas Barkin, governor of the Richmond Fed, even said that in order to curb inflation, the Fed should increase the rate increase. He argues that none of the possible measures should be ruled out in the Fed's efforts to curb inflation, including a one-off 75 basis point hike.
The Fed's aggressive interest rate hikes and fed officials' speeches sparked a sharp shock in U.S. stocks this week, with the Dow posting its biggest one-day gain and its biggest one-day drop since 2020 in a single week.
On the day of the Fed's rate hike, the Dow closed 932 points higher, the Nasdaq rose 401 points, and the S&P 500 rose 125 points. But the next day, the three major stock indexes suffered a heavy setback, giving back all the gains gained in the three consecutive gains since May, and the Dow opened with a surge of more than 1,000 points, the largest intraday decline this year.
On Friday, local time, U.S. stocks continued the downward trend of the previous day, as of the close, the Dow fell 98.6 points, or 0.3%, at 32899.4 points; the S&P 500 index fell 23.5 points, or 0.6%, to 4123.3 points; and the Nasdaq fell 173.0 points, or 1.4%, at 12144.7 points.
From the weekly point of view, the three major U.S. stock indexes have recorded a negative line on a weekly basis. The Dow fell 0.2 percent weekly, six consecutive weeks of weekly declines, the S&P 500 fell 0.2 percent weekly, and the NASDAQ fell 1.5 percent this week, recording a five-year-long cloudy weekly decline for the first time since 2012, when it fell a quarter from its all-time high last November.
What is the recent economic situation in the United States? Will the U.S. stock market experience more turmoil? The Daily Economic News interviewed Joel Prakken, co-head of the U.S. economy at S&P Global Market Intelligence.
NBD: What caused the 7.5% decline in U.S. non-farm payrolls productivity in the first quarter?
Joel Plaken: This was largely due to a slowdown in U.S. GDP growth in the first quarter, down 1.4% sequentially and 3.6% year-on-year, and the rapid shift in economic growth drivers from the more productive commodities sector to the less productive services sector. It is important to note that the current data is still preliminary and may be revised.
NBD: Will the one-quarter SLOWDOWN IN THE US GDP GROWTH CONTINUE?
Joel Plaken: GDP in the first quarter was constrained by a reduction in inventory accumulation and a sharp decline in net exports, and the negative growth in the quarter may also reflect supply chain disruptions. But given the fundamentally strong domestic demand and the unsustainable decline in net exports, we expect GDP growth to turn positive for the remainder of the year.
NBD: The U.S. stock market has experienced ups and downs this week, will the sharp sell-off by investors continue this year?
Joel Plaken: Our view in the near term is that the stock market will be struggling with the downsides of tight monetary policy, reduced earnings and increased geopolitical uncertainty, so we expect the stock market to remain volatile for years to come as monetary policy tightens and economic growth slows.
(Disclaimer: The content and data in this article are for reference only and do not constitute investment advice, and are verified before use.) Do so at your own risk. ）
01
Russian-Ukrainian diplomatic channels have been completely interrupted
Russia does not intend to use nuclear weapons in special operations against Ukraine
Azov Steel Plant, Ukraine
Image source: Xinhua News Agency (Photo by Victor)
May 7
The Ukrainian army said that it destroyed the Russian landing ship on Snake Island, and the Russian side did not respond for the time being.
May 7
For the first time, russian forces had face-to-face contact with the defenders of the Azov Steel Plant.
May 6
Due to the "difficulty of quitting" Russian oil, the new round of EU sanctions against Russia has been opposed by many countries, and it has proposed to revise the proposal.
May 6
Zelenskiy said all diplomatic channels of communication with Russia have been disrupted.
May 6
The Ukrainian side claimed to sink the frigate "Admiral Makarov" of the Russian Black Sea Fleet, and the Russian side said that the Russian side did not have relevant information.
May 6
Russian Defense Ministry spokesman Konashenkov informed that russian air defense forces shot down a Su-25 fighter and a MiG-29 fighter of the Ukrainian armed forces, intercepted 4 "Dot-U" tactical missiles, and shot down 13 Ukrainian drones in Kharkiv, Kherson Oblast, Donetsk and Luhansk. In addition, the Russian military used high-precision air-based missiles to strike a large ammunition depot in the eastern Ukrainian city of Kramatorsk. The Russian Foreign Ministry announced that Russia does not intend to use nuclear weapons in special operations against Ukraine.
May 5
U.S. sources revealed that the United States provided intelligence to Ukraine to help ukraine sink the cruiser Moscow, the flagship of the Russian Black Sea Fleet, with anti-ship missiles in mid-April.
May 5
Alestovich, adviser to the director of the office of the President of Ukraine, said that the Russian attack on the Azov steel plant has continued until the third day, and yesterday the Russian army entered the area of the Aeszov steel plant but was repelled by the Ukrainian defenders. In addition, he also said that the Ukrainian army may launch a counter-offensive from the end of June to the beginning of July in the case of receiving a large amount of weapons and equipment from Western countries.
May 5
The UK revoked the status of the Moscow Stock Exchange as a recognized exchange.
May 5
Since the outbreak of the Russian-Ukrainian conflict, 500 companies have withdrawn from the firefight area.
5th and 4th
European Commission President von der Leyen said the EU would completely ban oil imports from Russia for 6 months.
May 4
Russia's Foreign Ministry announced a permanent ban on the entry of 63 Japanese citizens, including the Japanese prime minister.
May 2
EU energy ministers met in Brussels to discuss the impact of the situation in Russia and Ukraine on EU energy supply, especially how to deal with Russia's suspension of gas supply to EU countries.
(Comprehensive CCTV News, Xinhua News Agency, People's Network, Global Network)
02
South Africa's COVID-19 positive detection rate is close to an all-time high
The new subtype of Omicron, BA.2.12.1, spread rapidly in the United States
Image source: Photo Network - 401676970
According to CCTV News, on the evening of May 7, local time, the South African National Institute of Infectious Diseases released data showing that in the past 24 hours, there were 8,524 new confirmed cases of new coronary pneumonia in South Africa. The outbreak in South Africa further worsened, with a positive detection rate of 31.1%.
The single-day positive detection rate is the highest this year, which is close to the record high of 34.9% positive detection rate in South Africa on December 14, 2021.
Epidemiologist Faswana Mavya said South Africa may have entered a fifth wave. The two subspecies of the newly discovered Omiljung variant, BA.4 and BA.5, are more likely to be the dominant players in the new wave of outbreaks due to their stronger contagiousness.
In addition, according to Xinhua News Agency reported on May 2, the United States reported another new subtype of BA.2.12.1 leading to an increase in infection cases. According to the U.S. Centers for Disease Control and Prevention, in the week ended April 23, THE NUMBER OF INFECTIONS CAUSED BY BA.2.12.1 HAS ACCOUNTED FOR NEARLY 30% OF THE TOTAL NUMBER OF CONFIRMED CASES IN THE UNITED. In some regions of the northeast, BA.2.12.1 has surpassed BA.2 as the dominant epidemic strain.
Roger Vronsky, director of the US Centers for Disease Control and Prevention, said a few days ago that the spread of BA.2.12.1 may be 25% stronger than BA.2. Its effect on the effectiveness of the COVID-19 vaccine is currently being studied. Vronsky also said that experts believe that people who have been vaccinated against the new crown, especially those who have received booster injections, can still get better protection against severe diseases even in the face of BA.2.12.1.
According to data released by the World Health Organization this week, the cumulative number of confirmed cases of COVID-19 worldwide exceeds 500 million, and it is estimated that the COVID-19 epidemic in 2020 and 2021 will directly or indirectly cause nearly 15 million deaths.
03
The United States has detected 109 cases of unexplained hepatitis in children and 5 deaths
According to CCTV News, on May 6, local time, the US Centers for Disease Control and Prevention said that it was investigating 109 cases of unexplained hepatitis in children in 25 states in the United States. Currently, 8 children need liver transplants, 5 children die, and 94% need hospitalization.
Jay Butler, deputy director of infectious disease control at the U.S. Centers for Disease Control and Prevention, stressed that the investigation, conducted by the CDC in collaboration with state health departments, does not have all cases of hepatitis caused by the same cause, and it is unclear what caused these cases to occur in children. Butler said that while adenovirus has been detected in some children, its role is unclear and remains to be seen. Investigations are currently underway into whether it is related to animal contact, including pet dogs.
In addition, 8 and 7 cases of unexplained childhood hepatitis have been detected in Argentina and Japan, respectively.
04
Progress in the Twitter acquisition
Musk received another $7.1 billion in financing commitments
Image source: Visual China
According to Bloomberg, a filing filed by Twitter to the U.S. Securities and Exchange Commission (SEC) on Thursday showed that Musk's $44 billion acquisition of Twitter won the support of some large investors, and he received about $7.1 billion in financing commitments. The new investors include cryptocurrency exchange Binance ($500 million), Sequoia Capital ($800 million), and Qatar Holdings ($375 million), the documents show.
Musk is also in talks with Twitter co-founder Jack Dorsey to discuss the possibility of the latter selling his stake in Twitter when or before the deal closes, the filing also said. In addition, previously announced margin loans for acquisition transactions fell from $12.5 billion to $6.25 billion.
05
Under the high oil price, many oil companies reported bright Q1 earnings
Why did BP Oil lose $20.4 billion?
On May 3, local time, British Petroleum (BP) released a report saying that it lost nearly $20.4 billion in the first quarter of this year, compared with a net profit of $4.667 billion in the same period last year.
BP CEO Bernard Rooney said the main reason for BP's first-quarter loss was its decision to exit its stake in Rosneft in February. Since 2013, BP has held a 19.75% stake in Rosneft.
BP is one of the largest foreign investors in Russia. Since the outbreak of the Russo-Ukrainian War, BP was the first international oil company (within 96 hours of the outbreak of the war) to announce its withdrawal from Russian oil and gas projects.
The earnings report showed that the withdrawal of Rosneft's stake and other businesses it cooperated with in Russia resulted in a loss of $25.5 billion for BP.
In contrast, Shell lost $3.9 billion and Total Energy assets lost $4.1 billion due to the withdrawal from the Russian oil and gas business, both less than BP.
Mainly due to higher crude oil and natural gas prices, Shell, Total Energy, ExxonMobil and Chevron all achieved significant net profit growth in the first quarter of this year.
06
Apple's "ApplePay" stall is in trouble
Or face a huge fine of 240 billion yuan
Against the backdrop of global inflation and tight supply chains, Apple delivered a bright earnings report after the US stock market on April 28 this year. But it also faces many challenges, such as the antitrust allegations that haunt Apple.
The European Commission said on May 2 that it had issued a written statement to Apple detailing how Apple abused its dominance in the mobile payment space through Apple Pay.
According to Reuters, if the allegation is established, Apple will face a hefty fine of up to 10% of its global annual turnover, estimated at about $36.6 billion (about 241.864 billion yuan) according to the turnover data of the previous fiscal year. However, the Reuters report also pointed out that the relevant penalties in the EU have rarely been implemented according to the upper limit penalty standard before. Apple said it would continue to engage with the European Commission on the issue.
Image source: Per Warp Mapping
Image source: Per Warp Mapping
Reporter | Tan Yuhan zhang Lingxiao
Editor| Tan Yuhan, Sun Zhicheng, Du Bo
Visual | Liu Qingyan
Typesetting | Tan Yuhan
Proofreading | Wang Yuelong
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