ECB and Bank of England hike interest rates again in fight with inflation


Europe’s two largest central banks raised interest rates sharply on Thursday, opting for bigger increases than the US Federal Reserve as inflation in the region remains near historically high levels.

The European Central Bank (ECB) and the Bank of England lifted rates by another half a percentage point. Benchmark interest rates for both are at their highest levels since 2008.

Across the Atlantic, the Federal Reserve eased up on rate hikes on Wednesday, delivering just a quarter-point increase as it judged that it was making progress in its battle against inflation.

The ECB said it expected to raise interest rates further and “intended” to hike them by another half a percentage point in March. Although inflation in the 20 countries that use the euro slowed in January, at 8.5% it remains far above the bank’s 2% target.

Speaking to reporters after the announcement, ECB President Christine Lagarde noted recent steep falls in energy prices, but said the fight to tame inflation had further to go.

“Headline inflation has gone down and more so than we had expected and that many had expected,” she said. “But underlying inflation pressure is there, alive and kicking, which is why … I say we have more ground to cover and we are not done.”

UK inflation has also eased, coming in at 10.5% in December, but remains near a 41-year high.

The Bank of England has a particularly tough job on its hands: prices are rising rapidly while at the same time the United Kingdom faces a risk of recession, and rate hikes act to dampen both inflation and economic growth. On Tuesday, the International Monetary Fund forecast that the United Kingdom would be the only major economy to contract this year.

The Bank of England said UK inflation was likely to fall sharply over the rest of the year, largely as past increases in energy and other prices fell out of the calculation. But it signaled significant uncertainty over its forecast.

“The labor market remains tight and domestic price and wage pressures have been stronger than expected, suggesting risks of greater persistence in underlying inflation,” the bank said in a statement.

In addition, wholesale energy prices might boost UK inflation more than expected, it added.

On the broader UK economy, the Bank of England turned more optimistic, forecasting a 0.5% decline in output this year compared with the 1.5% contraction predicted in November. That’s broadly in line with the latest IMF forecast.

The ECB also released some details on the unwinding of its asset purchase program, reiterating that its holdings would decline by €15 billion ($16.5 billion) per month on average from March and until the end of June.



Shell posts profit of nearly $40 billion and announces $4 billion in buybacks

Hong Kong/London

Shell made a record profit of almost $40 billion in 2022, more than double what it raked in the previous year after oil and gas prices soared following Russia’s invasion of Ukraine.

Europe’s largest oil company by revenue reported adjusted full-year earnings of $39.9 billion on Thursday — more than double the $19.3 billion it posted in 2021 — driven by a strong performance in its gas trading business. The company’s stock was up 1.7% in London.

The company reported $9.8 billion in profit in the fourth quarter. Just over 40% of Shell’s full-year earnings came from its integrated gas business, which includes liquified natural gas trading operations.

Shell CEO Wael Sawan said the results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world.”

The earnings are the latest in a series of record-setting results by the world’s biggest energy companies, which have enjoyed bumper profits off the back of soaring oil and gas prices.

ExxonMobil this week posted record full-year earnings of $59.1 billion. Last month, Chevron (CVX) reported a record full-year profit of $36.5 billion.

That has led to renewed calls for higher taxation. Governments in the European Union and the United Kingdom have already imposed windfall taxes on oil company profits, with the proceeds used to help households struggling with rising energy bills.

Shell said it expected to pay an additional $2.3 billion in tax related to the EU windfall tax and the UK energy profits levy. The company paid $13 billion in tax globally in 2022.

Shell (RDSA) also announced another $4 billion share buyback program and confirmed it would lift its dividend per share by 15% for the fourth quarter.

This is a developing story and will be updated.



Biden proposes ‘junk fee’ bill to cut hidden fees for credit cards and concert tickets


President Joe Biden announced new progress Wednesday on his administration’s “competition agenda,” specifically taking aim at junk fees while calling on Congress to pass legislation targeting hidden fees across multiple industries.

These costs can “drain hundreds of dollars a year from the pockets of hardworking American families, especially folks who are already struggling to make ends meet — but not anymore after today,” Biden said at the fourth meeting of the Presidential Competition Council on Wednesday.

The proposed legislation in partnership with the Consumer Financial Protection Bureau, called the Junk Fee Protection Act, would target four types of excessive fees:

  • excessive online concert, sporting event and entertainment ticket fees
  • airline fees for families sitting together on flights
  • exorbitant early termination fees for TV, phone and internet services
  • surprise resort and destination fees

In brief remarks before the meeting, Biden had called out credit card late fees in particular as “a junk fee if there ever was one,” saying the new guidance from the CFPB would reduce these fees.

“Today’s rule proposes to cut those fees from $31 on average to $8,” he added. “That change is expected to save tens of millions of dollars for Americans, roughly $9 billion a year in total savings.”

Biden called on Congress to pass the junk fee legislation, saying it would give “hardworking Americans just a little bit more breathing room.” It’s part of a plan, he added, to build “an economy that’s competitive and an economy that works for everyone.”

Rohit Chopra, director of the CFPB, noted before the announcement that “over a decade ago, Congress banned excessive credit card late fees.”

“But companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee,” he added in a statement to CNN. “Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”

Another fee category that frustrates many customers is event tickets sold online, for which additional fees are frequently high — and typically appear late in the checkout process when a customer is about to make the purchase.

For example, earlier this year, lawmakers grilled Live Nation president and CFO Joe Berchtold following a ticket sales debacle over exorbitant ticketing fees. Although the company said Wednesday it supports reform, it also said it opposes the proposed legislation.

“We stand ready to work with the President and Congress on many common sense ticketing reforms, while also speaking out against proposed legislation that would benefit scalpers over artists and fans,” the company said in a statement.

Biden’s Transportation Department also took steps last fall during the previous meeting of the Competition Council to reduce “unnecessary hidden fees,” from airline and travel sites that the the President were warned “weighing down family budgets.”



Bitcoin Pauses as Crypto Traders Await the Fed Decision. Brace for Volatility.

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Adani Group slams Hindenburg ‘attack on India’ as stock rout hits $70 billion

New Delhi

The Adani Group has accused a US investment firm of launching “a calculated attack” on India by publishing a report alleging widespread fraud at the ports-to-power conglomerate.

Hindenburg Research released its report on billionaire Gautam Adani’s business last week, accusing the group of “brazen stock manipulation and accounting fraud scheme over the course of decades.” It said it had taken a short position in Adani Group companies, meaning it would benefit from a drop in their value.

Since the release of Hindenburg’s report, Adani’s business empire has lost more than $70 billion of its stock market value. The infrastructure tycoon’s net worth has also plummeted by some $30 billion, according to the Bloomberg Billionaires Index.

He is still Asia’s richest man with a personal fortune worth over $92 billion, which is $10 billion more than fellow Indian entrepreneur Mukesh Ambani.

The Adani Group had already denounced the Hindenburg report as “baseless” and “malicious” in its initial response a few hours after the report’s release, and said Thursday that it was considering legal action. It followed that on Sunday with a long and angry rebuttal running to more than 400 pages, in which it called Hindenburg’s allegations “baseless and discredited” and said the research firm had an “ulterior motive.”

“This is rife with conflict of interest and only intended to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors,” it said.

The 60-year-old tycoon founded the Adani Group over 30 years ago, and is seen as a close ally of India’s current prime minister, Narendra Modi.

Before the rout, which continued on the Mumbai stock exchange on Monday, markets had been cheering for the businessman and his breathless pace of expansion. Investors were betting on the self-made industrialist’s ability to grow his businesses in sectors that Modi had prioritized for development.

In its detailed response Sunday, the Adani Group portrayed the US short seller’s report as an “attack” on India, its economy and investors.

“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” it said.

Hidenburg had concluded its report last week with 88 questions for the Adani Group. These ranged from asking for details on the group’s offshore entities, to why it has “such a convoluted, interlinked corporate structure.”

The Indian conglomerate called those questions “rhetorical innuendos coloring rumors as fact.” It then sought to answer them, and published some tables and charts to support its position.

The long rebuttal sought to reassure investors about the group’s debt, banking relationships and corporate governance practices. Shares in Adani Enterprises, the group’s flagship company, were up over 4% on Monday, but most Adani stocks extended last week’s losses.

The conglomerate’s chief financial officer Jugeshinder Singh compared the Indian market reaction to one of the most horrific events from the country’s colonial past under British rule.

“In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians. So am I surprised by the behavior of some fellow Indians? No,” Singh told Mint business daily in an interview published Monday.

On April 13, 1919, British Brigadier General Reginald Dyer ordered his soldiers to fire without warning on a peaceful protest of thousands of unarmed people in Jallianwala Bagh, a public garden in the city of Amritsar. They stopped firing 10 minutes later when their ammunition ran out. The horrific event is now known as the Jallianwala Bagh or Amritsar Massacre.

Hindenburg’s claims come at a sensitive time for Adani. He is aiming to raise 200 billion rupees ($2.5 billion) by issuing new shares in Adani Enterprises this month. The offer will close on Tuesday.

Hindenburg responded to Adani’s rebuttal by saying “fraud cannot be obfuscated by nationalism.”

“Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself,” it said in a post on Twitter On Sunday.

Hindenburg went on to add that the group has ignored “every key allegation we raised.”

“In terms of substance, Adani’s 413 page response only included about 30 pages focused on issues related to our report,” it said.

“The remainder of the response consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.”



Mortgage rates tick down ahead of Fed meeting next week

Washington, D.C.

Mortgage rates fell slightly this week, staying almost flat ahead of the Federal Reserve’s closely watched interest rate-setting meeting next week.

The 30-year fixed-rate mortgage averaged 6.13% in the week ending January 26, down from 6.15% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed rate was 3.55%.

“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the monthslong freeze that gripped the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.”

After climbing for most of 2022, spurred by the Fed’s harsh interest rate hikes to tame soaring inflation, mortgage rates have been trending downward since November, alongside data that continues to show inflation may have reached its peak. Last week’s mortgage rates hit the lowest level since September.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit. Many buyers who put down less money upfront or have less than ideal credit will pay more than the average rate.

The Fed is expected to continue its rate-hiking campaign at its two-day meeting on January 31 to February 1. The central bank is likely to announce a smaller increase in the fed funds rate, with a quarter-point hike, compared with the half-point and three-quarter-point increases in the meetings last year.

The Fed does not set the interest rates borrowers pay on mortgages directly. But its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions.

When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

“The Freddie Mac fixed rate for a 30-year loan rebounded slightly this week, following the trajectory of the 10-year Treasury,” said Jiayi Xu, an economist at “While businesses and investors are watching the market closely, the recent large-scale layoffs in the tech sector combined with Monday’s stock market rebound have created mixed signals.”

On one hand, she said, many cash-burning tech companies are struggling with the Fed’s rate hikes. On the other hand, investors are happy about slowing inflation and anticipating that interest rate hikes may begin to moderate or stabilize in the months ahead.

Economic indicators like the low unemployment rate and the cooling inflation rate do not point toward a recession, Xu said. “However, it’s important to keep in mind that monetary policy takes time to have an impact, and these economic indicators might not yet show the full effects of the restrictive policy,” she said.

While the Fed may continue to raise rates this year, Xu said, the slower pace will help to create a soft landing for the economy by balancing the risks of bringing down inflation without pushing up the unemployment rate.

“Despite slowing inflation, the expected ongoing restrictive monetary policy may keep mortgage rates in the 6%-7% range in the short term,” she said.

The downward trend for mortgage rates since November has had a positive impact on home affordability for mortgage borrowers.

Homebuyer affordability improved in December, with the national median payment decreasing 2.9% to $1,920 from $1,977 in November, according to the Mortgage Bankers Association.

Many buyers are taking advantage of the relatively lower rates of the past few weeks: Applications for mortgages were up 7% last week from one week earlier, according to MBA.

“Borrower demand, thanks to lower mortgage rates, continues to rise in early 2023,” said Bob Broeksmit, MBA president and CEO. “Mortgage applications increased for the third straight week. Purchase demand is still below year-ago levels, but lower rates and improving affordability are favorable developments for the housing market heading into the spring.”

Buyer traffic is picking up in many markets, even if inventory is slow to improve.

“High costs and concerns about economic uncertainty had many buyers pausing their purchasing decisions and led to fewer transactions,” said Xu. “However, decreased competition may have presented opportunities for some first-time home buyers.”



New York Stock Exchange: Trading briefly halted for multiple stocks

New York

Trading for dozens of companies on the New York Stock Exchange was briefly halted Tuesday just after the market opened.

Major names impacted included Verizon, McDonald’s, Morgan Stanley, AT&T and Nike, according to the NYSE.

Many of those stocks made large moves just minutes into the morning trading session, sending companies like Wells Fargo and Morgan Stanley into a nosedive.

Morgan Stanley briefly plunged to $84.93 after ending at $97.13 on Monday before recovering. McDonald’s and Walmart also fell more than 12% before trading was halted. Those drops may have triggered volatility halts on the exchange.

NYSE, and most other major stock exchanges, issue automatic halts for stocks that move dramatically up and down.

The affected companies resumed trading shortly thereafter, according to a status report from the NYSE at 9:50 am ET, which said “all systems are currently operational.”

NYSE officials told CNN that the exchange “continues to investigate issues with today’s opening auction.”

In an emailed statement, exchange officials said opening auctions “did not occur” for a number of stocks. The exchange, they wrote, is working to clarify which stocks were impacted.

“Impacted member firms may consider filing for Clearly Erroneous or Rule 18 Claims,” they added, meaning companies that saw their stocks halted can seek reimbursement for losses resulting from NYSE system failures.

This is a developing story, please check back for updates.



Elon Musk returns to the stand in class-action lawsuit over controversial tweet

Washington, D.C.

Tesla CEO Elon Musk took the witness stand for a second day on Monday and attempted to explain the thought process behind his controversial “funding secured” tweet from 2018, pushing back at the idea that it was partly a joke.

Musk, Tesla and company directors are facing a shareholder lawsuit over the tweet, in which the billionaire said that he was thinking about taking Tesla private for $420 a share and had “funding secured.” Those two words resulted in the CEO having to forfeit his position as Tesla’s executive chairman and pay millions of dollars in fines and legal fees.

Musk had spoken to executives of the Saudi sovereign wealth fund about the funding he would need to take Tesla private. However, it was anything but “secured.” Musk shared his recollection of the incident in his testimony Monday.

“My understanding was that they would proceed with the deal,” Musk said. Musk also claimed he was concerned news of the deal talks would leak in the press and tweeted it out himself to “make sure all investors would be on equal footing.”

Under questioning, Musk denied that he picked the $420 price as a joke given its meaning to marijuana enthusiasts, but rather as a roughly 20% premium on the stock price at the time.

“420 price was not a joke,” he tested. At another point, he said: “There is some karma around 420 although I should question if that is good or bad karma at this point.”

On Friday, Musk took the stand for about 30 minutes and tested that his tweets do not cause Tesla’s stock price to move higher or lower. He pointed to an incident in May of 2020 when he tweeted that “Tesla stock price is too high.” The stock price dropped the day of his tweet but recovered and closed the year higher than it had opened.

But the lead plaintiff, Glen Littleton, tested last week that he lost more than 75% of his investments following Musk’s “funding secured” tweet.

Musk attorney Alex Spiro had argued Wednesday that the CEO’s word choice was wrong, but it wasn’t a case of fraud. “In his rushed, reckless state he tweeted the wrong word choice,” Spiro said. “In his mind funding was not an issue, it was secured. But what he said in that tweet was ‘funding secured’ without elaborating what that meant to him.”

Guhan Subramanian, a Harvard law professor and expert witness for the plaintiff, argued Friday that Musk’s tweet and the proposed deal were a case of egregious corporate governance.

“To have no guardrails is very troubling,” Subramanian said of Musk’s Twitter account. Musk tested Friday that no one at Tesla reviewed his tweets in 2018 before he published them.

Subramanian said that when public companies go private, as Musk was proposing, there’s a much more extensive and rigorous process than what Musk and Tesla had gone through. Typically, a special committee is formed and there are months of engagement with consultants and advisers. Boards of directors typically approve the announcement of a company receiving an offer to go private, which wasn’t the case with Tesla.



Keystone Pipeline shuts down after oil leak, halting flow of 600,000 barrels a day

New York
CNN Business

The Keystone Pipeline has been shut down following a leak discovered near the border of Kansas and Nebraska.

The shutdown of the major oil pipeline that carries crude from Canada triggered volatility in the energy market on Thursday, with oil prices briefly surging as much as 5% before retreating.

Federal safety regulators are investigating the leak and have deployed to the site, a spokesperson for the Pipeline and Hazardous Materials Safety Administration told CNN.

Canada’s TC Energy (TRP) said it launched an emergency shutdown of the Keystone Pipeline System at 9 pm ET on Wednesday after alarms were triggered and pressure dropped in the system. The company said the system remains shut as “our crews actively respond and work to contain and recover the oil.”

Calgary-based TC Energy said there has been a “confirmed release of oil” into a creek located about 20 miles south of Steele City, Nebraska. An estimated 14,000 barrels of oil have been discharged as of late Thursday, the company said.

The PHMSA, an arm of the Transportation Department charged with enforcing safety regulations for pipelines, said the leak is located near Washington, Kansas, which is near the border with Nebraska.

The spokesperson said the agency continues to investigate the cause of the leak.

US oil prices climbed as high as $75.44 a barrel on the news, before easing. In recent trading, oil was up 0.8% to $72.57 a barrel. The gains follow a steep selloff in recent days that left crude at levels unseen since December 2021.

No timetable has been given for restarting the Keystone Pipeline, a 2,700-mile system that delivers mostly Canadian oil to major refineries across America. The pipeline can transport more than 600,000 barrels of oil per day.

Matt Smith, an analyst at commodity data provider Kpler, said Canadian oil normally transported by Keystone can’t be easily replaced.

“We’re seeing a pop in prices because this will impact refiners that take this crude,” Smith said.

“Our primary focus right now is the health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release,” TC Energy said in a statement.

The leak happened on an existing Keystone pipeline that is separate from Keystone XL, a controversial pipeline project that was terminated last year after President Joe Biden revoked the pipeline’s permit on his first day in office.

The Keystone Pipeline has experienced leaks in the past, including one in South Dakota in 2016 and another one in 2019 in North Dakota that impacted nearly five acres.



Premarket stocks: Jay Powell’s dream of the 90s is dead

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN Business

The US economy gained 263,000 jobs in November, 63,000 above the consensus estimate. The larger surprise was that average hourly earnings rose by 0.55%, the fastest pace since January.

The robust jobs market is good news for American workers, but concerning for the Federal Reserve and equity bulls alike. It indicates that the Fed’s strategy to rein in inflation by raising interest rates isn’t quite working and that more painful interest rate hikes are coming.

What’s happening: Executives often try to pass the cost of paying higher wages on to their customers by raising the prices of their goods and services. When prices rise, workers often demand more pay to keep up with the cost of living. And if they receive it, prices rise again to maintain corporate profits. This is the inflation-inducing wage-price spiral that Fed officials are desperately attempting to avoid.

The holy grail of economics, then, is often to keep wages up but prices low.

“To be clear, strong wage growth is a good thing,” Fed Chairman Jerome Powell said at the Brookings Institution on Wednesday. “But for wage growth to be sustainable, it needs to be consistent with 2% inflation.” The year-over-year wage growth rate increased to 5.1% in November, more than double that goal.

Getting back to a sustainable level of wage growth and tamping inflation will require reducing demand for labor. But there were 1.7 job openings for each job seeker in October and the labor participation rate decreased, keeping competition for workers, and wages, high.

The dream is over: For the past year, Powell has advanced the optimistic idea that wage growth could be lowered without slowing the economy into recession. The end of the pandemic would bring workers back from the sidelines and into the labor market, he said, reducing the labor imbalance and easing inflationary pressures.

The thought came straight out of the central bank’s 1994 playbook, when the Fed last tempered inflation and successfully executed a soft landing.

But employment today isn’t what it was then. Baby boomers were at the height of their careers in the 1990s and immigration numbers were strong. All of that led to a workforce bump that kept unemployment low even as interest rates rose.

Last week’s jobs report shows that Americans just aren’t returning to the job market.

Powell seemed to finally acknowledge that during his speech last week, citing an excess of permanent retirements as baby boomers leave the workforce and the impacts of long Covid are felt. Slower growth in the working-age population, a plunge in immigration and a surge in deaths during the pandemic are also long-term detriments to the labor-supply imbalance, he said.

In short, workers are in demand because there are fewer workers to go around.

Powell also seemingly acknowledged that his dream of a sudden surge in the supply of labor was over and that the path to lowering interest rates while avoiding widespread job loss had narrowed significantly.

“Despite some promising developments, we have a long way to go in restoring price stability,” he said.

Goldman Sachs grew its revenue this year, but the investment bank’s traders and salespeople will be fighting for a bonus pool that’s at least 10% lower than it was last year, according to a Bloomberg report.

Goldman has begun informing executives to expect figures cut by a “low double-digit percentage,” the report said.

Investment bank Jefferies also warned staff this week that 2022 will be a “difficult compensation season.”

The recent spate of gloomy warnings are part of a larger trend on Wall Street.

Overall, bankers who help consolidate companies could see their bonuses fall by about 20% this year, while those who help companies raise new capital could see that paycheck drop by 45%, according to a recent report from compensation consultancy Johnson Associates.

“This year is abnormally bad,” said Alan Johnson, managing director of Johnson Associates. “I think there will be a fair number of unhappy people. Some people will look for other jobs… But there will be layoffs, too.”

The big picture: No one is crying for bankers who earn an early-career salary of around $200,000 pre-bonus. But Johnson says you should be concerned even if you don’t work in finance. Year-end payouts are plunging as mergers and acquisitions dry up, inflation persists and recession threats grow.

“This is a canary in the coal mine for the economy. If the canary dies that’s not good for anybody,” said Johnson.

Global M&A volume was $642 billion in the third quarter, according to Refinitiv. That’s a 42% drop from the prior quarter and the lowest volume for that period in a decade.

A closely watched survey from the National Association for Business Economics found that the majority of their panel of economists believe there is a more than 50% chance of America experiencing a recession in 2023, most likely in the first quarter of the year.

“NABE survey participants continue to downgrade expectations for the US economy, with projections of slower economic growth, higher inflation, and a weaker labor market,” said NABE President Julia Coronado.

So what’s going to take us there? More than two-thirds of those panelists said they thought the largest factor in their dreary economic outlook was the Federal Reserve’s rate hike policy. Nearly 70% cited “too much monetary tightness” as the greatest downside risk.

More gloom: Less than one-quarter of the panelists in the pessimistic survey thought there was more than a 50-50 probability of the economy avoiding a “severe recession,” and none of those respondents rated the probability of achieving a soft landing at higher than 75% .