The Chinese government just had the sort of impact on markets that the Federal Reserve can only dream about.
In fairness to the Fed, it hasn’t spent the best part of a year undermining the stock market through a wide-ranging regulatory crackdown as Beijing has.
Nonetheless the intervention from China and the ensuing moves in Chinese stocks Wednesday are pretty seismic.
China promised to keep its stock markets stable and implement measures to boost its economy, according to a state-run media report of a meeting of the country’s financial stability and development committee. The committee also stressed that regulators should “actively introduce market-friendly policies.”
Significantly for U.S. investors, the committee said China continues to support companies’ listing of shares overseas and has maintained “good communications” with U.S. regulators, with a cooperation plan in the works. That’s quite the development – just last week the Securities and Exchange Commission named five Chinese companies that could face delisting.
So what’s changed? The pressure on Chinese stocks had ramped up in the past week as regulatory concerns returned and surging Covid cases led Beijing to lock down millions of people. The country’s links to Russia also spooked investors as U.S. officials said the Russian government has asked China for military aid. If it did help Russia, sanctions would surely follow.
Regardless of what’s behind it, China has abruptly changed its tune and it has sparked some huge gains, particularly among tech stocks.
Alibaba’s Hong Kong-listed shares soared close to 30%, while the e-commerce giant’s U.S.-listed stock was 20% higher in premarket trading. It wasn’t the only one –
JD.com surged 35% in Hong Kong and
Baidu rose 20% among others.
The Fed is up next, delivering its decision on interest rates later Wednesday. A 25 basis point hike is expected but the forward guidance and Jerome Powell’s comments have the potential to move markets – just not quite as much.
*** Join Quentin Fottrell, managing editor, personal finance at MarketWatch, today at noon as he talks with Andrew Keshner, tax reporter, and Greg Robb, senior Washington correspondent, about Russia’s invasion of Ukraine and the impact on the U.S. Sign up here.
The Fed’s ‘Forward Guidance’ Is Key Today
The Federal Reserve stands poised to begin lifting its short-term interest rates–likely by a quarter-point–and ending emergency bond buying. More important will be Fed Chairman Jerome Powell’s “forward guidance” on how aggressively the central bank will move to rein in surging inflation.
- The central bank’s two-day meeting, which concludes later Wednesday, comes amid prices climbing at the fastest pace in 40 years and an uncertain geopolitical picture sparked by Russia’s invasion of Ukraine.
- Powell recently told a House panel he expects to start interest-rate liftoff with a 0.25 percentage point increase, bringing the target rate to a range of 0.25% to 0.5%, while remaining vigilant on the war in Ukraine and its impact on the economy.
- In addition to updating plans for interest rates and the balance sheet, the Fed also will update on its longer-term outlook for economic growth and inflation in the so-called dot plot, or summary of economic projections.
What’s Next: With words like stagflation and recession grabbing headlines, Powell will likely look to project a hawkish image on the inflationary front while retaining flexibility to respond to sudden growth shocks like the recent-oil price surge and continuing pandemic and geopolitical uncertainty.
Zelensky to Address Congress as Biden Sends More Aid
Ukrainian President Volodymyr Zelensky will address Congress virtually at 9 a.m. Eastern time today. On Tuesday, he told the Canadian Parliament the war has killed 97 children, asking them for more help and to close Ukrainian airspace to stop the airstrikes, Canadian Broadcasting Corp. reported.
- President Joe Biden approved $13.6 billion more aid for Ukraine, its nearly 3 million refugees, and surrounding countries in the bipartisan government funding bill. Biden plans to announce $1 billion in military aid for Ukraine as early as today as part of that $13.6 billion, The Wall Street Journal reported.
- Fox News cameraman Pierre Zakrzewski and a consultant, Oleksandra “Sasha” Kuvshynova, were killed on assignment near Kyiv covering the war in Ukraine, network chief Suzanne Scott told employees Tuesday. Foreign-affairs correspondent Benjamin Hall is hospitalized in Ukraine.
- The European Union and the U.K. separately approved fresh sanctions and restrictions against Russia, including a ban on energy sector investment, an end to luxury exports to Russia, and new sanctions against Russian business executives and oligarchs. The U.S. added Russian Defense Ministry officials to its own sanctions list.
Duolingo, the language-learning website and mobile app, said interest in learning Ukrainian has increased 485% globally since Russia’s invasion, mostly in the U.S., and spiked 1,800% in Poland, where people are taking in refugees. Duolingo is donating ad revenue from its Ukrainian lessons to Ukraine relief efforts.
What’s Next: Biden is headed to a NATO summit in Brussels, Belgium, on March 25, and to a European Council Summit on Ukraine, to discuss ongoing deterrence efforts against Russia and providing defense and humanitarian aid to Ukraine, the White House said.
—Janet H. Cho
AMC’s Deal for Mining Company Not as Bizarre as It Sounds
AMC Entertainment, the movie theater operator otherwise known as a favorite of meme stock investors, has a 22% stake in
Hycroft Mining Holding, a gold and silver mining company, going in with billionaire Canadian precious metal investor Eric Sprott for a deal totaling $56 million.
- It’s a head-scratcher deal, no doubt, but AMC sees it as a chance to diversify beyond its core business of showing movies and selling popcorn. Like AMC, Hycroft has seen a cash crunch, though more recently.
- AMC CEO Adam Aron said Hycroft “has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue.” AMC raised money through stock sales and debt transactions in 2020 and 2021, and “we will be a valuable advisor” as Hycroft tries to raise cash, he said.
- Hycroft is 40% owned by Mudrick Capital Management, a distressed asset investor. For a brief period in early 2021, Mudrick also had a $100 million secured debt deal with AMC, which had been selling shares to raise funding as its cash depleted. Mudrick also converted debt to AMC stock.
Past deals of seemingly unrelated companies include Swiss food maker
Nestlés $600 million deal for weight loss company Jenny Craig in 2006 and battery maker
Energizer’s $1.9 billion deal for tampon maker Playtex in 2007.
What’s Next: AMC is also adding new theaters, boosting the number of IMAX and Dolby Cinema screens, offering non-fungible token programs, and accepting cryptocurrency payments to boost theater attendance. “It isn’t enough for us to merely bring back the AMC of old,” Aron said.
Retail Sales Expected to Reach Nearly $5 Trillion in 2022
The National Retail Federation expects retail sales to rise 6% to 8% in 2022, to as much as $4.95 trillion, excluding transactions for automobiles, gasoline and restaurant visits. The forecast is higher than the 10-year, prepandemic growth rate of 3.7%, but lower than last year’s 14% increase.
- NRF anticipates strong growth in jobs and wages, declining unemployment, and full-year GDP of around 3.5%. Inflation is expected to stay “elevated well into 2023,” NRF Chief Economist Jack Kleinhenz said.
- Ellen Zentner, Morgan Stanley’s chief U.S. economist, forecasts GDP growth of 4.3% this year, but Joel Prakken, IHS Markit’s chief U.S. economist, expects only 2.4%, saying consumers will see higher food and fuel prices, including $150 a barrel oil before summer.
U.S. consumers will spend $1 trillion shopping online in 2022, the highest ever,
Adobe said in a new study. The software company estimates total 2021 U.S. online sales were $885 billion, up 9% from 2020.
- Adobe found clear evidence of online inflation, with prices rising for 21 consecutive months. Higher prices accounted for $4.7 billion in 2020 online spending and are expected to add $27 billion to overall spending this year.
What’s Next: The $1.7 trillion shoppers spent online during the pandemic, from March 2020 to February 2022, nearly tripled from the $609 billion spent in 2018 and 2019 combined. Online grocery shopping, which jumped to $73.7 billion in 2020, is expected to surpass $85 billion this year.
—Eric J. Savitz and Janet H. Cho
Airline Stocks Take Off on Positive Guidance, Higher Demand
The stocks of American Airlines, Delta Air Lines, Southwest Airlines and United Airlines took flight on Tuesday, after they unveiled improved revenue forecasts and higher demand. Passenger volumes at U.S. airports on Sunday and Monday reached 90% of 2019 levels.
American Airlines expects first quarter revenue to drop 17% from 2019, but that is better than a previous forecast for a drop of 20% to 22%. It warned that it has no contracts outstanding to hedge its fuel consumption, meaning it is “fully exposed” to changing fuel prices. Its shares rose 2.6%.
Delta Air Lines expects to post revenue in the March quarter at 78% of 2019 levels, up from the 72% to 75% range it issued in January. Delta said total revenue per available seat mile will be flat in March 2022, compared with March 2019. Its shares rose 8.7%.
Southwest Airlines said its first-quarter revenue will be down 8% to 10% from the first quarter in 2019, also better than previous forecasts for a 10% to 15% drop. Shares rose 4.9% after it said March would be “solidly profitable” because of improving revenue and fuel hedging gains.
United Airlines said revenue in the first quarter of 2022 will be “near the better end” of guidance for a drop of 20% to 25% from 2019. It said 2022 capacity will be down by a high-single-digits percentage compared with 2019, better than its forecast in January. Shares rose 9.2%.
What’s Next: Delta signaled strong spring and summer travel demand. The Omicron variant of coronavirus delayed the demand recovery for 60 days earlier this year, but it expects a return to profitability in March.
—Callum Keown and Janet H. Cho
My mother is close to passing. We have not spoken in over 20 years because we don’t get along. We both live in Florida. Since my brother and dad have both passed I am the only direct remaining family member. My cousin is the only one my mother still talks to in our family.
Even though I don’t speak to my mother, I previously told my cousin if she needed me I would be there for her. However, that changed when my brother passed away from cancer, and no one told me until the last few days of his life. Not one person put a phone up to his ear so I could speak to him. My mother poisoned his mind.
She relies on my cousin to do repairs on her home. When my mom dies I want complete control of her estate. She owes me for the hell she put me through my entire life. I do not want it to go to my cousin who is stepping in during her twilight hours. Am I entitled to her entire estate as the last living direct family member?
—Sincerely Estranged Daughter
Read The Moneyist’s response here.
—Newsletter edited by Liz Moyer, Rupert Steiner