Neel Kashkari, President and CEO, Federal Reserve Bank of Minneapolis, speaks at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, U.S., May 7, 2024.
David Swanson | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Markets regain momentum
U.S. markets rose Monday, with the S&P 500 and Dow Jones Industrial Average notching fresh closing highs. Asia-Pacific stocks mostly climbed Tuesday, with the Chinese and Hong Kong markets popping over 3% on Beijing’s announcement of policy easing measures.
PBOC policy easing
The People’s Bank of China Governor Pan Gongsheng on Tuesday announced a cut to banks’ reserve requirement ratio. That means banks won’t need as much cash on hand, which injects liquidity into the economy. The yields on Chinese bonds, in turn, dropped to record lows after the PBOC’s announcement.
New property stimulus in China
At the same press conference, the PBOC governor also said Beijing will reduce interest rates on existing individual mortgages by an average of half a percentage point, and lower the down-payment ratio for second home purchases to 15% from 25%. Hong Kong-listed shares of property companies surged in response to the stimulus.
Revised offer for Boeing workers
Amid a strike by Boeing workers, the company revised its contract offer, raising wages by 30% over four years, up from 25% it proposed earlier. Boeing reinstated annual bonuses and doubled a contract ratification bonus to $6,000 from $3,000. The labor union said Monday it is reviewing the offer.
[PRO] Tech for Big Tech
The rising tide of artificial intelligence is lifting related stocks. Specialized chips, data centers and electricity are needed to power the AI boom. Companies in those sectors have seen their stocks rise. The next to benefit from AI, according to Japanese bank Nomura, is the industry specializing in cooling of data centers.
The bottom line
We were treated to abundant Fedspeak on Monday.
In an interview with CNBC, Minneapolis Fed President Neel Kashkari said, “We still have a strong, healthy labor market. But I want to keep it a strong, healthy labor market.” Kashkari’s emphasis on the strength of the jobs market suggests the Fed wants to reinforce the narrative that the economy’s not staring at a recession.
Atlanta Fed President Raphael Bostic was more circumspect. “Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,” he said at a separate event.
That Bostic was possibly surprised by the increase in the unemployment rate is an indication some Fed officials are indeed worried the jobs market isn’t as strong as it should be.
Last, in remarks to the National Association of State Treasurers, Chicago Fed President Austan Goolsbee said that “it’s appropriate to increase our focus on the other side of the Fed’s mandate — to think about risks to employment, too, not just inflation.”
Goolsbee sees “many more rate cuts over the next year” because the state of employment is a “through line on economic conditions.” That suggests economic conditions need the support of additional cuts.
Still, yesterday’s Fedspeak was sufficiently vague and didn’t seem to cause alarm.
Major U.S. indexes ticked up. The S&P rose 0.28%, the Dow advanced 0.15% and the Nasdaq Composite climbed 0.14%. While those increases appear small, they pushed the S&P and Dow to new closing highs.
The narrative the central bank has been on top of its game to ensure a soft landing, then, is very much intact.
– CNBC’s Jeff Cox, Brian Evans and Alex Harring contributed to this story.
