Bears Avenge

A sober warning for Wall Street and beyond: The Federal Reserve is still on a collision course with financial markets. Stocks and bonds are set to tumble once more even though inflation has likely peaked, according to the latest MLIV Pulse survey, as rate hikes reawaken the great 2022 selloff. Ahead of the Jackson Hole symposium later this week, 68% of respondents see the most destabilizing era of price pressures in decades eroding corporate margins and sending equities lower. All these bearish sentiments underscore the deep skepticism held by investors in the face of an unexpected $7 trillion equity rebound of late. While stocks fell last week, the S&P 500 has still trimmed its 2022 loss to 11% versus the 23% decline through its mid-June nadir.

Deal With Iran

President Joe Biden spoke Sunday with fellow Western leaders looking to revive a nuclear deal with Iran, as the US weighs a response to Tehran’s position on the latest proposal. Biden spoke Sunday with German Chancellor Olaf Scholz, French President Emmanuel Macron and UK Prime Minister Boris Johnson. The four nations were among the signatories of the original deal, which also included Russia and China. Negotiations will continue. Iran submitted its response on Aug. 15 to a framework circulated by the EU for a deal, which the EU took as constructive. The US has stayed tight-lipped on its position.

Pick One, Liz

Rishi Sunak has told Liz Truss, his rival and the front-runner in the race to be the next UK prime minister, she can’t deliver both support for struggling British households this winter and stick to her flagship policy of tax cuts. The way to tackle the cost of living crisis, caused by soaring energy and food bills, has become a key point of difference in the two candidates’ campaigns to replace Boris Johnson. Sunak, the former Chancellor of the Exchequer, is pledging more direct aid, while Truss stresses the importance of allowing people to keep more of their money. The stakes in the debate will be raised further this week when the energy regulator Ofgem announces what the new price cap will be for the three-month period beginning in October.

No Wall Street Titan

The new boss of Credit Suisse seems to have had enough of the Swiss giant’s investment bank and the gloves are finally off in Zurich. After years of past chief executive officers tinkering at the edges of a misfiring machine that lost $1 billion in the first six months of 2022, bankers now fear a torching of much of the division. Credit Suisse’s decades of dueling with the titans of Wall Street for a place among the bulge-bracket investment bank elite are potentially over. One possibility is that the investment bank ceases to exist as a separate division at some stage, with the remnant parts needed for asset and wealth management and the Swiss bank folded into those units.

Coming Up…

European stocks are poised to start the week on a soft note as investors assess the Fed’s tightening path ahead of this week’s Jackson Hole symposium. UK Foreign Secretary Liz Truss and former Chancellor Rishi Sunak hold hustings in Birmingham as they vie to be the country’s next prime minister. German Chancellor Olaf Scholz visits Canada, where he’s expected to meet Prime Minister Justin Trudeau. Austrian Chancellor Karl Nehammer delivers remarks at an event. Expected data include Irish PPI inflation. Palo Alto Networks and Zoom are scheduled to report earnings.

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(Source: Bloomberg, August 22-2022)