Hammer On

Federal Reserve officials kept up the drumbeat of support for extending their run of interest-rate hikes, stressing the need to quash inflation that’s proved unexpectedly stubborn. Five officials, from Governor Christopher Waller to Cleveland Fed President Loretta Mester, delivered a resolutely hawkish message that inflation is too high and they won’t be deterred from raising rates by volatility in financial markets. The median of the 19 policymakers’ latest projections sees another 1.25 percentage points of increases over their two remaining meetings of the year, with investors pricing a 75 basis-point move when they gather Nov. 1-2. Fed forecasts show an additional 25 basis-point increase next year, with policy staying at restrictive levels until at least 2024.

Nuclear ‘Armageddon’

President Joe Biden said the US is trying to find an “off-ramp” for Russian President Vladimir Putin and worries his threats to use tactical nuclear weapons are real and could lead to “Armageddon.” “I don’t think there’s any such thing as the ability to easily use tactical nuclear weapons and not end up with Armageddon,” Biden said Thursday at a fundraiser in New York City. Biden’s comments are in contrast to those from National Security Advisor Jake Sullivan, who said last week that the US does not presently see indications about the imminent use of the weapons and that the threat is the latest in a string of similar warnings Putin has employed since the invasion began in February.

When Banks Meet Kwarteng

Chancellor of the Exchequer Kwasi Kwarteng discussed ways to ease the cost-of-living crisis, including giving more time for energy and council tax payments, with the bosses of UK banks on Thursday. The bosses of banks including mortgage giants NatWest and Lloyds Banking attended, according to a Twitter post by the Treasury. The meeting came after banks pulled more than 40% of mortgage products from the market following the chancellor’s so-called mini-budget on Sept. 23. Since then, the cost of a five-year mortgage has breached 6% for the first time in more than a decade, while the two-year rate is at its highest in almost 14 years.

Next on Credit Suisse

Credit Suisse is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses, as the firm’s leaders aim to put the finishing touches on their planned overhaul. Businesses being targeted for a boutique-style future include the advisory and dealmaking teams alongside the leveraged finance unit, people with knowledge of the deliberations said. The bank is interested in an outside investor to take a partial stake in order to provide capital and help fund the costs of hiring and keeping talent, the people said. Meanwhile, an analyst at JPMorgan says Credit Suisse is worth at least $15 billion as its shares are still worth more than the market is currently pricing.

Musk Must Make Good

A Delaware judge halted a court case against Elon Musk over his $44 billion purchase of Twitter, giving the parties more time to complete the deal. Delaware Chancery Judge Kathaleen St. J. McCormick said if the transaction isn’t done by 5 p.m. on Oct. 28, she will set new trial dates in November, according to an order issued Thursday. The ruling hands a partial victory to Musk, who earlier in the day had asked the judge to pause Twitter’s lawsuit against him ahead of an Oct. 17 trial date. But it also gives Musk a deadline by which he needs to make good on his April agreement to pay $54.20 a share — an obligation he previously tried to abandon.

Coming Up…

European equity futures edged lower ahead of a key US jobs print that’s expected to underscore the need for more Fed tightening and as investors assessed weak chipmaker earnings. BOE Deputy Governor Dave Ramsden and the Fed’s John Williams speak at events. The Nobel Peace Prize is announced. Expected data include Norway GDP and Italy retail sales. JD Wetherspoon and Tilray Brands report earnings.

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(Source: Bloomberg, Oct. 7-2022)