U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC.
Win Mcnamee | Getty Images
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
Slower pace of Fed cuts
Federal Reserve Governor Christopher Waller said there will be monetary policy loosening this year but the central bank could do it at a slower pace. “In many previous cycles … the FOMC cut rates reactively and did so quickly and often by large amounts.” For this cycle, he said, “I see no reason to move as quickly or cut as rapidly as in the past.”
China’s growth
Official data showed China’s economy grew at a pace of 5.2% in 2023, exceeding Beijing’s 5% growth target for the year by a sliver. For the first time since the summer, China posted youth jobless rates which surged to 14.9% for December. The country temporarily stopped reporting the jobless rate for young people last year, saying it had to reassess its methods. Youth unemployment previously recorded a reading of over 20%.
More Big Bank earnings
Goldman Sachs and Morgan Stanley reported earnings on Tuesday, wrapping up results for Wall Street’s biggest six lenders. Morgan Stanley’s fourth quarter revenue topped analysts’ estimates but the bank warned of economic and geopolitical risks. Goldman Sachs exceeded expectations, boosted by higher asset and wealth management revenue.
[PRO] ‘Buy the dip’
Morgan Stanley highlights its key picks in Europe’s technology hardware sector after a “rollercoaster year” in 2023. The investment bank says the sector could recover as excitement grows around themes like artificial intelligence, advanced packaging, silicon carbide and gate-all-around transistors.
The bottom line
Wall Street returned for the first day back after a long weekend, only to be rudely awoken by a reality check from a Fed official.
The blue-chip Dow Jones Industrial Average closed 0.62% lower, while the S&P 500 dropped 0.37%. The tech-heavy Nasdaq Composite ended with a 0.19% dip.
Federal Reserve Governor Christopher Waller said there’s “no reason” for the central bank to “move as quickly” in its approach to lower interest rates this year. His comments were in sharp contrast to the aggressive policy loosening that markets are expecting this year.
Traders still see a more than 64% chance of the Fed cutting interest rates by 25 basis points to 5%-5.25% range at its meeting in March, according to the CME Group’s FedWatch tool. Those bets came down substantially from a near 77% chance of rate cuts on Friday, when data showed producer prices unexpected dropped in December.
In Asia hours, China reported its highly anticipated economic growth figures along with an unexpected print on youth unemployment, which the country abruptly stopped reporting since last summer.
And perhaps for good reason too.
The December reading on jobless rate for young individuals came in at 14.9%, lower than record levels of 21.3% in June.
Dan Wang, chief economist at Hang Seng Bank told CNBC’s Street Signs Asia she was surprised by the improvement in youth unemployment: “I can see that it is a result of government efforts and not so much improving economic fundamentals.”
China’s economy grew at 5.2% for all of 2023, above the 5% growth target it had set for itself at the beginning of the year. For the fourth quarter, it also grew at a pace of 5.2% — falling short of a Reuters poll expectation of 5.3%.
Day 2 at the World Economic Forum in Davos saw plenty more discussions.
Artificial intelligence remained a hot topic, with Microsoft CEO Satya Nadella advocating for its uses, noting that more countries are now talking about AI in similar ways.
“I think [a global regulatory approach to AI is] very desirable, because I think we’re now at this point where these are global challenges that require global norms and global standards,” Nadella said.
Microsoft is a big player in the AI arms race.
