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[Daily Outlook] Crude oil surged to its highest since 2014


The New York state manufacturing index unexpectedly plunged into negative territory, the largest drop in nearly two years:

A New York state manufacturing index fell in January from the previous month, and orders and shipments fell sharply, suggesting that the omicron variant led to lower manufacturing activity. Data on Tuesday showed the New York Fed's manufacturing index fell sharply to -0.7 from 31.9 a month earlier. A reading below zero indicates contraction in economic activity, and the data fell short of economists' expectations from Bloomberg.


Money markets expect the Fed to raise rates by 50 basis points, the biggest move since 2000:

Money market prices show that investors are increasingly betting that the Federal Reserve could massively raise borrowing costs for the first time in more than two decades. While a 25bps rate hike remains the most likely scenario, the swap market is now pricing in more than 25bps hikes by the end of March. With no action expected at this month's policy meeting, that suggests traders are at least considering the possibility of a 50 basis point rate hike in March. Since May 2000, the Fed has not raised rates so much in one go. Rising speculation in recent days surrounding a steeper rate hike by the Federal Reserve may have exacerbated Tuesday's slide in U.S. Treasuries. JPMorgan Chase CEO Jamie Dimon warned last week that Fed tightening might not be as "gentle breeze" as some had expected, and billionaire investor Bill Ackman said the Fed should raise rates by 50 basis points in March Rebuild credibility.


The theme of Wall Street's Great Inflation peaked temporarily, and funds quickly withdrawn from inflation-preserving products:

From a series of cross-asset signals, including passive investing, Wall Street's big inflation-themed trade has temporarily peaked. Investors pulled money from the largest exchange-traded fund (ETF) tracking U.S. inflation-protected securities (TIPS) at the fastest pace since last May. That comes as Bank of America's customers with $1.1 trillion in assets are seeing their weakest inflation expectations in more than a decade. A net 48% of respondents in Bank of America's monthly survey of 329 respondents forecast inflation to fall from current levels, the highest percentage since 2009. The upbeat outlook echoes bond market expectations for easing price pressures, even as the mutant omicron wreaks new shocks on global supply chains. U.S. inflation hit a near 40-year high, prompting traders who had taken hedging positions over the past year to trim their already crowded exposure.


Crude oil surged to its highest since 2014, and the Biden administration says it is continuing to work with producers:

Oil prices rose to seven-year highs as the White House said the Biden administration was working with producers to ensure supply was at a level sufficient to meet demand. National Security Council spokeswoman Emily Horne said in a statement on Tuesday that the White House plans to continue monitoring energy prices against the backdrop of global economic growth, holding consultations with OPEC+ countries if necessary. "We continue to work with producers and consumers, and these measures have had a real impact on prices, and we still retain tools to address energy prices," Horne said. Rising gasoline prices have been the main factor behind soaring inflation during the Biden presidency, and the White House has done everything possible to reduce the cost of gasoline. Rising oil prices are hurting Biden's approval ratings, making it harder for Democrats to retain majorities in both chambers in November's midterm elections.


The People's Bank of China said it will introduce more policies conducive to stabilizing growth before the downward pressure eases:

Officials of the People's Bank of China said at the first press conference held in the new year that the current economy is facing triple pressures, and the policy must be strengthened, the monetary policy toolbox must be opened wider, the total amount should be kept stable, and credit collapse should be avoided. At a press conference held by the State Council Information Office on Tuesday, Liu Guoqiang, deputy governor of the People's Bank of China, said that a variety of monetary policy tools will be used comprehensively to keep liquidity reasonably sufficient, enhance the stability of total credit growth, and maintain money supply and social financing. The scale growth rate basically matches the nominal economic growth rate. "Before the downward pressure on the economy is fundamentally relieved, progress must serve stability, not introduce policies that are not conducive to stability, and introduce more policies that are conducive to stability, so as to promote stability. Simply put, the current focus is on stability, and policies are The requirement is to exert force," Liu Guoqiang said at the press conference. He also said that the policy will be sufficient, precise and advanced.

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