The Fed's more hawkish policymakers | 29 April 2022

#SP500:

U.S. business activity slowed in April as soaring costs for raw materials, fuel and labor pushed input prices to a record high, according to a survey. S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to a reading of 55.1 this month from 57.7 in March. "Many businesses continue to report a tailwind of pent-up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost-of-living squeeze, as well as persistent supply chain delays and labor constraints," said Chris Williamson, chief business economist at S&P Global. With price pressures mounting, business sentiment slipped to a six-month low in April. The ebb in sentiment was across the manufacturing and services industries.

Trading recommendation: sell 4305 and take profit 4200.

#WTI:

A half-point interest rate increase "will be on the table" when the Federal Reserve meets on May 3-4 to approve the next in what are expected to be a series of rate increases this year, Fed Chair Jerome Powell said. With inflation running roughly three times the Fed's 2% target, "it is appropriate to be moving a little more quickly," Powell said in a discussion of the global economy at the meetings of the International Monetary Fund. "Fifty basis points will be on the table for the May meeting." Traders in contracts linked to the overnight federal funds rate currently expect the Fed to increase it to a range between 2.75% and 3% by then, a pace that would involve half-point hikes at three upcoming meetings and quarter-point increases at the year's three other sessions. This is a negative signal for oil prices.

Trading recommendation: sell 100.10 and take profit 96.15

#HSI:

U.S. Treasury Secretary Janet Yellen said it was worth considering taking steps to lower U.S. tariffs on Chinese goods given the "desirable effects" such a move could have on lowering U.S. inflation, which has hit 40-year highs this year. Yellen's comments come after a top White House adviser, Daleep Singh, suggested the United States could lower tariffs imposed on a host of non-strategic Chinese goods such as bicycles or apparel to help combat inflation. Inflation is a critical concern for Biden, whose approval ratings are falling as the costs of energy, food and other staples increase, and his Democrats are at serious risk of losing their majorities in Congress in midterm elections in November. This is a positive signal for the Hong Kong stock market.

Trading recommendation: buy 20011 and take profit 19513