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Mike Dolan: ROI-Fed might have to hike its prices to maintain its credibility
It may not be sufficient to wait out the oil crisis. Federal Reserve officials may have to show that they will take action to achieve their inflation targets, just as European counterparts seem to be determined to do. If that happens, it could be a big deal given what Wall Street forecasters are currently thinking. The crude oil futures for the end of year are at their highest levels since the Iran 'war began, with little evidence of a lasting peace agreement. The latest U.S. April inflation data showed that the damage to?already high prices was escalating. The Fed's target of 2% for annual consumer price inflation has not been met since February 2021. Producer prices rose the most since March 2022, when Russia invaded Ukraine. They also increased at the fastest annual rate in three years. You can manipulate the numbers in a thousand different ways, but there is no doubt that core inflation and "trimmed-mean inflation rates" that remove the extreme monthly price movements are on the rise. The price trend is now moving higher, as has the overall trend. The regional Fed presidents are concerned that the central bank’s inability of returning to its target could undermine its credibility over the long term and push inflation expectations and market prices even higher. Susan Collins, the president of Boston Fed, is the latest to express concern. Collins stated on Wednesday that "more than five years of inflation above target has lowered my patience to 'look through' another supply-shock." "I can imagine a scenario where some policy tightening would be needed to ensure that inflation returns to 2% durably and in a timely fashion." Collins is not the only one. The more hawkish members of the Fed's Policymaking Council echo Collins' view. Beth Hammack of the Cleveland Fed, for instance, was among three policymakers to dissented against the Fed's easing bias in its last statement. She said that the statement should be neutral about whether or not the next step is up or down, or if it's just on hold. The hawkish nature of the central bank is not hidden by talk of a split. Many Fed watchers believe that only three of the 18 Fed board members or regional presidents are dovish. And Warsh only replaces one of the doves. The only way up is up? How likely is the next Fed action if a prolonged energy squeeze continues to affect core goods and service prices? Fed futures markets that bet confidently on two rate cuts up until the attack on Iran in late Febuary now see no further easing. They place an 80% probability of a 25 basis-point increase in the policy rate of 3.625% over the next year. This week, the yields on two-year Treasury bonds topped 4% once again. The 30-year bond rate is now above 5% and the average 30-year fixed-rate mortgage rates are at 6.46%, above 6% for almost four years. Fixed-income markets are already bracing themselves for a shift in Fed policy, and it's not what most people had in mind when Warsh first was nominated back in January. The 'persistence of forecast rate cuts suggests that the investment world is still focusing on further easing. This is based on the assumption that the Gulf conflict will end and oil prices will fall, re-opening the Fed door. Only one economist and strategist polled three weeks earlier expected that rates would rise by mid-year. Median view was two further cuts in that time. Even though the poor inflation data has forced many banks and forecasters? to delay their timelines for easing, rate reductions remain on the table. UBS Global Wealth Management pushed back its expectations for the next cut by three months, to September. However, it still expects that two cuts will be made in December and February next year. Morgan Stanley's mid-year outlook still pencils a Fed reduction next year. It also predicts an S&P 500 rise of 11% and a decline in 10-year Treasury rates to 4.2%. All these investment firms hedge their bets with different scenarios, which is understandable considering the geopolitical uncertainty. Even though the market for rates may have partially repricing, there would?have to a tsunami of changes in forecasts if the Fed's next move was indeed upward. The opinions expressed are those of Mike Dolan a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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CEZ, the Czech energy company, has raised its profit forecast for 2026 as Middle East prices rise.
CEZ raised its earnings forecast for 2026 on Thursday due to an increase in prices and generation caused by the Middle East conflict. The Czech electricity producer also posted a 6% rise in first-quarter adjusted profit. CEZ, which is majority owned by Czech state, and will undergo reorganisation in the next few years, has said that it expects an adjusted net profit between 30 billion crowns (about $1.44 billion and $1.64 billion), compared to its previous forecast of 27 billion crowns to 31 billion. Earnings are expected to be in the range of 107- 112 billion crowns. This is also higher than "the previous outlook". CEZ expects higher electricity prices, increased coal usage and higher coal mining volumes due to the Middle East Crisis, which has resulted in a blockade of Strait of Hormuz - a major waterway for oil, gas and other commodities. CEZ achieved a net profit of 28.1 billion crowns in 2025 and EBITDA 137.0 billion crowns. The adjusted net profit in the first quarter?rose above the average poll estimate of 12.3 billion crowns. The elimination of the windfall tax was a major driver of earnings. Lower prices and lower generation also played a role. EBITDA dropped 18% on an annual basis to 35.3 billion crowns in the third quarter. The company reported that it had pre-sold?31.9 terawatt hours of its output for 2027 at an average price of 86 euros per Megawatt Hour, as opposed to a previous rate of 85 euros.
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India's largest state, Uttar Pradesh, is hit by a storm that kills nearly 90 people
The state disaster management office announced on Thursday that almost 90 people were killed by a violent storm that slammed India's most populous state - Uttar Pradesh - with rain and hail. Storms are frequent in the north during the hot months of March to June before the monsoons rains provide relief. In a Facebook post, Uttar -Pradesh relief commissioner stated that "adverse weather conditions", on Wednesday, led to the death of 89 people. The post also reported that storms, hail and lightning caused 114 livestock deaths, 53 injuries, and 87 homes to be damaged in the state. TV images showed billboards and trees uprooted by strong winds, some of which crashed into cars. Dust and debris clouds also knocked over wooden furniture from roadside stalls. A state relief official said that some of the deaths were caused by falling trees and collapsed walls in homes. Authorities?said that the chief minister of a state governed by Prime Minister NarendraModi's Bharatiya Janata Party had ordered officials to distribute financial aid and assist survivors within 24 hours. (Reporting and writing by Saurabh Dash and Jatindra dash; writing by Sakshi dayal and Shanima aniyeri; editing by Clarence Fernandez, YPrajesh and Clarence Fernandez)
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Wall Street Journal, May 14,
These are the most popular?stories from the Wall Street Journal. These?stories have not been verified and we cannot vouch for their accuracy. Cerebras Systems' initial public offering in the United States was priced at $185 per share, which is above the upper end of their indicated price range. - 'Chip startup Fractile announced that it raised a $220 million Series?B funding round led by Accel, Factorial Funds and Peter Thiel’s Founders Fund. Cisco Systems will cut?thousands? of jobs in order to?increase artificial intelligence? in its business. The National Football League has signed a four-year contract with Netflix to license three additional games. Additional games have also been licensed to Fox and NBC. Equinox Gold and Orla Mining have agreed to merge in a deal that would create a $18.5 billion North American gold miner. This would allow both companies to accelerate growth, which would otherwise take years. Susan Collins, the Boston Fed president, has hinted that the central banks might have to raise interest rates in the future if inflation pressures increase. This is despite the fact that this is not her current most likely forecast for the economy.
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Gold prices rise on weaker dollar as Trump-Xi meetings and Iran war are in the spotlight
Gold prices rose on Thursday as a result of a 'weaker' dollar. Investors were also looking for any signs of progress with the Iran War and focused mainly on talks between U.S. president Donald?Trump & Chinese president Xi Jinping. As of 0440 GMT, spot gold was 0.4% higher, at $4,706.70 an ounce. U.S. Gold Futures for June Delivery rose 0.2% to $4,713.40. Dollar eased making greenback bullion prices more affordable for holders other currencies. GoldSilver Central's Managing Director Brian Lan said, "Gold is consolidating at the moment because everyone is watching what happens in the high level talks between the U.S. and China." Lan said: "I think (gold) is also a window for those investors who want to get into metal." Trump will meet with Xi at a series in Beijing to discuss economic gains, maintain a fragile truce on trade, and negotiate thorny issues like the Middle East conflict. Analysts say that Trump will likely seek China's assistance to end the unpopular and costly conflict he started with Israel late in February. However, analysts believe he won't get the support he needs. Data released on Wednesday shows that U.S. Producer Prices posted their largest increase in four-years in April. This was boosted by rising costs for goods and services. It is the latest indication of inflation. Kevin Warsh was approved by the U.S. Senate as chairman of the Federal Reserve. The U.S. Central Bank is grappling with a?intensifying rate of inflation, which could make it difficult to implement the interest-rate reductions that Trump has demanded. According to CME Group’s FedWatch, traders have?largely priced in a Fed rate reduction this year. Markets now see a 28% likelihood of a hike before December. Gold is often considered to be a hedge against inflation, but higher interest rates can weigh down on this non-yielding material. Gold discounts in India reached a record-breaking $200 per ounce on Tuesday, after a surge in prices following an import duty hike triggered investor sales in a weakening demand environment. Spot silver dropped 1% to $87.08 an ounce. Platinum was unchanged at $2,137.30 and palladium fell 0.1% to $1,499.14.
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Demand for Japanese stocks is boosted by optimism about technology.
In the seven days leading up to May 9, foreign flows into Japanese shares jumped to an all-time high. A rally in AI-linked stocks, as well as strong tech and banking sector earnings, boosted risk sentiment. Data from the Ministry of Finance (MOF) on Thursday showed that foreigners continued to buy Japanese stocks for a sixth consecutive week. The Nikkei?225 posted a record high of 63,799.32 points on Thursday. AI-linked demand?and rising interest rate boosted earnings for Japanese tech companies and banking stocks. Sumco, Kioxia, and Ibiden are tech sector suppliers that have set records this week. Sumco, Kioxia, and Ibiden all gained last week. MOF data revealed on Wednesday that foreigners had invested a record amount of 9.41 trillion yen in domestic stocks during April. Japanese bonds attracted a net 474.1 billion Japanese yen in foreign capital during the last week, after facing outflows of two consecutive weeks. In the past week, foreigners purchased long-term 'bonds' of?106.2billion yen as well as short-term bonds worth 367.9billion yen. Japanese investors also sold 593.6 billion yen worth of foreign shares. This is compared to net sales of 2,43 trillion yen in the previous week. The Japanese, on the other hand, continued to be net buyers of foreign long-term debt, investing?1.64 trillion in the second consecutive week.
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The morning bid rally for EUROPE-AI continues, while the Trump-Xi Summit takes centre stage
Ankur Banerjee gives us a look at what the future holds for European and global markets The record-setting rally fueled by 'AI' appears to be going well as investors shrug off the prospect that interest rates will remain higher in order to combat inflation, oil prices over $100 per barrel and the impasse of negotiations to end the Iran War. The markets are on edge as a high-stakes meeting between U.S. president Donald Trump and China’s Xi Jinping, which has yet to yield any details. Even if expectations are low, a continuation to the status quo may be enough to elicit positive reactions. Trump called Xi a 'great leader and a good friend' as they began two days of discussions on Thursday. The talks will cover the fragile trade truce between China and the United States, Iran and U.S. weapons sales to Taiwan. Xi and Trump greeted each other on the red carpet of Beijing's Great Hall of the People. They shook hands, smiled, and shook hands. Trump brought a group CEOs with him, including Nvidia CEO Jensen Huang and?Elon Musk. For now, the AI theme is still in charge. Asia remains the leader. South Korea's KOSPI, Taiwan's stocks and Japan's Nikkei are all just a few points away from their records peaks reached earlier this week. AI-driven bets have boosted all three indexes. There is little sign that the momentum will fade as Asian chipmakers continue to record record profits with their hyperscaler clients. SK Hynix is 'on the verge of joining the trillion-dollar club. The stock has risen by?more that?1,000% from the beginning of 2025. Investors will be focusing on UK economic data to determine the extent of damage caused by the Iran War that erupted in February. As the political drama intensifies, sterling and government bonds will continue to face pressure. Keir Starmer, British Prime Minister, has so far refused to resign following one of the Labour Party's biggest defeats at last week's regional and local elections. The following are key developments that may influence the markets on Thursday. Economic Events Estimates of UK GDP for March and Q1 Data for UK construction and industrial output in March
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Climate risks are increasing, and a study warns that the World Cup in 2026 will be dangerously hot.
The 'global players union' of football expressed concern on Thursday over the heat during the 2026 World Cup, after scientists warned that the risk of dangerous temperatures for both players and fans had'significantly increased'. A climate research group, World Weather Attribution, has found that a quarter (24 out of 104) matches in the expanded tournament in the United States, Mexico, and Canada will likely be played under conditions that exceed the safety limits recommended by FIFPRO. This is almost twice as high as the risk at the 1994 World Cup held in the United States. Researchers said that around five matches may be played in unsafe conditions, and it would be wise to postpone them. Scientists evaluated the risk by using kickoff time and the Wet Bulb Globe Temperature index (WBGT), which measures how well the body can cool itself. Vincent Gouttebarge, FIFPRO’s medical director said: "The calculations used to estimate the likelihood that 2026 FIFA World Cup matches will be played under high WBGT are in line with FIFPRO’s calculations published in 2020." These estimates justify the need to implement a number of mitigation strategies to protect players' health and performance in hot conditions. FIFPRO recommends that cooling measures be taken when the WBGT exceeds 26 degrees Celsius. Matches should also be postponed at 28C. This is roughly equivalent to 38C for dry heat or 30C with high humidity. FIFA has said that it has undertaken heat-risk planning. This includes measures such as three-minute breaks for hydration in each half-game, cooling infrastructures for fans and players and adapted work-rest cycle. In a press release, FIFA said that it was committed to the protection of the health and well-being of all players, officials, fans, staff and volunteers. "MORE CONSERVATIVE FOOTBALL" Chris Mullington is a consultant anaesthetist and clinical senior lecturer for Imperial College London NHS Trust. He said that extreme heat can have a greater impact on how people play games than it does on medical emergencies. He said that it would be more a matter of performance than health. These players are elite athletes who have acclimatised. You'll notice players self-pacing. This behavioural thermoregulation can be very hard to overcome. You may find yourself playing a more conservative version of football. According to an analysis, cooling systems will reduce the risk in three of 16 venues. More than a third (35%) of the games scheduled in stadiums with a chance of exceeding WBGT of 26C are played at venues without air conditioning, such as Miami, Kansas City and Philadelphia. The analysis showed that the final at the MetLife Stadium, East Rutherford in New Jersey faces a 1 in 8 chance of exceeding 26 C and a 3% chance of reaching the?more dangerous level. This is about twice the risk in 1994. Friederike Otto is a professor of climate science at Imperial College London. She said that the findings showed FIFA the importance of reconsidering the dates for future World Cups, especially in areas susceptible to extreme heat during the summer. Otto said that from a health perspective, it is better to hold the World Cups earlier or later in the calendar year so that you can have a football celebration rather than something which poses a huge health risk for a city. FIFPRO warned that, while air-conditioned stadiums may protect players in cities like Dallas and Houston, fans at outdoor festivals and matches could be exposed to dangerously high temperatures for long periods. Iain Axon reported from London, Lori Ewing wrote in Manchester and Toby Davis edited.
INDIA BONDS-Indian Bonds rangebound as traders look at Trump-Xi meeting
Indian government bonds remained in a tight range on Thursday morning,?as traders avoided large bets, as U.S. president Donald Trump'met' China’s Xi Jinping. This could have an impact on the 'trajectory.of the Iran War. Trump is expected this week to ask Xi for help in resolving a costly and unpopular conflict with Iran. Analysts believe Xi will likely nudge Tehran towards negotiations, but he is unlikely to reduce economic support for its key Middle East partner. Brent crude futures rose 0.4% to $106.05 per barrel. The rising oil price could increase India's oil import-dependent inflation, pressurize the rupee and widen its current account deficit. The benchmark 2035 bond yield of 6.48% hovered around 7.0565% as of 11:03 am IST. It had settled at 7.0493% earlier in the day. In the last few sessions the 10-year yield failed to close above the critical?7.05% mark, which prompted some early buying. This limited further upside. The rupee fell to a new record low of 95.8875 weighed down by continued foreign portfolio outflows. This added to the current and capital account strains.
A private bank trader stated that "there is growing anxiety about oil supply shortages across India, and the likely rise in petrol and diesel price," India raised import duties on bullion earlier to reduce the trade deficit.
Barclays economists stated that they had previously raised their FY27 CPI forecast by 50 basis point to 4.5%, assumant of a fuel-price hike. They added that the increase in bullion duties before an increase in fuel prices could indicate a delay.
As oil prices rose, the overnight index swaps surged. The five-year swap jumped 1.65% to 6.688%, while the two-year swap was up 4.5 basis points at 6.34%. Reporting by Khushi malhotra, Editing by Eileen Soreng & Harikrishnan Nair
(source: Reuters)