February 22, 2018, by Joanna Ossinger
Quarles won’t quarrel with this economy
Federal Reserve Governor Randal Quarles delivered an upbeat assessment of the U.S. economy and endorsed a “gradual” path for raising interest rates in his first public speech on monetary policy since joining the central bank in October. “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis,” Quarles said in prepared remarks in Tokyo. And there’s more to come from Fed officials Thursday: Bill Dudley is speaking at a briefing on Puerto Rico, Raphael Bostic talks at a banking conference and Robert Kaplan appears on a trade panel in Vancouver.
European Central Bank officials are set to release minutes of their January meeting, and they will be scrutinizing investors’ reaction to see whether, this time around, they got their message across. Last month, remarks in the minutes of their December meeting sent the euro and bond yields soaring as investors bet stimulus might be scaled back faster than previously expected. That probably wasn’t what Mario Draghi and his colleagues had intended. The ECB president relayed the Governing Council’s surprise at the reaction two weeks later, saying policy makers only discussed the “need to have a discussion” about the way forward. So it’s likely they’ll have been more careful with their wording this time to avoid another repeat of that episode. Meanwhile, the ECB is facing a big test in Latvia, Bloomberg View says.
Speaking of the ECB, is it to blame for the surge in U.S. Treasury yields of late? After all, hefty European issuance was cited as one of the drivers of the bond selloff in December. One argument why markets should fear diminishing European monetary stimulus: the ECB’s asset purchases have exceeded the net issuance of respective government bonds — unlike the Fed. That pushed European investors into other markets, such as Treasuries. One estimate has the ECB buying more than a trillion euros ($1.2 trillion) of foreign bonds since its QE began.
Mega-donors in the midterms
Billionaire Tom Steyer and packaging king Richard Uihlein are leading the charge among mega-donors seeking to influence the U.S. November elections, with the top 10 contributors logging a combined $65.7 million so far in the current campaign cycle. With control of Congress at stake, the top Democratic and Republican donors will be pressed to finance a battle that’s already triggering television advertising and expected to set a spending record. The first midterm elections under President Donald Trump will be a high-priced test of whether the GOP can keep majorities in both the House and Senate. As many as a dozen Senate seats and 80 in the House could be in play. At the same time, states are rushing to defend the 2018 election from feared Russian interference after a late start.
Large financial institutions in the U.S., which have been seeking to hire more foreign workers in recent years under the H-1B visa program, are now being forced to reconsider their approach after the Trump administration made it harder to obtain the work permits. Eight major investment banks increased their H-1B applications for high-skilled workers by almost 60 percent over five years to more than 7,000 in fiscal year 2017, according to a Bloomberg analysis of visa filing data. The lenders, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., increasingly have been using a similar approach to hiring as tech companies, which rely most heavily on the visas. To hire foreign workers under the program, companies compete in a government lottery for a share of the 85,000 permits available annually.