Trump puts inflation on the agenda
The inflation risk stalking the markets eased over the summer, but it never really went away. It’s front and center again as investors contend with a Trumponomics crackdown on immigration, a rising trade-war risk and a potential bonanza of tax cuts.
An important inflation measure comes out at 10 a.m. Eastern: the Personal Consumption Expenditures index report. It’s the Fed’s preferred inflation gauge and one of the last big data releases of the year that the central bank will consider as it ponders when to lower borrowing costs further. (Next week’s jobs report is another.)
Donald Trump’s latest trade threats show how uncertain the outlook could be. Since the president-elect this week vowed to impose tariffs on Canada, China and Mexico — the United States’ three biggest trade partners — analysts have been gaming out the potential impact. Economists fear that it could add bottlenecks and costs to supply chains and reignite inflation, and that it could scramble the Fed’s policy on interest rates.
A worst-case scenario from Deutsche Bank economists: that core P.C.E. next year would jump by an additional 1.1 percentage points if the Trump tariffs were fully enacted.
Is the tariff talk an opening salvo for trade negotiations, or a fait accompli? That uncertainty can be felt in the $28 trillion market for U.S. Treasury notes and bonds: Yields hit a four-month high this month, though they are down on Wednesday. Yields climb when prices fall, and have been especially sensitive to concerns that fiscal policy could fuel inflation.
Here’s what to watch for in Wednesday’s P.C.E.:
Core P.C.E., which excludes volatile food and food prices, is forecast to come in at 2.8 percent on an annualized basis. That would be 0.29 percent above September’s reading.
Such a rise would represent a second straight month of inflation trending higher, putting the level further above the Fed’s 2 percent target. The report “should show another ‘bump in the road’ on the path to 2 percent inflation,” Veronica Clark, an economist at Citigroup, wrote in an investor note this week.
The culprits are thought to be shelter inflation — especially house prices, with mortgage rates soaring — and used car prices, as well as higher portfolio management fees.
Futures traders on Wednesday were pricing in roughly 60 percent odds of a Fed rate cut next month. But their calculations have been volatile in recent months, and a surprisingly hot number could cause a shift in thinking once again.
That said, the minutes from this month’s Fed rate-setting meeting showed that central bank officials were still confident in their effort to bring inflation down, and that they saw more rate cuts on the horizon. Left unsaid was how many.
HERE’S WHAT’S HAPPENING
Thousands begin to return to southern Lebanon as a cease-fire takes effect. The U.S.-backed deal took effect on Wednesday and appears to be holding, even as the Israeli military shelled two villages in the area. Benjamin Netanyahu, Israel’s prime minister, says the 60-day truce will help Israel to rebuild its arsenal while trying to isolate Hamas and focus on Iran. Brent crude prices ticked higher on Wednesday after two straight days of declines.
The Trump transition will not delay the government’s antitrust case against Google. Amit Mehta, the U.S. district judge presiding over the search monopoly case, said that the trial was scheduled for April and that President-elect Donald Trump’s new team at the Justice Department would not disrupt the schedule. The Biden administration has called for Google to be forced to spin out its Chrome browser, but Trump has signaled that he’s skeptical about forcing the company to break up.
Starbucks is said to cut staff bonuses. Most corporate employees who qualify will get only about 60 percent of their annual reward, the worst since 2020, Bloomberg reports. The reduced bonus pool reflects deeper troubles at the coffee chain after it missed expectations in the third quarter and as Brian Niccol, its new C.E.O., tries to reverse a sales slump.
Trump’s economic team takes shape
Donald Trump has rounded out the picks for his economic team, choosing Kevin Hassett to head the National Economic Council and Jamieson Greer to lead the Office of the United States Trade Representative.
Both served in his first administration and are seen as pragmatic, making them known quantities as Trump looks for officials to put in place a tariffs and tax agenda that has already rattled global markets and allies.
Hassett has been a vocal defender of Trump’s economic policies. He served as chair of the Council of Economic Advisers until 2019 and pushed hard for Trump’s sweeping tax cuts in 2017. Trump is expected to extend them when many of them expire next year, and has promised more cuts.
Hassett has long argued for tax cuts as a way to bolster the middle class, and his analyses lent them credibility amid pushback from other economists.
But some Trump supporters are wary of Hassett’s views on immigration. Hassett has said that immigration bolsters economic growth and has previously said that the United States should double its intake of immigrants. That hasn’t sat easily with those in Trump’s inner circle pushing for a major cut in immigration numbers.
Greer was chief of staff to the U.S. trade representative during Trump’s first term. He worked under Robert Lighthizer, who led the push to use tariffs to force American companies to decouple with China. Greer has backed that tough view and was part of the negotiating team with Beijing, as well as the discussions that led to a revamp of the North American Free Trade Agreement. (Lighthizer might still get a role in the administration, with Trump wanting him as a trade czar.)
Who will take point on trade? Trump said in a social media post last week that Howard Lutnick, the C.E.O. of Cantor Fitzgerald that he tapped for commerce secretary, would get responsibility for the Office of the U.S. Trade Representative.
The picks make clear Trump priorities. Trump is seeking to build a cabinet that partners those with traditional business community interests (think Scott Bessent as Treasury secretary, Lutnick at commerce) with economic nationalists and national security hawks (Marco Rubio as secretary of state) who are especially tough on China.
Lower taxes and tough trade tactics will be the overarching goal — and tariffs may be used as more than a negotiating tactic. “His core aim is dominance (both his own and America’s), and tariffs are a favored means for achieving it,” Arthur Kroeber, head of research at Gavekal Research, wrote in a note on Wednesday.
A Thanksgiving standout
Turkey? Check. Stuffing and cranberry sauce? Yep. “Macy’s Thanksgiving Day Parade” playing on NBC, or streaming in the background on Thursday morning? Erm, yeah.
The parade broadcast has become a major ratings-grabber. If recent history is any guide, this year’s airing will probably draw more viewers than the Dodgers-Yankees World Series and the Oscars, The Times’s John Koblin reports.
The Thanksgiving parade broadcast has reliably pulled in around 20 million viewers a year since the 1980s — a remarkable run in the era of cord-cutting, social media saturation and declining legacy media viewership.
Last year, the audience soared to 28 million, and it’s been the most-watched entertainment program in the country for three years running, giving a lift to Comcast, NBCUniversal’s parent.
Last week, Comcast said it would spin off its cable channels, including MSNBC and CNBC, as it restructures its media empire. The NBC broadcasting network, home to the parade, is staying under the Comcast umbrella.
Saudi’s World Cup bid dashes to a climax
Saudi Arabia is a shoo-in to win the rights to host the 2034 FIFA World Cup at a vote on Dec. 11. But turmoil in the oil market and human rights concerns hang over the kingdom’s bid for the world’s single largest sporting event, Vivienne Walt reports for DealBook.
The event will be the crown jewel in a push into global sports. Mohammed bin Salman, Saudi Arabia’s all-powerful crown prince, has used investment in sports to further his country’s commercial and diplomatic reach and build links with Wall Street. Just last month, some of the biggest names in finance, including BlackRock’s Larry Fink and Ken Griffin of Citadel, were in Riyadh to schmooze and talk deals at the annual Future Investment Initiative gathering.
It comes as Saudi officials are flexing their tight connections with Donald Trump. Yasir al-Rumayyan, the head of Saudi Arabia’s sovereign wealth fund, was spotted this month with the president-elect at an Ultimate Fighting Championship event. And Trump has said he could seal a deal between the PGA Tour and the Saudi-backed LIV Golf to end an expensive fight between the rival competitions.
The kingdom’s World Cup bid is getting heat before votes are even cast. There is growing outrage from rights organizations and U.S. senators about Saudi’s human rights track record, and unwelcome scrutiny from players about Saudi Aramco as a new sponsor of the tournament.
Finances are another issue. The cost of hosting the tournament could easily top Qatar’s $200 billion tab for the 2022 World Cup. Saudi’s bid promises the construction of 185,000 hotel rooms, and eight new stadiums.
The oil markets aren’t cooperating. For the past year, Brent crude, the global benchmark, has been trading well below the $96-a-barrel level the I.M.F. believes Saudi Arabia needs to balance its budget. Continuing turmoil in the Middle East and a Trump-led rise in U.S. drilling could keep them lower for longer.
The Saudi bid looks sure to sail through, with no other contender. It’s also being helped by a lucrative sponsorship deal FIFA struck with the oil giant Saudi Aramco, Human Rights Watch said. It’s estimated at $100 million a year.
“It stinks to high heaven,” Minky Worden, global initiatives director for Human Rights Watch, told DealBook. She added that her organization had been talking to sponsors, including Adidas, to keep pressure on FIFA about standing up for human rights and protections for workers in Saudi Arabia.
For FIFA’s top-line Western sponsors, the upside in supporting the Saudi tournament is that it brings remarkable global exposure that may outweigh reputational concerns. There was a loud outcry when the kingdom hosted top female players at the Women’s Tennis Association Finals this month, given the country’s restrictions on women’s rights. But that ultimately didn’t stop big brands from being part of it.
THE SPEED READ
Deals
In tech fund-raising news: Databricks is reportedly close to raising at least $5 billion at a $55 billion valuation; and SoftBank is paying up to $1.5 billion to increase its stake in OpenAI. (CNBC)
“Elon Musk’s Twitter backers gain windfall from xAI deal” (FT)
Politics and policy
How Donald Trump is running his own foreign policy without waiting to be sworn in. (NYT)
Disney agrees to pay $43 million to settle a lawsuit accusing the media giant of paying men more than women. (CNN)
Best of the rest
The shipping industry’s latest challenge: a lack of seafarers, leading to more accidents and higher freight rates. (CNBC)
“Taylor Swift Looks to Deliver Another Megahit — for Target Stores” (WSJ)
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The post Inflation is Back in Focus as Trumponomics Looms Large Over Global Trade appeared first on New York Times.
