FT News Briefing
Fed holds rates as inflation fears grow
· Summarized
Key takeaways
- Meta and Microsoft are managing to invest heavily in AI without overly increasing their capital expenditures, but their growth prospects differ significantly, impacting their market value.
- The Federal Reserve's decision to pause interest rate hikes is partly influenced by market expectations, but persistent inflation concerns suggest that future increases may be necessary, with market skepticism persisting.
- The Bank of Japan faces credibility challenges as it maintains low interest rates despite rising inflation and economic pressures, prompting market doubts about its monetary strategy.
- UK oil and gas companies are increasingly focusing on international markets due to high domestic taxes and policy uncertainties, leading to a decline in North Sea investments and raising concerns about domestic energy security.
Summary
Tech Earnings: Meta and Microsoft
The podcast discusses the recent earnings reports from Meta and Microsoft. Both companies maintained their investment levels in AI, not increasing their capital expenditure targets. Microsoft showed growth in its cloud business, pleasing investors, while Meta's upcoming growth guidance disappointed, leading to a decline in its shares. This highlights the differing trajectories of these leading tech giants amidst the AI investment landscape.
Federal Reserve's Steady Interest Rate Decision
The Federal Reserve decided to keep interest rates unchanged for the fifth consecutive meeting despite ongoing inflation concerns. Fed Chair Jerome Powell emphasized commitment to fighting inflation but also noted that market expectations and recent treasury yields might influence future rate hikes. Market reactions suggest doubts about the Fed's resolve, especially as bond markets have shown volatility, signaling traders' desire for more definitive action.
Bank of Japan and Global Monetary Policy
The Bank of Japan is expected to hold interest rates steady after an increase last month. However, there are concerns about the credibility of Japan's monetary policy amid rising inflation and government spending, with Japanese bonds and the yen declining. Traders are closely watching for any signs of more aggressive rate hikes to restore confidence.
UK Oil and Gas Sector Shifts Abroad
UK oil and gas companies are increasingly investing overseas, abandoning the North Sea in favor of international acquisitions. The shift is driven by high taxes, policy uncertainties, and the finite nature of North Sea resources. Major deals include investments in Norway, Argentina, Mexico, and Southeast Asia, raising questions about the future of domestic production and the UK economy's energy security.
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Show notes
Meta and Microsoft reported quarterly earnings as investors raised concerns about AI spending, and the US Federal Reserve held interest rates steady. The Bank of Japan is also expected to leave rates unchanged at its meeting on Friday, and UK oil and gas companies are looking away from the North Sea in favour of foreign investment opportunities.
Mentioned in this podcast:
Microsoft’s cloud business boosts sales as AI investment climbs to $41bn
Meta shares drop on falling profits and weak sales forecast
US central bank holds rates steady even as Iran war threatens fresh jolt of inflation
UK North Sea oil companies look overseas for growth
Investors warn Bank of Japan faces test to inflation-fighting credibility
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Credit: Federal Reserve
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The FT News Briefing is produced by Victoria Craig, Sonja Hutson, Saffeya Ahmed, Katya Kumkova, and Fiona Symon. Our editor is Marc Filippino. Our show is mixed by Sam Giovinco and Alex Higgins. Additional help from Gavin Kallmann, Michael Lello, Peter Barber and David da Silva. Our intern is Cole van Miltenburg. Our executive producer is Topher Forhecz. Flo Phillips is the FT’s global head of audio. The show’s theme music is by Metaphor Music.
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