Wall Street closed its first losing week in the last four with an up-and-down on Friday, as investors brace for the Federal Reserve to tighten the brakes on the economy more aggressively to beat down inflation.
Big tech stocks once again led the market lower, and the S&P 500 fell 11.93 points, or 0.3 per cent, to 4,488.28 after wobbling much of the day. The Dow Jones Industrial Average rose 137.55, or 0.4 per cent, to 34,721.12. The weakness for tech stocks, meanwhile, dragged the Nasdaq composite down 186.30, or 1.3 per cent, to 13,711.00.
For the week, the S&P 500 lost 1.3 per cent. Stocks have slumped as the Federal Reserve swings more aggressively towards fighting inflation by raising short-term interest rates and making other moves. It's a sharp reversal from keeping rates at record lows to stimulate the economy and carry it through the pandemic.
Investors learnt this week that the Federal Reserve may hike short-term rates by double the usual amount at several coming meetings, and that it came close to doing so last month. The last time that happened was in 2000. The Fed also indicated in the minutes from its last meeting that it's likely to shrink its massive stockpile of bonds by up to $95 billion monthly, starting as soon as next month.
Altogether, the moves should make it more expensive for US households and businesses to borrow, which in turn would slow the economy and hopefully halt the hottest inflation in 40 years.
Higher rates hurt all kinds of investments, particularly the stocks seen as the most expensive. That’s because higher rates mean better returns for owning relatively safe bonds, which makes investors less willing to pay higher prices for riskier assets like stocks.
That’s why big technology and other high-growth stocks have led the market lower recently. Amazon, Nvidia and Tesla were among the heaviest weights on the S&P 500 on Friday, and each dropped at least 2 per cent.
Worries are also rising about the strength of the economy. With the Fed set to raise rates so aggressively, the fear is it will squeeze the brakes too hard or too quickly and force the economy into a recession. While that’s not the consensus on Wall Street, economists at Deutsche Bank earlier this week said they project a US recession by late next year.
The war in Ukraine has made things more uncertain by threatening to worsen inflation and damage the global economy. Prices for oil, gas and food have been particularly volatile since Russia invaded the country.
A barrel of benchmark US crude rose $2.23 to settle at $98.26 on Friday. It has swung wildly in recent weeks and briefly topped $130 last month. Brent crude, the international standard, added $2.20 to settle at $102.78 per barrel.
Much of the market’s focus has been on the bond market, where expectations for a more aggressive Fed have sent yields to their highest levels in three years. The 10-year yield climbed to 2.71 per cent from 2.65 per cent late on Thursday. It was at just 1.51 per cent at the start of the year.
It could be set to rise further as the Fed not only halts but reverses its programme to buy trillions of dollars of bonds.
The bond buying helped prices for stocks and other financial assets to soar and markets to stay relatively calm
Michael Hartnett,
chief investment strategist at BofA Global Research
The bond buying helped prices for stocks and other financial assets to soar and markets to stay relatively calm, chief investment strategist Michael Hartnett wrote in a recent BofA Global Research report.
Now the Fed is less than a month away from reversing that, which “by design will be negative” for financial assets, Mr Hartnett said. He said it should lead to higher bond yields and higher volatility in markets.
Meanwhile, Covid-19 continues to squeeze the economy around the world, particularly in China. Shanghai residents face severe restrictions on movement and activities because of a surge in infections, with economic effects rippling around the world.
ACM Research, a supplier of equipment for the semiconductor industry that has operations in Shanghai, said the restrictions will cause a significant hit to its revenue. Its stock fell 6.1 per cent.
A jump in Covid-19 cases is also behind airline disruptions in Europe. Two major airlines, British Airways and easyJet, cancelled many scheduled flights during the week. The industry is suffering from staff shortages because of the virus.
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ESSENTIALS
The flights
Emirates, Etihad and Swiss fly direct from the UAE to Zurich from Dh2,855 return, including taxes.
The chalet
Chalet N is currently open in winter only, between now and April 21. During the ski season, starting on December 11, a week’s rental costs from €210,000 (Dh898,431) per week for the whole property, which has 22 beds in total, across six suites, three double rooms and a children’s suite. The price includes all scheduled meals, a week’s ski pass, Wi-Fi, parking, transfers between Munich, Innsbruck or Zurich airports and one 50-minute massage per person. Private ski lessons cost from €360 (Dh1,541) per day. Halal food is available on request.
Day 1, Abu Dhabi Test: At a glance
Moment of the day Dimuth Karunaratne had batted with plenty of pluck, and no little skill, in getting to within seven runs of a first-day century. Then, while he ran what he thought was a comfortable single to mid-on, his batting partner Dinesh Chandimal opted to stay at home. The opener was run out by the length of the pitch.
Stat of the day - 1 One six was hit on Day 1. The boundary was only breached 18 times in total over the course of the 90 overs. When it did arrive, the lone six was a thing of beauty, as Niroshan Dickwella effortlessly clipped Mohammed Amir over the square-leg boundary.
The verdict Three wickets down at lunch, on a featherbed wicket having won the toss, and Sri Lanka’s fragile confidence must have been waning. Then Karunaratne and Chandimal's alliance of precisely 100 gave them a foothold in the match. Dickwella’s free-spirited strokeplay meant the Sri Lankans were handily placed at 227 for four at the close.
UAE currency: the story behind the money in your pockets
more from Janine di Giovanni
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Company profile
Name: GiftBag.ae
Based: Dubai
Founded: 2011
Number of employees: 4
Sector: E-commerce
Funding: Self-funded to date
KILLING OF QASSEM SULEIMANI
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
Company%20Profile
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TOP 5 DRIVERS 2019
1 Lewis Hamilton, Mercedes, 10 wins 387 points
2 Valtteri Bottas, Mercedes, 4 wins, 314 points
3 Max Verstappen, Red Bull, 3 wins, 260 points
4 Charles Leclerc, Ferrari, 2 wins, 249 points
5 Sebastian Vettel, Ferrari, 1 win, 230 points
UAE currency: the story behind the money in your pockets
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
Women%E2%80%99s%20T20%20World%20Cup%20Qualifier
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South and West: From a Notebook
Joan Didion
Fourth Estate
Paltan
Producer: JP Films, Zee Studios
Director: JP Dutta
Cast: Jackie Shroff, Sonu Sood, Arjun Rampal, Siddhanth Kapoor, Luv Sinha and Harshvardhan Rane
Rating: 2/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
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Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
The specs: 2018 Mercedes-Benz E 300 Cabriolet
Price, base / as tested: Dh275,250 / Dh328,465
Engine: 2.0-litre four-cylinder
Power: 245hp @ 5,500rpm
Torque: 370Nm @ 1,300rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.0L / 100km
UAE currency: the story behind the money in your pockets
The specS: 2018 Toyota Camry
Price: base / as tested: Dh91,000 / Dh114,000
Engine: 3.5-litre V6
Gearbox: Eight-speed automatic
Power: 298hp @ 6,600rpm
Torque: 356Nm @ 4,700rpm
Fuel economy, combined: 7.0L / 100km
Brief scoreline:
Toss: South Africa, elected to bowl first
England (311-8): Stokes 89, Morgan 57, Roy 54, Root 51; Ngidi 3-66
South Africa (207): De Kock 68, Van der Dussen 50; Archer 3-27, Stokes 2-12
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
