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Fedspeak continues today.

Market moves | Wall Street traders are gearing up for Friday’s monthly US jobs report after weekly unemployment claims topped estimates. Bloomberg Economics predicts that 187,000 jobs were added in March and expects the unemployment rate to remain at 3.9%, higher than consensus expectations. The S&P 500 dropped 1.2%, wiping out earlier gains, as a rally in oil amid geopolitical tensions triggered a flight to the safest corners of the market. Brent crude oil climbed above $90 a barrel for the first time since October as Israeli Prime Minister Benjamin Netanyahu said his country will operate against Iran and its proxies and will hurt those who seek to harm it. President Joe Biden told Netanyahu on a call that US support for his war would depend on new steps to protect civilians. Bond yields dropped across the US curve.

Fed path | That was not all. More than half a dozen Federal Reserve policymakers gave public remarks Thursday, leaving traders with lots to digest. Perhaps the most notable came from Minneapolis Fed President Neel Kashkari, who said interest-rate cuts may not be needed this year if progress on inflation stalls. “In March I had jotted down two rate cuts this year if inflation continues to fall back towards our 2% target,” said Kashkari, who doesn’t vote on monetary policy this year. He called the January and February inflation data “a little bit concerning.” Philadelphia Fed President Patrick Harker also believes inflation remains too high while Richmond Fed President Thomas Barkin said it’s “smart” for the central bank to take time to gain greater clarity about the inflation path before lowering rates.

Currency angst | A resurgent US dollar is exasperating central bankers and governments around the world, forcing them into action to relieve the pressure on their own currencies. From Tokyo to Istanbul, policymakers are stepping in to defend exchange rates as a resilient American economy keeps the greenback strong by pushing back expectations for lower rates. The dollar has gained against virtually every major peer in 2024, prompting warnings from Japan on its readiness to intervene to buoy the yen from near a 34-year low. Turkey blindsided markets with a rate hike to boost the lira, China and Indonesia have moved to steady their currencies, while Sweden and India are also under pressure. Just months ago, a recession in the US seemed all but inevitable. Instead, data show the nation benefiting from a tight labor market and upbeat consumer mood.

Michael Barr. Photo: Bloomberg

Bank stress from empty offices a 'slow moving train,' Barr says

The Federal Reserve’s Michael Barr, Vice Chair for Supervision, warned that banks are likely to continue to face stress from the struggling commercial real estate sector for an extended period. The vice chair for supervision said the overall banking system was “sound and resilient” and didn’t face the same kind of pressures that it did in March 2023, when Silicon Valley Bank and Signature Bank collapsed. However, he said empty office space remains an area of stress. (Bloomberg Economics | Apr 3)

Powell sticks with Fed's cautious rate-cut strategy

Federal Reserve officials, including US central bank chief Jerome Powell, on Wednesday continued focusing on the need for more debate and data before interest rates are cut, a move financial markets expect to occur in June. Powell's remarks repeated language the Fed has adopted as it tries to balance the risks of cutting interest rates before inflation is truly controlled with the risks of suppressing economic activity more than is needed. As new data arrives, however, many questions have been raised and answered. (Reuters | Apr 3)

Private funds to feel Basel IV financial update

The Basel Committee on Banking Supervision’s latest global regulatory capital framework revisions represent an opportunity for alternative lenders and more innovative partnerships between private funds and banks. With the move into Basel IV, which will roll into action in January 2025, lenders will feel a market change. On paper, this phase presents the prospect of deeper market penetration on top of an already booming private credit space. Private credit funds, for example, could take a greater share of some lending market. (Bloomberg Law | Apr 3)

Yellen heads to China Friday to press Beijing on overcapacity

US Treasury Secretary Janet Yellen will travel to China on April 5th for the second time in nine months, aiming to press her counterparts on a build-up of industrial overcapacity that poses threats to the rest of the world’s economies. Yellen will spend two days in the southern commercial and manufacturing hub of Guangzhou before heading to Beijing for two more days of talks. She’s scheduled to meet China’s economic policy czar, Vice Premier He Lifeng, and his predecessor Liu He, who analysts say retains influence. Yellen will also meet with People’s Bank of China Governor Pan Gongsheng and Finance Minister Lan Fo’an. (Bloomberg Economics | Apr 2)

Wall Street gets tougher rules for managing retirement funds

Wall Street asset managers whose institutions have faced foreign criminal charges will soon find it harder to oversee workplace retirement assets without running afoul of federal benefits law protections. The US Labor Department has finalized a long-awaited set of stricter conditions on its qualified professional asset manager prohibited transaction exemption, a prized designation big banks and financial advisers use to manage pension assets and 401(k)s. (Bloomberg Law | Apr 2)

US, UK to conduct joint tests of AI models, aiming to cut national security risks

The United States and Britain on Monday announced a new partnership on the science of artificial intelligence safety, amid growing concerns about upcoming next-generation versions. Britain and the United States are among the countries establishing government-led AI safety institutes. Britain said in October its institute would examine and test new types of AI, while the United States said in November it was launching its own safety institute to evaluate risks from so-called frontier AI models and is now working with 200 companies and entities.

— Reuters

AT&T says data about 73 million accounts leaked to the dark web

AT&T Inc. said that personal data from about 73 million current and former customers was leaked onto the dark web, prompting it to reset 7.6 million account passcodes. The data, which included 65.4 million former customers, spilled onto the dark web about two weeks ago. Information divulged may have included customers’ full name, email and postal address, phone number, Social Security number, date of birth, AT&T account number, and passcode, the company said in an email to consumers. It apparently does not contain personal financial information or call history.

— Bloomberg Industries | Telecom

US ambassasor to China hacked in China-linked spying operation

Security missteps at Microsoft might pave the way for a cyber overhaul of the cloud sector. "A cascade of security failures at Microsoft" allowed Chinese hackers to penetrate the company's Exchange Online cloud-based email system last year, according to the US Cyber Safety Review Board. The board spent seven months investigating the espionage incident, in which the email accounts of 22 organizations and more than 500 individuals around the world were compromised. 

— The Wall Street Journal

Google has agreed to destroy billions of data points that a lawsuit alleges it improperly collected. Photo: Andre M. Chang | Zuma Press

Google pledges to destroy browsing data to settle 'incognito' lawsuit

Google plans to destroy a trove of data that reflects millions of users’ web-browsing histories, part of the settlement of a 2020 lawsuit that alleged the company tracked people without their knowledge when in "incognito" mode. The deal with consumers doesn’t include damages for individual users but will allow them to file claims. Already plaintiff attorneys have filed 50 in California state court.

— The Wall Street Journal

Google Search could soon charge you for AI-powered results – and search engines might never be the same

If you want smarter searching with Google, you might have to pay for it — or at least if you want AI-assisted search queries, anyway (which you’d hope would prove smarter). This is according to a report from the Financial Times, which contends that Google is mulling over the idea of a "premium' search that leverages generative AI.

— TechRadar

Are you rich?

You know them. They’re lawyers in New York, doctors in Phoenix, dentists in Memphis. They own construction companies in your hometown, burger franchises off the highway, homes in the resort villages your parents want to retire in. They’re young, old, Democrats and Republicans. They have two things in common: They’re rich. But they don’t feel that way.

— Bloomberg