Pimco and Franklin Templeton warn of persistent inflation: FII update
(Bloomberg) – Executives at some of the world’s biggest asset managers have warned that it could be difficult for central banks to get inflation back to where it was.
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Speaking at the Future Investment Initiative event in Saudi Arabia, Pacific Investment Management Co. Vice Chairman John Studzinski called inflation in the United States “sticky.” Jenny Johnson, CEO of Franklin Templeton, agreed, saying underlying inflation “is stickier than most people think.” Third Point CEO Daniel Loeb offered a different view, saying, “I actually think we may have seen the worst already.”
Earlier, Saudi Aramco said the global oil market was already adjusting to sanctions on Russia, with Moscow redirecting crude flows to Asia from Europe and other producers doing the opposite.
Meanwhile, Saudi Arabia’s sovereign wealth fund has announced plans to invest $24 billion in countries in the Middle East and North Africa as the oil-rich kingdom seeks to bolster regional economies.
In the morning, former US Treasury Secretary Steven Mnuchin said China is expected to experience a significant downturn. He also said that people used to underestimate economic risks, but now “we are overestimating those risks. Suddenly everyone became incredibly negative.
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Brookfield’s Bruce Flatt says inflation must be crushed (2:30 p.m.)
Brookfield Asset Management Inc. CEO Bruce Flatt said inflation was too high, caused by money flooding into the system for a short time. The Fed needs to get to a point where the economy is slowing down, he said.
“We have to crush this inflation and the central banks will do it,” he said. When it comes to investments, Flatt said real assets and private capital are the place to be.
Pimco, Franklin Templeton, Third Point executives‘ views on US inflation (2:15 p.m.)
Pimco Vice Chairman Studzinski called inflation in the United States “sticky” and does not expect it to reset to 2% for the foreseeable future. He also expects a series of short-term interest rate hikes.
“We’re looking at somewhere between 3% and 4% as a core inflation level certainly for the next two years,” he said. “Until you have an energy resolution, a supply chain resolution, and a resolution of some sort of some of the geopolitical tensions that exist, particularly in Europe.”
Franklin Templeton CEO Johnson agreed. She said core inflation “is stickier than most people think” given consumers have very little debt, more money in their bank accounts than before Covid and unemployment. is weak.
The asset manager also expects the Fed to “raise rates quite aggressively.” He sees “75, 50 and then maybe another 50 or two 25s. Then he’ll have to sit on it for a while because it’s a lag effect.
Third Point CEO Loeb offered a different view, saying, “Actually, I think we may have seen the worst already. “That doesn’t mean inflation is going away. This means that our peak inflation is starting to reverse. You see some improvement.
However, he raised concerns about the efforts the Federal Reserve might have to make to maintain what he called “rate flattening.”
“The next thing to worry about is what does that mean? How long does this last and how much will the Fed have to beat the economy to subdue it in terms of rising unemployment? ” he said. “I think it’s going to be less bad than people think.”
Saudi Wealth Fund plans to invest $24 billion in regional states (2:00 p.m.)
Saudi Arabia’s sovereign wealth fund plans to invest $24 billion in Middle Eastern and North African countries as the oil-rich kingdom seeks to bolster regional economies.
The Public Investment Fund plans to set up companies to invest in Bahrain, Oman, Jordan, Iraq and Sudan, according to a statement. It will channel funds to several sectors, including infrastructure, healthcare, real estate and telecommunications. In August, the PIF established the Saudi Egyptian Investment Co. to invest in Egypt.
Saudi Crown Prince Mohammed bin Salman is sitting on his first budget surplus since taking office, allowing him to funnel billions of dollars into assets globally and plan ambitious construction projects.
Global Oil Flows Shift as Russia Hits Sanctions, Says Aramco (1:30 p.m.)
Saudi Aramco said the global oil market is already adjusting to sanctions on Russia, with Moscow redirecting crude flows to Asia from Europe and other producers doing the opposite.
“The realignment is underway,” Amin Nasser, chief executive of the world’s largest oil company, said at the Future Investment Initiative event in Riyadh. “The Russians, with the right discount, are able to place their crude in different markets.”
“There are logistical issues, insurance issues,” Nasser said. “But that is managed with the right discounts. The flow goes to Asia — however, it takes longer. And crude that used to go to Asia is now going to Europe and other parts of the world. »
Oman’s Wealth Fund Scouts for UK Deals Amid Pound Slump (1:15 p.m.)
The Oman Investment Authority, which manages funds equivalent to 40% of the sultanate’s economy, is seeking deals in the UK, a senior official said.
“Problems create opportunities,” said Ibrahim Al Eisri, director of private equity at the OIA, in an interview. “We see opportunities in Europe in different sectors, especially in technology. The UK has a lot of opportunities due to the falling currency.
“We have a strong exposure to the United States and we like that market,” he said.
Saudi Arabia has jumped ahead of the economic curve and is stabilizing the oil market: Jadaan (1 p.m.)
Saudi Arabia has preempted the global slowdown and worked to mitigate risks to its economy, Finance Minister Mohammed al-Jadaan said.
“You have to make sure you mitigate early, you’re ahead of the curve, like we’ve been doing for the last two years to make sure you’re protected from these shocks,” he told Bloomberg. TV in an interview.
He predicted that Saudi Arabia’s non-oil GDP would continue to grow by 5% or more next year. Externally, the kingdom has taken steps to stabilize energy markets and it said the United States and Saudi Arabia have close ties despite recent tensions over oil policy.
Aramco Announces $1.5 Billion Sustainability Fund (12:30 p.m.)
Saudi Aramco has launched a $1.5 billion sustainability fund to invest in technologies that can support the energy transition.
Managed by Aramco Ventures, the fund will initially focus on carbon capture and storage, greenhouse gas emissions, hydrogen, ammonia and synthetic fuels. The fund will target investments globally.
HSBC CEO: Higher Tariffs to Make Clean Energy Switch Costlier (12 p.m.)
Rising interest rates will make switching from fossil fuels more expensive, so policymakers must act to get inflation under control, HSBC Holdings CEO Noel Quinn said at the event.
“Building that bridge to the future will be easier if we can collectively get inflation under control. Building this bridge will be very expensive with high inflation and high interest rates,” he said.
Nevertheless, banks will also have to continue to finance fossil fuels over the next few years to ensure that the basic needs of society are met.
“We can’t just put all of our investments in the future and ignore today. There has to be survivability so that society can meet some of the basic needs, not just in 2023 but in 2023, 2024, and 2045. There has to be a bridge to the future.
“People want to turn off power sources today and you can’t,” Quinn said.
Saudi Finance Minister: IMF Meetings No Longer Denying Economic Risks (9:50 a.m.)
Previous meetings of the International Monetary Fund have denied global economic risks, but that has now changed, Saudi Finance Minister Al Jadaan said.
“There was largely a denial of the risks that we see today, in previous IMF meetings, but that changed in last week’s meetings in Washington,” he said.
Speaking of the region, he said “there is a lot of commitment to reform and reform is continuing.”
“We must be vigilant and provide all necessary support to the region,” he added.
Mnuchin expects significant slowdown in China (9:45 a.m.)
Former US Treasury Secretary Steven Mnuchin said at the event that China is expected to experience a significant downturn.
“It’s clear that China is going to experience a significant downturn and that will impact the global economy,” said Mnuchin, now a managing partner at Liberty Strategic Capital. “Things will get worse before they get better.”
Mnuchin said he expects 10-year Treasury yields to peak at 4.5%. Treasuries rallied sharply on Tuesday amid signs that the Federal Reserve’s rate hikes are starting to weigh on the economy.
Mnuchin says people underestimated economic risks (9:45 a.m.)
Mnuchin said people used to underestimate economic risks, but now “we are overestimating those risks. Suddenly everyone became incredibly negative.
“I think you’re going to see inflation in the United States starting to come under control and it’s probably going to be a two-year period,” he said. “But you’re going to start seeing that crunch relatively regularly. And I think people are overvaluing Federal Reserve stocks just as they undervalued them.
Investcorp and Fung Capital launch $500 million Greater Bay fund (9:40 a.m.)
Investcorp, the Middle East’s largest alternative asset management company, and the private equity arm of the Fung brothers’ family office are creating a fund to invest in mid-cap companies in China’s Greater Bay Area .
–With help from Yousef Gamal El-Din, Sarah Halls, Habiba Basiony, Ben Bartenstein, Shaji Mathew, Dana Khraiche, Matthew Martin, Stefania Bianchi, Adveith Nair, Julia Fioretti, Abeer Abu Omar, Zainab Fattah, Archana Narayanan, Christine Burke, Nicolas Parasie, Salma El Wardany and Dinesh Nair.
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