5 Things You Need to Know to Start Your Day

Investors look ahead to the Federal Reserve meeting, markets react to Microsoft and Alphabet earnings, and finance veterans clash over the r [View in browser]( [Bloomberg]( Investors look ahead to the Federal Reserve meeting, markets react to Microsoft and Alphabet earnings, and finance veterans clash over the right approach to Chinese debt. — [Tiffany Tsoi]( Fed Preview Federal Reserve policymakers are [poised to hike interest rates]( to the highest level in 22 years, while retaining a tightening bias that signals the possibility of an additional move later in the year. The Federal Open Market Committee is expected to raise rates a quarter point today to the 5.25% to 5.5% range, an 11th increase since early 2022. It will release the decision at 2 p.m. in Washington. Chair Jerome Powell will hold a news conference 30 minutes later. Investors will be listening for clues about how determined the central bank is to raise again. “They will be leaving all options open,” said Veronica Clark, an economist at Citigroup Inc. “They will certainly stay cautious after only a couple of months of softer inflation data, which is not enough for them to be convinced the job is done.” Tech Earnings Alphabet Inc. shares jumped more than 7% in late trading after the Google parent reported revenue that beat analysts’ expectations, while Microsoft Corp. fell after posting tepid sales growth. Alphabet [revenues](were boosted by advertising on the company’s flagship search business, which is withstanding new competition from artificial intelligence chatbots. It has also weathered an ad slowdown that affected social media companies in recent quarters. Microsoft [forecast]( a continued slowdown in its Azure cloud-services business, overshadowing optimism about customer interest in new AI-powered products. Meta Platforms reports later on Wednesday. China Bonds [Three Japanese market veterans are clashing]( on whether Chinese debt is the deal of the century or the road to ruin. The spat highlights the dilemma global investors face in deciding to play in the world’s second-largest bond market. Tatsuya Higuchi, a finance veteran at Mitsubishi UFJ Kokusai Asset Management Co., sees China as the top destination for bond investors as interest rates climb ever higher almost everywhere. Akira Takei, with Asset Management One Co., wouldn’t touch China’s debt. His thesis: the securities are simply too risky to own. Fivestar Asset Management Co.’s Hideo Shimomura, who’s invested across markets for over three decades, agrees. One of the biggest quandaries in global finance is how to invest in a market that’s too large to ignore, yet vulnerable to both unpredictable Communist Party decision-making that’s brought some of China’s biggest corporate titans to heel and the geopolitical rivalry between the world’s two largest economies. Mixed markets Contracts on the S&P 500 are trading nearly unchanged while Nasdaq 100 futures advanced as of 5:06 a.m. in New York. Treasury yields have fallen across the curve, while the dollar has edged lower. Oil prices have declined, whereas gold and iron ore prices have climbed. Coming up… Another big day for corporate earnings, including Meta, Airbus, Coca-Cola, Boeing, AT&T, eBay, CME Group, Union Pacific, General Dynamics, Thermo Fisher, Mattel, Carlisle, and Fiserv. At 2:00 p.m., the Federal Reserve Open Market Committee will release its rate decision. Powell will be speaking at 2:30 p.m. At 7:00 am., US MBA Mortgage Applications data is due, and at 10:00 a.m., US June New Home Sales. EIA US Crude Oil Inventories are out at 10:30 a.m. The SEC is to propose new rules on AI for investment advice at 10:00 a.m. At 11:30 a.m., the US is selling $24 billion 2-year FRNs and $46 billion 17-week bills. This week, the MLIV Pulse survey is asking: Do you think this AI rally resembles the dotcom bubble? Will Nvidia Corp. become the world’s largest company? Are you planning to increase your exposure to tech stocks? Share your views [here]( on big tech and ChatGPT. What we’ve been reading Here’s what caught our eye over the past 24 hours: - UK billionaire Joe Lewis [charged with insider trading]( - NatWest CEO steps down after [Nigel Farage controversy]( - Thirsty [data centers are battling local communities]( over water - Rolls-Royce’s [share price doubles]( after reporting better-than-expected results - [Elon Musk plans]( on making Twitter a financial-services app - [Porsche declines]( after warning that supply chain issues will persist - [Why elite-college admissions matter]( And finally, here’s what Joe’s interested in this morning… Hello and Happy Fed Day. The unanimous expectation is that the Fed hikes 25bps today, bringing rates to their highest level in 22 years. [Read Steve Matthews' full preview here](. Then the expectation is that the following meeting (September) is up for debate, so at the press conference we'll learn more about where Powell's head is at with what comes next. Obviously, soft landing optimism has broken out in the markets and Wall Street over the last several weeks. But whether the data will cooperate, so to speak, remains TBD. Yesterday we got the latest Conference Board Consumer Confidence Data, and thus a chance to update one of my favorite charts. The white line shows how the public is feeling about the labor market. The teal line is the quits rate (which comes from the JOLTS report). Both lines ticked up in the recent readings, indicating that both in sentiment and actions (quitting is a sign of economic confidence) the public is feeling quite good about the job market. Both of these lines remain extremely elevated by historical standards. Bloomberg If you're under the view that we must see more labor market weakness in order for inflation to finally go back to target, then this would imply there's still a long way to go. Another thing that's worth noting is that oil and gasoline prices are picking up again. At least on a headline inflation basis, the big tumble in energy costs has been a huge disinflationary driver over the last year. But [as Tracy Alloway noted yesterday]( (via [Omair Sharif](), the US just saw its biggest one-day jump in gasoline prices in a year. Energy costs matter tremendously, both for consumers, and for the cost of other goods, etc. So definitely worth keeping an eye on the chart. Bloomberg Follow Bloomberg’s Joe Weisenthal on Twitter @[TheStalwart]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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