5 Things You Need to Know to Start Your Day

Good morning. Investors weigh higher-for-longer Federal Reserve rates, a new hedge fund seeks $3 billion to invest in Asia and China’s leade [View in browser]( [Bloomberg]( Good morning. Investors weigh higher-for-longer Federal Reserve rates, a new hedge fund seeks $3 billion to invest in Asia and China’s leadership shakeup raises concerns. Here’s what’s moving markets —[ Kristine Aquino]( Fed fallout US equity futures followed European and Asian stocks lower after investors heeded [the Federal Reserve’s message on Wednesday that interest rates must remain higher for longer](, even as Chair Jerome Powell signaled the central bank is close to done raising interest rates. In quarterly economic projections released following a two-day policy meeting, 12 of 19 Fed officials said they still expect to raise rates once more this year, and they see fewer rate cuts in 2024 than previously anticipated. The projections showed they expect inflation to fall below 3% next year, and return to their 2% target by 2026. That combination of views led to lower two-year Treasury yields, while rates for longer-maturity notes edged higher. $3 billion hedge fund [Kurt Baker, former head of Morgan Stanley’s Asia prime brokerage, is seeking nearly $3 billion for a multi-manager hedge fund](, according to a person with knowledge of the matter. Baker is in advanced talks with several potential investors to back his Hong Kong-based, Asia-focused firm named 30th Century Partners, which aims to rival the likes of Citadel in the region. The fund plans to start trading in June 2024, and the majority of the firm’s investments will be in Asia. Multistrategy hedge funds in the region lost money in just one year — a 3% decline in 2018 — in the last decade. China leadership [Chinese President Xi Jinping’s leadership is raising questions after he fired several top officials](, including the mysterious purge of his foreign minister in July, followed by the reported ouster of his defense chief less than two months later. The upheaval is leaving investors and governments spooked and is undercutting Beijing’s efforts to convince the private sector it’s safe to invest in China. Health-care tycoons have lost some $17 billion in Xi’s latest sweeping anti-graft campaign, while Western firms in China are now the gloomiest they’ve been about the future in decades, according to a recent American Chamber of Commerce in Shanghai survey. Stocks retreat S&P 500 and Nasdaq 100 futures were down at least 0.4% as of 5:29 a.m. in New York, following declines in Asian and European equity markets. Most Treasury yields climbed apart from two-year rates, which edged lower. Yields in UK gilts saw a steeper advance as investors anticipate a rate hike from the Bank of England. The Bloomberg Dollar Spot Index traded near the day’s highs, pressuring most other Group-of-10 currencies. Brent crude fell for a third-straight day, trading below $93. Gold slid and Bitcoin declined 1%. Coming up… At 8:30 a.m., we’ll get data on jobless claims and the second-quarter account balance, along with the latest reading of the Philadelphia Fed’s business gauge. At 10 a.m., figures for home sales are due. What we’ve been reading This is what’s caught our eye over the past 24 hours: - [Knife-edge Bank of England decision](sends pound to a five-month low - Auto strike, government shutdown among [the threats to the Fed’s soft-landing goal]( - [Two ex-Goldman bankers make a fortune]( with a controversial bet on coal - Investors [Ken Griffin and Bill Ackman meet with Ukraine’s Zelenskiy]( - [Google hiring in Zurich sends house prices soaring]( past London, Paris - The godfather of solar [ponders the idea of solar panels in space]( - Why no one [invites the boss for dinner anymore]( And finally, here's what Joe’s interested in this morning The Fed held rates steady yesterday as everyone expected. And it's possible (though still very much up in the air) that there will be no further rate hikes this cycle. But what's clear is that even if there are no more rate hikes, the Fed still has the ability to tighten policy further. All it has to do is not cut rates next year, or even just not cut rates as much as expected. That was the takeaway from the "dots" yesterday, which showed FOMC members expecting fewer cuts in 2024 and 2025. The easiest way to see what's going on is to just look at the real short end of the yield curve. The 3m-2y spread is inverted, meaning that the market anticipates that average Fed Funds over the next two years will be lower than they are right now (i.e. cuts). But the inversion is slowly fading, with the shallowest inversion since March. In other words, the market still sees some cutting, though not nearly as much as it did earlier this year. If we keep getting strong labor data, and sticky inflation numbers, the Fed doesn't have to hike per se. It can just let more cuts come out of imminent expectations, which would show up in this line continuing to drift back towards positive territory. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. 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](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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