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China flows.

Some of the largest ETFs tracking Chinese stocks are seeing a surge in trading volume, potentially signaling revived interest. Yet the nation’s $6 trillion stock market rout reveals a painful truth: People are hopelessly gloomy about the outlook for the world’s second-largest economy. A government rescue package under consideration and a sudden cut in the bank reserve ratio show that authorities indeed are growing anxious. According to Bloomberg Economics, there is little doubt the People’s Bank of China will deliver more stimulus on top of the latest reduction in bank reserve requirements.

US GDP growth | The US has pulled further ahead of China in the race for the world’s biggest economy, thanks in part to a vibrant American consumer. The US economy’s fourth-quarter growth trounced forecasts as cooling inflation fueled consumer spending, capping a surprisingly strong year that defied recession calls. Gross domestic product increased at a 3.3% annualized rate. For all of 2023, the economy expanded 2.5%. US stocks closed at a record high for the sixth straight day as soft-landing hopes grow. Swap contracts continued to fully price in a Fed rate cut in May.

Not as easy | The Federal Reserve raised the rate on loans to banks issued under an emergency lending program launched last year, after borrowing surged in recent weeks as institutions took advantage of the attractive financing terms. The Fed’s Bank Term Funding Program will not be extended beyond its March 11 deadline, top officials had signaled earlier this month. But effective immediately, the adjusted interest rate for borrowing will “be no lower” than that of reserve balances in effect on the day the loan is made, the Fed said on Wednesday night.

Illustration: Cari Vander Yacht | Bloomberg Businessweek

Recession fears recede as US Q4 economy expands at strong 3.3% rate

The US economy grew at a 3.3 percent annualized rate during the final quarter of last year, capping off a strong 2023 that defied recession fears and prompted President Joe Biden to attempt to claim credit. The figures pointed to the US economy’s remarkable resilience in the face of the Federal Reserve’s sustained campaign to snuff out inflation with higher interest rates — and encouraged investors who believe the central bank will cut rates in the coming months. (Financial Times | Jan 25)

SEC's Gensler calls for global talks on halving forex settlement time

As the United States, Canada, and Mexico in May halve the time it takes to settle stock trades, it would be worthwhile to also start a global debate on shortening the time it takes to settle forex trades, US Securities and Exchange Commission chair Gary Gensler said on Thursday. Gensler told a conference in Brussels he thought the European Union, Britain, and Switzerland would copy Wall Street's move to settling stocks within a day after the transaction, sometime during this decade. (Reuters | Jan 25)

SEC imposes new rules on blank-check deals as SPACs fizzle

Wall Street’s main regulator tightened its oversight of blank-check companies on Wednesday with new regulations to force more disclosure, crack down on conflicts of interest, and speed up the deal-making process. After surging during the Covid-19 pandemic as an alternative to traditional initial public offerings, blank-check companies have fallen out of favor. In a move that could further reduce interest, the Securities and Exchange Commission’s new rules revoke legal protections that shielded sponsors of the deals from getting sued by investors for over-embellished statements. (Bloomberg Markets | Jan 24)

Goldman, Lazard look to ex-spies for edge in volatile world

A growing legion of former spies, diplomats, and soldiers are shifting into banking. The number of finance jobs that require a background in intelligence has jumped 30% in the past year. The trend is being fueled by increasing recognition that the perils faced by investors go far beyond interest rates, inflation, and loan losses, and that it’s unwise to ignore geopolitics in any investment — particularly this year, with elections in dozens of countries. The possibility that a rogue political actor might upend market assumptions with a single action was cited as the top global risk in a recent poll of 500 institutional investors by fund manager Natixis SA. (Bloomberg Businessweek - Finance | Jan 24)

Say goodbye to the Fed's 2023 bank rescue facility

The Federal Reserve is pulling the plug on a rescue program that had become easy money for banks. The central bank said Wednesday that it would adjust the interest rates on any new loans issued through the expiration of the program in mid-March. As a result of the change, the rates on the program's new loans will be no lower than the interest banks can receive on funds they deposit at the central bank, effective immediately. (The Wall Street Journal | Jan 24)

EquiLend handled transactions worth $2.44 trillion in December alone. Photo: Andrew Kelly | Reuters

Hackers hit platform for lending securities

Hackers disrupted operations at the key node of a multitrillion-dollar market, and the company says restoring the affected systems 'may take several days.' EquiLend Holdings, a financial technology company at the center of the securities-lending market, said hackers took several of its systems offline this week, and added that restoring them may take days. In a statement, the company said its systems were knocked out by a "technical issue" on Monday, and an investigation later determined a cyberattack was the cause.

— Wall Street Journal

Latest cyberattack leaves banks stuck with Excel and a headache

Another cyberattack against the unglamorous platforms underpinning Wall Street left one of the global banks’ biggest businesses falling back on an old-fashioned method of doing business. Securities-lending teams at two major lenders had to resort to manually inputting certain stock loans and other transactions into spreadsheets after financial technology firm EquiLend succumbed to a ransomware attack, according to people familiar with the matter. 

— Bloomberg Technology | Cybersecurity

Another provider of cloud services says Russian intelligence hacked it

The major cloud computing provider spun out of Hewlett-Packard said late Wednesday that it had been hacked by a suspected Russian intelligence team, the second such hack of a major US internet company reported this month. In a filing with the Securities and Exchange Commission, Hewlett Packard Enterprise said it was notified Jan. 12 of a breach that allowed hackers to steal emails from its cybersecurity employees and some others. The disclosure follows a similar report Friday from Microsoft.

— The Washington Post

Photo: Bloomberg

Worried AI will replace your job? Fear not.

Artificial intelligence can’t replace the majority of jobs right now in cost-effective ways, the Massachusetts Institute of Technology found in a study that sought to address fears about AI replacing humans in a swath of industries. In one of the first in-depth probes of the viability of AI displacing labor, researchers modeled the cost attractiveness of automating various tasks in the US, concentrating on jobs where computer vision was employed — for instance, teachers and property appraisers. They found only 23% of workers, measured in terms of dollar wages, could be effectively supplanted. In other cases, because AI-assisted visual recognition is expensive to install and operate, humans did the job more economically.

— Bloomberg Technology

Kill the wormholes: How to get rid of distractions and get more done

The most important thing we can do to improve our digital spaces is kill the wormholes: declutter your digital workspace, save time with shortcuts, and leverage an AI helper.

— The Wall Street Journal

How a 27-year-old codebreaker busted the myth of Bitcoin's anonymity

Once, drug dealers and money launderers saw cryptocurrency as perfectly untraceable. Then a grad student named Sarah Meiklejohn proved them all wrong — and set the stage for a decade-long crackdown.

— Wired