| Hello. Today we look at the market reaction to Federal Reserve Chair Jerome Powell's latest outlook, a selloff in key housing markets and the state of global remittances. Federal Reserve Chair Jerome Powell cheered markets on Thursday, but perhaps overly so. In a well-anticipated speech before officials stop talking ahead of their Dec. 13-14 meeting, Powell cemented expectations the central bank will slow their pace of interest-rate hikes. He also outlined a case for how inflation could be tamed without the economy being tripped into a deep recession. A soft landing is "very plausible."  Photographer: Valerie Plesch/Bloomberg Such an outlook was enough to send US stocks sharply higher. Bond traders also dialed back their expectations for how high they think the Fed might push rates. "Powell was materially less hawkish and more optimistic than anticipated," said Krishna Guha and Peter Williams of Evercore ISI.
A challenge, as Guha and Williams also noted, is that Powell's tone "can be unstable from one event to the next." In July, stocks soared after Powell seemed to suggest the Fed's key rate had reached "neutral." Then the following month, his infamous 8-minute speech in Jackson Hole sparked a market rout as he reinforced his focus on taming inflation. The risks, as Powell himself acknowledged, are that there is a "long way" to go before price stability is restored and rates will still likely be "somewhat higher" than what the Fed forecast as recently as September. To Derek Tang of LH Meyer in Washington, Powell managed to "walk a fine line signaling a possible turning point and not sounding too encouraging for risk appetite." "His main goal was to pin down a message of no easing in 2023, a signal that got across," he said. "The market was encouraged because a longer-hold strategy means not hiking too much more."
Guha and Williams sounded less sure, noting happy markets lean against the inflation fight. Powell "might in retrospect judge that he was a bit too risk-friendly, given the risks associated with letting go of financial conditions too soon," they said.
Others agree... —Simon Kennedy Two of the loftiest housing markets in the era of easy money are firmly in reverse as higher rates bite. And things may be about to get worse. In New Zealand, house prices saw the biggest annual decline in more than 13 years in November, down 2.9% from a year earlier. Some economists predict they will fall more than 20% from their peak in late 2021. "As long as interest rates continue to increase, it's likely housing values will continue to fall," said CoreLogic Head of Research Nick Goodall. "The question is at what point will the RBNZ become concerned enough about falling house prices and an upcoming recession, including job losses, to pull back in the inflation war."
Australia's housing downturn extended into November too. And with record-low fixed-rate mortgages secured in 2021 starting to expire, shifting those borrowers on to much higher variable rates, the market will face further challenges next year. "It's fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched," said Tim Lawless, research director at CoreLogic.
- New ECB era | The European Central Bank is about to enter a new phase in its fight against inflation, probably heralding more contentious decisions on monetary policy.
- China shift | China's top official in charge of the fight against Covid-19 said the country's efforts to combat the virus are entering a new phase with the Omicron variant weakening and more people getting vaccinated.
- Russia lacks labor | The call-up of men to fight in Ukraine has left labor so scarce in Russia that entire industries are in distress.
- Export woes | South Korea's exports fell the most in 2 ½ years, suggesting the global economy is cooling as demand weakens and rates rise. Factory indexes across Asia showed factories are struggling too.
- Stretched households | Brexit has added £210 to food bills for the average UK household, with low-income families hardest hit, a study shows. Meanwhile house prices are falling more sharply than expected.
- Yellen's autograph | Treasury Secretary Janet Yellen, whose signature will soon appear on US currency, joked that she worked hard to avoid the ridicule faced by some of her predecessors over their sloppy handwriting.
Migrant workers from India are on track to send home a record amount of money this year, boosting the finances of Asia's third-largest economy, which is set to retain top spot as the world's top recipient of remittances. Flows to India will rise 12% to reach $100 billion this year, according to a World Bank report. That puts its inflows far ahead of countries including Mexico, China and the Philippines. Highly-skilled Indian migrants living in wealthy nations such as the US, UK, and Singapore were sending more money home, according to the report. Over the years, Indians have moved away from doing lower paid work in places like the Gulf. Wage hikes, record-high employment and a weakening rupee also supported growth. Still, the World Bank also said that amid weaker expansion in rich economies, remittances to low-income and middle-income countries will grow 2% in 2023 to $639 billion, down from 4.9% this year. That's a lot of money... Read more reactions on Twitter | 
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