WSJ What’s News - Investors Brace for Historic Fed Rate Cut

Episode Date: September 18, 2024

A.M. Edition for Sept. 18. Just hours away from the Fed's rate-cut decision, economists and investors remain at odds over how large it will be. Economics editor Paul Hannon explains why central banks around the world are watching closely. Plus, Hezbollah is reeling a day after pagers carried by thousands of its operatives exploded across Lebanon. The WSJ’s Stephen Kalin reports from the ground. And, a European court hands Alphabet’s Google a win over a $1.7 billion antitrust fine. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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leaves thousands wounded. Plus investors the world over await the Fed's rate-cut decision. Policymakers have to make a decision between going cautiously and the other risk that if they don't move quickly enough, the jobs market might weaken again. And Google scores a win against Europe's competition watchdog. It's Wednesday, September 18th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. We begin in Lebanon, where authorities say nine people have died and almost 2,800 have

been injured in what appeared to be an unprecedented attack yesterday on pagers carried by thousands of Hezbollah operatives. We are reporting that many of the affected pagers were from a new shipment that the group received in recent days. Taiwanese company Gold Apollo said today that the pagers that exploded yesterday were made by BAC Consulting KFT, a Hungary-based company that had licensed its brand and trademark. BAC didn't respond to requests for comment. Hezbollah and the Lebanese government have blamed Israel for the attack, though the Israeli

military declined to comment. Journal Foreign Correspondent Stephen Kalin is in Lebanon and told me yesterday's attack has left Hezbollah a group long concerned about operational security reeling. This is obviously a pretty big challenge for them that all of these pages went off all at the same time and it indicates some sort of infiltration or weakness in their communication system. The group has been trying to move to lower tech solutions to try to avoid infiltration, penetration. And so they were using these pagers. They are a little bit more advanced than the pagers that we might think about from the 80s and 90s. So there's an ability to send messages,

to type and send messages. And so these were seen as safer than talking on the phone and other more advanced communications methods. So I think it comes as a shock that these then became used as weapons against them. Hospitals across the country were full last night. I was in Beirut, visiting a couple of hospitals until about midnight and there were still ambulances rolling in from across the country carrying some of the most injured people to

get high level treatment. Today I've just driven for an hour and a half across the country. It's quieter than usual. Schools are closed. You can feel people are a little bit in a state of shock. Nat. All right, Stephen. So Hezbollah in a bit of shock right now, but should we be bracing for some sort of response from them? Stephen. The group has issued a number of statements condemning the attack and saying that they're still prepared for conflict. They're still prepared to defend themselves and also continue the conflict that they've been engaged in with Israel on behalf of the people of Gaza.

The sense is that the whole summer was really tense. There were a number of assassinations in Beirut. There was one in Tehran and that prompted a response from Hezbollah, which Israel spent many weeks waiting for and worried that it was going to lead to escalation. And a lot of people thought we had gone into another period of calm and now we've just been sort of sucked back into this vortex of potentially more escalation. It might not be immediate, but it seems almost inevitable that it will have to be some sort of response.

It could just take a few days or a couple of weeks. Well today's other big story is the Federal Reserve's looming move to cut interest rates for the first time in years later this afternoon. And despite the announcement being in the cards for months, economists and investors alike don't know by exactly how much the Fed will cut rates, lending an air of surprise to an already hotly anticipated 2 p.m. Eastern Time announcement. Paul Hannan is the economics editor for Dow Jones Newswires.

Paul, I can't remember the last time we were just hours away from a Fed rate decision with so much uncertainty still lingering around their move, not least because so much rides on whether we end up seeing a quarter point or a half a point cut. Between those two options, which would trigger more volatility in markets or potentially raise more questions than it answers? It's a finely balanced thing. So different people will have different expectations. And if they don't deliver on that, they'll be surprised and do things that are sort of

unpredictable perhaps. But I think on balance, it's probably the larger move just because it's a non-traditional way to start a cycle of rate moves. You usually start fairly gingerly unless there's an obvious emergency. And that's one of the questions around the communication that would come with a 50 base point cut is that it might send a signal that things are a little bit worse than most people are aware right now. It doesn't look like an economy that's in desperate need of a boost. On the other hand, if you wait too long, it might get to a situation where, yeah, it is.

So we're going to have to wait and see. Nat. Also, waiting and seeing will be central banks around the world who, from your reporting, sound like are treating this sort of as an opening gun, maybe of sorts, to take their own rate cutting steps. Paul Anthony I mean, for some, it will be an opening gun. So central banks in Europe, for example, have already been lowering interest rates. And Brazil started way back in August of last year.

But then there are a bunch of central banks like South Africa, India, South Korea, that have been sort of waiting for the Fed to remove a little bit of currency and inflation risk from their first moves. And they've waited for the Fed, why exactly? Well, if we take South Africa as an example, its policymakers are going to meet tomorrow and they are likely to be the first central bank to follow the Fed with a rate cut. And what they're seeing is a weak economy and falling inflation. But the problem is that if they cut rates

before the Fed moves, it's quite likely that the Rand, the local currency, would weaken against the dollar, and that would raise the prices of things that South Africa imports, and that could restart inflation. So that kind of calculation is pretty common more across sort of developing economies

than the big economies of Europe, but it's still a calculation pretty much everywhere. Paul Hannan is the economics editor for Dow Jones Newswires. Paul, thank you as always for the update. Thanks, Luke. And in other markets news, shares in DNA testing company 23andMe have slumped off hours

after all seven of its independent directors resigned. It comes after a long negotiation with founder and CEO, Anne Wojcicki, over her plan to take the company private. Trading at around 30 cents a share, the company is worth less than the cash on its balance sheet. And after years of struggling with weak sales, Tupperware Brands has filed for bankruptcy, with the company saying it started

Chapter 11 proceedings in Delaware, seeking court approval to continue operating and to facilitate a sale process. The company's shares are sharply lower in off-hours trading after losing more than half of their value in yesterday's session. Coming up in EU court, let's Google off the hook for a $1.7 billion antitrust fine, and we've got the rest of the day's business and politics headlines after the break. Looking for a path to accelerate your career? Clear direction for next-level success?

In a place that is innovative and practical? A path to stay current and connected to industry, a place where you can be yourself, you will find it at York University School of Continuing Studies where we offer career programs purpose-built for you. Visit continue.yorku.ca. A European court has scrapped a $1.7 billion fine imposed on Google over its online advertising practices. European Union antitrust officials had levied the fine in 2019, saying Google abused its dominance as a search engine and as an ad broker by restricting the way some websites

displayed ads sold by its rivals. Google didn't respond to a request for comment. Today's decision is a win for Google's parent alphabet, though the ruling can still be challenged at the EU's highest court. BlackRock and Microsoft are partnering with United Arab Emirates-backed investor MGX on a new artificial intelligence fund that aims to raise $30 billion in private equity capital to invest in data centers and power infrastructure. Including debt financing, the partnership could deploy up to $100 billion in total capital, and most of the infrastructure investments will be

made in the U.S. The plans come amid a recent frenzy to build infrastructure to power AI, and as Microsoft and other big tech players are investing billions in their own data centers. Attorney General Merrick Garland says the Justice Department will spare no resource in investigating the apparent assassination attempt on Donald Trump in Florida last weekend. Garland said yesterday that national security prosecutors would be heavily involved in the criminal inquiry, suggesting the DOJ could pursue more serious charges than the two initial firearms violations against the suspect, Ryan Ruth. At the same time, top Democrats on Capitol Hill said they were open to passing a one-time cash infusion for the Secret Service in order to boost protective measures through the election season amid what law enforcement officials have described as an unprecedented threat

environment. And Senate Republicans have blocked a bill that would provide legal protections for fertility treatments and mandate insurance coverage, despite Donald Trump's campaign trail promise to force insurers or the government to pay for them. It is the second time Republicans have voted down the bill. Many say they support IVF, but that they oppose the legislation as expensive government overreach, a position that Washington Democratic Senator Patty Murray suggested was untenable. But Democrats are not going to stop pushing. And I have a message for my Republican colleagues

who think they can talk about this issue, make big promises to desperate families, like Trump's promise to cover IVF treatment, and then fail to follow through. I would urge them to think again and tread lightly because that promise may just be an empty sound bite to Donald Trump, but it is so personal to these families. Access to fertility care has emerged as an important political issue since an Alabama Supreme Court decision earlier this year forced clinics in the state to pause IVF services. Democrats have tried to link access to fertility treatments with the more polarizing issue of abortion.

And that's it for What's News for Wednesday morning. Today's show was produced by Daniel Bach with supervising producer Christina Rocca, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.