🐂 AI goes to work

Markets

Yesterday, the stock market initiated November on a positive note following the Federal Reserve's decision to maintain unchanged interest rates for the second consecutive month, while indicating the potential for future rate increases. For those closely monitoring the Fed's actions, Chairman Jerome Powell and colleagues upgraded their evaluation of the economy, shifting from describing it as growing at a "solid pace" in the previous assessment to now characterizing it as advancing at a "strong pace." Notably, technology stocks spearheaded the market surge, witnessing gains in companies such as Alphabet and Meta, while semiconductor manufacturers like AMD, Micron, Nvidia, and Intel also experienced notable increases.

Bank of England Leaves Key Interest Rate At 5.25%

The Bank of England's policymakers maintained their key interest rate unchanged for the second consecutive meeting, signaling a reluctance to implement immediate policy easing.

The decision, upheld by six members of the Monetary Policy Committee, saw a vote to keep the benchmark rate at 5.25%, while three members favored an increase to 5.5%. This contrasted with the previous meeting in September when four members had pushed for a rate hike. Before this recent hold, the BOE had consistently raised its key rate over 14 consecutive meetings.

Following the lead of the Federal Reserve and the European Central Bank, the BOE opted to keep its key rate steady. This marks the first time since December 2021 that all three central banks decided against raising borrowing costs.

Considering a decrease in inflation rates and sluggish economic growth, there's speculation among investors regarding the possibility of European central banks reducing their key rates to stimulate economic activity.

The BOE clarified that any rate cuts aren't imminent, suggesting that a cut is unlikely before the third quarter of next year. They emphasized the need for rates to remain relatively high "for an extended period of time." However, the BOE also cautioned that they might need to increase the key rate if inflation exceeds their expectations.

Andrew Bailey, Governor of the BOE, emphasized the effectiveness of higher interest rates in reducing inflation but stressed that it's premature to contemplate rate reductions.

In the UK, consumer prices soared by 6.7% in the 12 months up to September, significantly surpassing the inflation rates in the eurozone and the US.

The BOE anticipates a substantial decline in inflation throughout October and the subsequent months, with a projection that it will fall below their 2% target by the end of 2025.

Market expectations suggest that the BOE might commence cutting its key rate in the third quarter of next year. While the BOE's inflation forecast indicates a later rate cut, it doesn't strongly oppose the market's anticipation for an earlier cut.

AI

Microsoft’s AI copilot may be coming to your office

For quite some time, proponents of ChatGPT have been forecasting that the AI-powered chatbot will revolutionize work processes, and these predictions seem to be materializing.

Employers might now be contemplating the addition of Microsoft Copilot to their company's enterprise Microsoft 365 subscription. Described as an intelligent assistant by Gizmodo—a sort of "Clippy with an MBA"—this ChatGPT-driven tool aims to enhance productivity by converting Word documents into PowerPoint presentations, composing email responses, summarizing video meetings, and automating various tasks within the Microsoft 365 suite.

Businesses interested in integrating Copilot into their Microsoft 365 E3 or E5 subscriptions need to purchase a minimum of 300 user licenses at $30 each, in addition to the existing subscription fees of $36 and $57 per user per month, respectively.

Could "proficient in Copilot" become the new sought-after skill on resumes?

Microsoft is the pioneer in incorporating ChatGPT's technology into a widely used business software product, leading some to speculate whether this is Microsoft's watershed moment akin to the iPhone. Analysts at Piper Sandler anticipate that Microsoft could generate $10 billion in annual revenue by 2026 by having AI assistance integrated into the white-collar work routine.

Certain high-earning US companies gained early access to Copilot several months ago. At one of these firms, employees reported that the tool saved them between five to 10 hours per month, according to the Wall Street Journal.

Analysts express optimism about the potential scalability:

By the conclusion of the next year, Forrester, a market research group, estimates that nearly 6.9 million knowledge workers in the US could be using Copilot. Piper Sandler also forecasts that the fear of missing out (FOMO) will drive businesses to adopt Copilot to remain competitive with industry peers utilizing the tool. However, considering nearly a year of experience with ChatGPT, it's acknowledged that AI can occasionally make errors. Tech experts advise those integrating Copilot to review the bot's output for anomalies before finalizing tasks such as sending out a presentation deck.

Government

The US Treasury laid out its plan for new bonds.

In the recent interest rate announcement by the Federal Reserve, Treasury Secretary Janet Yellen took the spotlight, drawing more investor attention than Chairman Jerome Powell. Yellen's update on the scale of forthcoming bond auctions stole the focus. Many had apprehensions about the US introducing new debt into a market characterized by high interest rates and diminished bond demand, leading to elevated yields. However, Yellen's remarks were well-received by the market. She clarified that the government's emphasis would be on shorter-term notes rather than longer-term ones, leading to a surge in the value of 10- and 30-year bonds.

Energy

Offshore wind is not doing well

Similar to the fate of numerous suburban frozen yogurt shops that emerged during the summer of 2014, various planned offshore wind energy initiatives are currently facing declining profitability.

Orsted, recognized as the world's largest developer of offshore wind farms, revealed its decision to abandon two major projects in New Jersey this week, dealing a blow to the Biden administration's clean energy objectives. The Danish company cited the projects' financial sustainability being compromised by higher interest rates and supply chain disruptions, resulting in a write-off of $4 billion.

Establishing a wind farm in the US is proving to be a challenging task. Orsted's CEO Mads Nipper conveyed to the New York Times that although the renewable energy industry has encountered difficulties in Europe, the challenges are more pronounced in the US. Besides financial obstacles, the industry faces issues with public opposition and insufficient subsidies.

In August, Orsted cautioned that New Jersey's tax incentives were insufficient to support the projects amid escalating expenses. The initiatives also faced legal challenges from Republican lawmakers and residents along the Jersey Shore, leading to costly project delays.

Nevertheless, despite these setbacks, the federal government approved the Coastal Virginia Offshore Wind Project just yesterday. This project, if successful, would become the largest offshore wind farm in the United States. This approval signals a potential turning point for offshore wind production, offering hope for a resurgence in the industry.

Entertainment

Mariah Says ‘tis the season

Pack away those Halloween decorations and set fire to your leftover Halloween candy, because according to Mariah Carey, it's time to bid farewell to gourds and welcome tinsel. The unofficial Queen of Christmas recently tweeted a video of herself, marking the transition from October 31 to November 1 by singing the opening notes of her beloved holiday classic, signaling the annual surge in Google searches for "All I Want for Christmas Is You."

This iconic holiday tune, which was initially released in 1994, consistently returns to the charts in the months leading up to Christmas, earning the title of the unofficial song of the holiday season and the official earworm for retail workers. Last year, it was among the 25 songs selected by the Library of Congress to be added to the National Recording Registry.

However, not everyone is a fan. In 2021, a Texas bar gained viral attention for banning the song from playing before the month of December.

Looking at the broader perspective, it's not just Carey who's initiating the Christmas fervor before Thanksgiving even arrives. Both Starbucks and Dunkin' have introduced holiday drink flavors, including peppermint, to their menus this week. Additionally, Rockefeller Center announced the selection of its 12-ton tree for this year's festivities.