Fed's John Williams Highlights 'Very Strong Case' to Raise Rates this Year

The back and forth associated with the impending federal interest rate hike has had investors playing it safe for much of the year. San Francisco Federal Reserve President John Williams stoked the fire on Tuesday when he stated that there's a "very strong case" for the Fed to raise interest rates next month if the economy continues to improve and inflation begins to pick up.

If and when a rate hike comes to pass, it will be the first in nearly a decade. The rate has remained near zero since the early days of the financial crisis in 2008.

Williams's comments are particularly noteworthy, because he's a voting member of the Fed's policymaking committee. Also, his views typically align with those of Fed Chair Janet Yellen, with whom he worked when she headed the San Francisco Fed. Yellen told Congress last week that a December rate hike is a "live possibility" based on the results of upcoming economic reports.

On the other side of the fence, some Fed policymakers have suggested waiting until next year to raise rates in order to avoid risks of derailing the ongoing economic recovery. These voters remain focused on the Fed's two percent annual target for inflation. Williams opposed those views by referencing the strong unemployment rate, which is at a near-normal five percent.

Despite his optimism, Williams did acknowledge a few obstacles that could block the path to a December rate hike. Weak overseas economies have strengthened the dollar and limited exports while curtailing inflation. This activity led to the Fed holding off on a hike in September, because China's economic slowdown caused concerns about a possible ripple effect throughout the region.

An argument for beginning the hike highlights a more gradual increase designed to avoid the risk of a run-up in inflation. With this delayed strategy, the Fed would be able to stop raising rates if the economy weakens in the near future.

Moving forward, Williams expects full employment figures to counteract the effects of low oil prices and a strong dollar as inflation takes hold. Despite general market tepidness, he doesn't believe a rate increase will have much of an impact on growth in the months to come.

Domestic Oil Prices Fall with Rising Inventories

Crude oil prices recorded another dip on Wednesday after industry reports suggested an increase in U.S. stockpiles. Although prices have remained near six-year lows for months, analysts report that U.S. output has remained surprisingly resilient.

Oil is being aided by the recent gains of foreign currencies on the U.S. dollar. A weaker dollar supports oil, which is priced in the U.S. currency, by making it more affordable for holders of different currencies.

OPEC has continued to closely observe market conditions. At an Arab-South American summit earlier this week, Ecuador's oil minister said the only way to balance the market was to cut production. The organization plans to reach an agreement on a change in production during its December meeting.

Venezuelan President Nicolas Maduro echoed these sentiments. Sub-$50 a barrel oil prices have had a dramatic impact on the country's energy-based economy.

Data from the U.S. Energy Information Administration is due on Thursday, and it's expected to show that stockpiles rose for the seventh consecutive week. Rather than posting an outright decline, U.S. production has plateaued in recent months while awaiting additional market stabilization. However, a price recovery in the short term looks increasingly unlikely.

An analyst with Deutsche Bank stated that forecast oversupply of one million barrels per day in expected in the first half of 2016, adding to current stockpiles. On the demand side, things don't appear to be much better.

In Japan, confidence levels fell in November to levels not seen in more than two years, according to Reuters. Fears of a China-led slowdown in overseas demand threaten to push Asia's second-largest economy into recession.

For the time being, weak global manufacturing activity is putting considerable pressure on energy demand, and a significant drop in oil demand growth during 2016 is likely.

Global Economy Growth in 2016 Depends on China

Analysts suggest that economic growth will continue to pick up in 2016, but not by much. That's because China, the world's second-largest economy, is slowing down. Forecasts from the OECD, the International Monetary Fund and The Conference Board generally agree with this summary.

China's economy is expected to continue its fall in 2016, while the U.S. will likely remain in its current "good but not great" state. European economies are expected to achieve modest improvements, but growth will likely be lackluster.

Emerging economies such as India are expected to achieve the most noteworthy growth, standing as a bright spot in an otherwise frozen global economy.

The Conference Board forecasts the world economy will grow by 2.8 percent next year, up slightly over the results of 2015. China will be key to this performance. The consensus on the Asian nation's economy is that it's in the midst of a "soft landing." Despite the optimism of China's official government data on growth, analysts remain cynical.

China's import market includes a lot of raw materials such as oil and copper. If the Chinese slowdown is over, the country's imports will enable the rest of the world to promote growth throughout 2016.

The second major factor in economic growth is U.S. consumer spending. Americans have been enjoying cheap gas prices for nearly a year, and spending has increased alongside optimism about the future. This spending will need to continue, because U.S. businesses are continuing to hoard cash.

With a lack of investment in the future, the economy will struggle to exceed its current levels. India and parts of Africa are expected to continue getting richer, but they aren't big enough players in the global economy to drive international growth just yet. As a result, the economy is stuck in low gear. It's growing, but all eyes remain on the performance of the Chinese economy in the months to come.

China's Singles Day Crushes Records

Singles Day began as a celebration of single people, held on the loneliest date of the year: 11/11. Today, however, it's grown beyond its roots into one of China's biggest shopping holidays. Foreign companies are taking notice. This year, a long list of foreign brands took part in one of the world's biggest online shopping extravaganzas.

Last year, Chinese retailing site Alibaba recorded sales of more than $9.3 billion, and it had already exceeded those figures as of late afternoon Wednesday. This performance is being partly spurred by the introduction of foreign companies into the festivities. Scott Wotherspoon, chief executive for Australian milk company A2, highlighted the benefits in an interview with the New York Times.

Though the company is new to online selling in China, online outlets "have allowed us to get into China in a much more direct way," he stated.

Beijing continues to welcome foreign enterprises into the country's retail markets in an effort to stimulate growth by increasing consumption. Although online purchases account for only about 10 percent of China's total retail sales, Beijing remains optimistic that expanded ecommerce with have significant future implications.

China's growing middle class is driving a shift toward luxury goods. An increasingly affluent population is attaching importance to the sources of certain goods. According to Nielsen research, they are more likely to buy beauty products from France and South Korea, shoes and bags from Italy and health care products from Australia.

Retailers are taking note. Brands from all sectors participated in the Singles Day festivities. Alibaba reported that its shopping festival offered roughly 5,000 overseas brands from 25 countries. With so many companies jostling for position, the festival has become a haven for steep discounts on goods as varied as clothes and cars.

Jack Ma, founder of Alibaba, promoted the opportunities presented by China's expanding middle class in a recent press release.

"There are currently 300 million middle class in China, and that number will rise to 500 million in 10 to 15 years," he said. "This will be an opportunity for every nation. China's consumption power will rise quickly and that will not only drive China's economy, but also the world's economy."

Prosecutors Announce Additional Charges in JPMorgan Hacking Case

Federal prosecutors deemed the global, multiyear scheme to steal information on 100 million customers of a dozen companies in the U.S. the largest hacking case ever uncovered. The complex scheme was originally uncovered last year at JPMorgan Chase, along with the breach of contact information from 83 million customer accounts.

With a little digging, investigators uncovered 75 shell companies and a hacking scheme using 30 fake passports from 17 different countries. Since 2007, the group in charge had used the scheme to reap hundreds of millions of dollars in illicit proceeds that were stashed in Swiss accounts and other bank accounts.

Two Israeli citizens and a United States citizen were accused of orchestrating the scheme and now face 23 counts of fraud and other illegal activities, according to recently unsealed indictment documents. This added hacking to manipulation and fraud charges that were previously filed in July.

Prosecutors stated that the group hacked seven financial institutions and two newspapers to obtain contact information in order to advance a pump-and-dump stock manipulation scheme. The success of nearly all the activities relied heavily on computer hacking and other cybercrimes.

The men also operated at least 12 unlawful internet casinos and marketed them to customers in the U.S. through extensive email promotions. The casinos reportedly generated at least $1 million in profits each month.