Kansas City Federal Reserve Bank President Esther George said "the volatile week in the stock market" was to be expected, partly reflecting the impact of tighter monetary policy. Her support for a 50 basis point rate hike was unchanged. "I think what we're looking for is to communicate our policy through market expectations, and tightening is expected," George said in an interview with CNBC on Thursday. "That's one of the ways that financial conditions are tightening." The Fed raised rates by 50 basis points earlier this month, and Chairman Jerome Powell signaled that the Fed would take action of a similar magnitude at its June and July meetings, the Federal Open Market Committee said. Both hawks and doves in the U.S. have embraced the plan. "Inflation is so high now that we need a series of rate adjustments to bring it down," she said. "We do see financial conditions start to tighten, so I think that's something we have to watch carefully. It's hard to know for sure how much tightening is needed."

Initial claims for state unemployment insurance in the U.S. unexpectedly rose to their highest level since January, led by gains in Kentucky and California. Initial jobless claims rose by 21,000 to 218,000 in the week ended May 14, data from the Labor Department showed on Thursday. The median estimate in a Bloomberg survey was 200,000. Continuing jobless claims fell to 1.32 million for the week ended May 7, the lowest level since 1969. While the continued claims data underscores that the labor market remains solid, the continued rise in initial claims could point to some weakness. Rising interest rates are expected to reduce labor demand as the Federal Reserve tightens monetary policy more aggressively to combat high inflation. "The level of jobless claims remains relatively low, but is slowly climbing, suggesting a slowdown in net hiring going forward," said Bloomberg economist Eliza Winger.

Some of Wall Street's top strategists said the gloomy outlook for the U.S. economy and stocks may have been overdone. Goldman Sachs Group Inc.'s David J. Kostin and JPMorgan Chase & Co.'s Marko Kolanovic both believe investors' fears of an impending U.S. recession are overblown -- leaving room for stocks to rally this year. The S&P 500 has fallen 18% from a record high in January, approaching a bear market. "A recession is not inevitable," Goldman Sachs strategists led by Kostin wrote in a May 18 report. "Sector rotation within U.S. equities suggests that investors are pricing in a high probability of an economic downturn beyond what recent strong economic data suggests." Kostin wrote that the relative performance of cyclical and defensive stocks portends "a sharp slowdown in growth." slowing down”, but ISM manufacturing data does not support this. Economists at Goldman Sachs project a 35 percent chance of a U.S. recession in the next two years.

Sakakihara, a former senior official of the Japanese Ministry of Finance, said that as the monetary policy divergence between the United States and Japan deepens, the yen may fall to its lowest level since 1990. Sakakihara said the sharp divergence between the Fed's hawkish stance and the Bank of Japan's easing policy remains the biggest driver of the yen's weakness. JPY/USD could remain under pressure until the divergence narrows. Sakakihara was known as "Mr. Yen" for his ability to influence the Japanese currency during his tenure at the Japanese Ministry of Finance from 1997-1999. "The market is expecting the yen to be between 140 and 150 by the end of the year -- so there's a good chance the yen will fall to that level," Sakakihara, now a professor at Japan's Aoyama Gakuin University, told Bloomberg Television. . "If the yen falls below 150, then I think the BOJ will be a little worried."

Apple executives showed the upcoming mixed reality headset to the company's board of directors last week, according to people familiar with the matter, signaling that development of the device has entered an advanced stage. The company's board, which includes eight independent directors and Apple CEO Tim Cook, meets at least four times a year. A version of the device was demoed at a recent board meeting, the people said. In recent weeks, Apple has also accelerated development of rOS, the software that runs the headset, according to people familiar with the matter. This development, combined with a demo on the board, suggests the product could debut in the coming months. The headset, which combines elements of virtual and augmented reality, is Apple's next big bet and will be the company's first major new product category since launching the Apple Watch in 2015, bringing the tech giant into a market still in nascent industry.

Prime Minister Justin Trudeau's government has joined the ranks of its closest intelligence allies in banning Huawei from Canada's 5G network. Canada's Industry Minister Francois-Philippe Champagne said Thursday that the Chinese telecommunications equipment champion posed a threat to Canada's national security. This confirmed an earlier report by Bloomberg News. ZTE's equipment will also be banned. Companies that have installed Huawei or ZTE equipment will have to remove them, Champagne said. The Trudeau government has delayed the decision for more than three years due to deteriorating relations between China and Canada, and the ban will almost certainly spark tensions. The announcement will be welcomed by the U.S. Joe Biden administration, which is trying to get countries to ditch Huawei. U.S. officials have claimed that Huawei equipment could allow the Chinese government to interfere in 5G networks. Since 2019, the United States has imposed the strongest possible sanctions against a company against Huawei.

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