2025-01-29 11:08

A look at the day ahead in U.S. and global markets from Mike Dolan The AI-related stock shakeout seems to have calmed as investors turn to megacap tech earnings - with the Federal Reserve set to pause its easing campaign in its first policy decision for 2025 just as central banks in Canada and Sweden cut again. The hoopla over the arrival of China's cheap artificial intelligence model DeepSeek continues to reverberate, even though giant U.S. chip firms like AI darling Nvidia (NVDA.O) , opens new tab have clawed back at least some of Monday's steep losses. Up again ahead of Wednesday's bell Nvidia's shares look set to have recovered just over half of the 17% plunge at the start of the week - a moved that lopped more than half a trillion dollars off its overall market value. The whole episode has reintroduced two broader market fears - the concentration of broad index (.SPX) , opens new tab fortunes in a handful of outsize tech stocks, and whether the hundreds of billions of dollars of investment spending in AI development by many firms is really worth it longer term. On the latter issue at least, quarterly updates from first three of the so-called 'Magnificent Seven' megacaps on Wednesday may tell a tale as Microsoft (MSFT.O) , opens new tab, Meta (META.O) , opens new tab and Tesla (TSLA.O) , opens new tab report after the bell tonight. With China's markets closed for the lunar new year holiday, there was a scramble to find out more about DeepSeek. U.S. officials said they're looking at the national security implications of the Chinese wonder app, while President Donald Trump's crypto czar said it was possible that intellectual property theft could have been at play. Both OpenAI and Microsoft say they are looking at the extent to which their tech had been copied. Chinese tech behemoth Alibaba (9988.HK) , opens new tab, meantime, released a new version of its Qwen 2.5 AI model - claiming it surpassed the highly-acclaimed DeepSeek-V3. Its U.S.-listed stock was 2% higher before Wednesday's open. Global investors, such as Norway's $1.8 trillion wealth fund, said they were surprised about the DeepSeek development and fretted about tech concentration risk in portfolios. But boss Nicolai Tangen said on Wednesday that the wealth fund had a small underweight in tech stocks before this and warned that last year's big market returns - which bagged it a record $222 billion annual profit - may not be repeated. "I just want to warn again that this will not last forever." U.S. stock futures were marginally higher on Wednesday although European stocks (.STOXX) , opens new tab powered ahead to new records, helped by an 11% surge in chip equipment maker ASML (ASML.AS) , opens new tab after strong earnings. The European technology sector at large (.SX8P) , opens new tab surged 4.5% - its best single day in a year. The gloomy European macro backdrop is being offset by hopes for further interest rate cuts this week, with the European Central Bank widely expected to lop another quarter point off its main policy rates on Thursday. Sweden's central bank got the ball rolling on Wednesday and cut its main rate by a quarter point to 2.25% - the Riksbank's fifth rate cut in a row and the sixth since May last year. The crown brushed off the expected move. The Bank of Canada is also expected to bang that drum later today with a quarter point rate cut of its own, comfortable with sub-target inflation rates and wary of the economic impact of repeated Trump tariff threats. The Canadian dollar was slightly weaker ahead of the decision. The Fed, however, is set to stand pat today and this week's meeting will be the first one without a rate cut since it began easing in September. With inflation stuck above 2% and estimates of U.S. GDP growth back above 3% for the first time this year - according to the Atlanta Fed's 'GDPNow' model - the Fed is expected to hold the line for a bit while it assesses the macro impact of Trump's new policies. Encouraging the rates market this week, however, has been signs of the equity market wobbling and news on Tuesday that U.S. consumer confidence began to ebb more than expected in January. That's led Fed futures to fully price in two more rate cuts by the end of this year. Helped by a decent 7-year note auction, Treasury yields have slipped back again. Two-year yields are back below 4.2% and 10-year yields are probing 4.5%. The dollar index (.DXY) , opens new tab bucked the yield trend and pushed higher - in part because the slipped back ahead of the expected ECB cut tomorrow. Key developments that should provide more direction to U.S. markets later on Wednesday: * U.S. Federal Reserve's Federal Open Market Committee announces latest policy decision, press conference from Fed Chair Jerome Powell; Bank of Canada policy decision, briefing by governor Tiff Macklem * US December trade balance, Dec wholesale/retail inventories * US corporate earnings: Microsoft, Meta, Tesla, IBM, Ameriprise, General Dynamics, Corning, Nasdaq, MSCI, Otis, Danaher, Hess, ADP, Teradyne, Las Vegas Sands, ServiceNow, Western Digital, CH Robinson, Lam Research, Waste Management, United Rentals, Lennox, Norfolk Southern, Progressive * Bank of England's Governor Andrew Bailey gives evidence on the Financial Stability Report to a parliamentary committee Sign up here. https://www.reuters.com/markets/us/world/uk/global-markets-view-usa-2025-01-29/

2025-01-29 11:01

OTTAWA, Jan 29 (Reuters) - The Bank of Canada is almost certain to trim its key policy rate by 25 basis points on Wednesday as a slew of factors, from potential cross-border tariffs to a reduced population target, keep the outlook for the economy muted. Poor business investment, high unemployment and erratic consumer spending kept the economy under strain for most of last year. Gross Domestic Product missed the central bank's third-quarter forecast. Now with a prospect of U.S. President Donald Trump imposing 25% tariffs on Saturday looming over Canada, the BoC will be under pressure to prop up the economy through lower interest rates, analysts and economists said. "It would shock everybody if they did not," said Étienne Bordeleau-Labrecque, portfolio manager at Ninepoint Partners, on market expectations of a rate cut. He said the BoC's monetary policy report will be closely watched to see how the curbs on immigration and potential tariffs from the United States impact growth and inflation this year and next. The BoC will announce its decision at 9:45 a.m. ET (1345 GMT) on Wednesday. The announcement will also accompany its Monetary Policy Report, a quarterly document that gives the latest projections for inflation and economic growth. Currency swap markets are betting that the odds for a 25-basis-point rate cut are over 98%, and a Reuters poll published this month said 25 out of 31 economists expect a quarter-point rate cut to 3%, a step down from December's half-percentage-point move. . Economists have said that based on the extent of tariffs and how Canada retaliates, there is a potential risk of persistent inflation, a spike in unemployment and lackluster demand, a situation known as stagflation, which the bank has tried hard to avoid through consistent rate cuts. "This is the communications challenge the bank has because all of these scenarios have very different outcomes," said Randall Bartlett, senior director of Canadian economics at Desjardins. "The bank doesn't want to make monetary policy decisions on 'what if' scenarios," he said, but added that the market would still want to clearly know the BoC's expectations. If the bank's decision aligns with market expectations, it will be the sixth time in a row that the BoC will have reduced borrowing costs with a cumulative 2 percentage points in a space of seven months. Sign up here. https://www.reuters.com/markets/rates-bonds/bank-canada-most-likely-cut-rates-by-25-bps-wednesday-2025-01-29/

2025-01-29 10:48

Exports could fall more than 10% in 2025 due to low output Dry weather followed by heavy rains dents production Record 2024 exports deplete inventory, trim carry forward stocks MUMBAI, Jan 29 (Reuters) - India's coffee exports are expected to decline more than 10% in 2025 due to lower production and reduced carry-forward stocks from last season's crop, even as beans fetch record high prices, industry officials told Reuters on Wednesday. The South Asian country, a major tea producer, is also the world's seventh-largest coffee grower. The country mainly produces robusta beans used to make instant coffee, but also grows the more expensive arabica variety. Lower exports from India could further tighten global supplies, already squeezed by weaker output from top producer Brazil, which would support benchmark futures , that hit a record high this week. "Although prices are higher, the smaller crop will result in lower export volumes," Chengappa Pradhan, researcher at Volcafe, the coffee trading arm of ED&F Man, told Reuters. Exports in 2025 could fall by more than 10% from the prior year's record 295,402 metric tons, he said. Output is expected to fall this year as higher summer temperatures and water scarcity impacted the conversion of coffee flowers into cherries, while later heavy rains lead to fruit dropping, said Marvin Rodrigues, a coffee grower. "This year, harvesting was delayed due to rains. Early trends suggest lower yields," said Rodrigues. The country harvested 374,200 tons of coffee, including 261,200 tons of robusta and 113,000 tons of arabica in the 2023/24 marketing year ended in September 2024, the state-run Coffee Board estimated. "We have not yet finalised the number for the current season's production. We are receiving reports of lower yields. Our estimate will be finalised after conducting a detailed survey," said an official with Coffee Board. DEPLETED STOCKS The rally in coffee prices in 2024 and European Union Deforestation Regulation (EUDR) regulation led to higher Indian exports in 2024, but that brought down inventories to a negligible level, said Ramesh Rajah, president of the Coffee Exporters' Association of India. "Lower carry forward stocks would bring down available surplus for exports," Rajah said. European countries such as Italy, Germany and Belgium are among key buyers of Indian coffee. The initial deadline for the EUDR, which aims to prevent the import of commodities linked to deforestation, was December 2024, which has since been delayed to December 2025 for large operators and traders. European buyers bought more coffee than required in 2024 anticipating the EUDR, but they are now slowing down purchases because of record prices, Rajah said. Demand for Indian arabica is a bit subdued, but there is good demand for Indian robusta, which is fetching premium over the benchmark London futures, Rajah said. Indian robusta was being offered at a premium of $250 per ton over London futures, dealers said. "Farmers have witnessed prices rally month after month, and many are holding back their crops in anticipation of further gains," said Pradhan of Volcafe. Sign up here. https://www.reuters.com/markets/commodities/indias-coffee-output-dips-clouds-export-outlook-despite-record-prices-2025-01-29/

2025-01-29 10:28

EYNSHAM, England, Jan 29 (Reuters) - Britain will boost its economy by resetting its ties with the European Union and building on its special relationship with the United States, finance minister Rachel Reeves said on Wednesday. "That means building on our special relationship with the United States," Reeves said in a speech outlining how she intends to improve the weak performance of Britain's economy. "Acting in our national interest also means resetting our relationship with the EU, our nearest and our largest trading partner, to drive growth and support business." Sign up here. https://www.reuters.com/world/uk/uks-reeves-seeks-growth-boost-improving-eu-us-relations-2025-01-29/

2025-01-29 10:18

MUMBAI, Jan 29 (Reuters) - The Indian rupee closed nearly flat on Wednesday after facing pressure early in the session, which was countered by dollar sales by state-run banks and as traders awaited the U.S. Federal Reserve's monetary policy decision. The rupee closed at 86.54 against the U.S. dollar, barely changed from its close at 86.5225 in the previous session. While dollar demand related to month-end importer payments and the maturity of positions in the non-deliverable forwards market hurt the rupee in the first-half of the session, the currency was supported by dollar sales by state-run banks, traders said. The dollar index rose 0.1% to 108.1 on Wednesday, while most Asian markets were shut for local holidays. So far in January, the rupee has declined more than 1% and is the worst performer among major Asian currencies due to persistent outflows and uncertainty about the U.S. President's approach to trade tariffs. Foreign investors have sold nearly $9 billion of local stocks and bonds, on a net basis, this month. The BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab, India's benchmark equity indexes, are on a four-month losing streak, set for their worst such run in 23 years as weak earnings, foreign outflows and economic uncertainty have taken the wind out of the sails of a market that hit record highs just four months back. The rupee is likely to consolidate in the 86.30-86.70 band if inflows don't resume on a net basis, a trader at a foreign bank said, assuming the central bank continues to curb volatility. While the Fed is widely expected to keep rates unchanged later in the day, investors will keep a close eye on commentary from Chair Jerome Powell. "Despite the slightly lower-than-expected inflation in December, the strength of the jobs market should keep Chair Jerome Powell's communication on the cautious side," ING Bank said in a note. Sign up here. https://www.reuters.com/markets/currencies/rupee-ends-little-changed-focus-turns-fed-policy-decision-2025-01-29/

2025-01-29 10:15

NAIROBI, April 4 (Reuters) - Kenya's shilling was unchanged against the dollar on Friday, data from the London Stock Exchange Group showed. At 0719 GMT, the shilling traded at 129.00/50 per dollar, the same as Thursday's close. Sign up here. https://www.reuters.com/markets/currencies/kenyan-shilling-unchanged-versus-dollar-lseg-data-shows-2025-04-04/