2025-01-10 11:47

PARIS, Jan 10 (Reuters) - Inhabitants of the cyclone-ravaged French overseas territory of Mayotte were advised on Friday to ensure they could shelter in sturdy buildings and had food and water over the weekend as another tropical storm neared the Indian Ocean archipelago. The Mayotte prefecture said in a statement it had triggered a cyclone pre-alert as of 0800 GMT on Friday as Storm Dikeledi was due to cross Madagascar on Saturday before heading eastwards. The storm was due to pass about 140 km (87 miles) south of Mayotte on Saturday night and on Sunday, bringing high winds and heavy rainfall. "Winds will gradually increase to reach an average of 50-60 km/h and gusts of 90-100 km/h, with a risk of marine submersion on the coasts due to the level of the tide and the state of the sea", the prefecture said, citing Meteo France. In mid-December the most devastating cyclone to hit Mayotte in 90 years caused colossal damage in France's poorest department, killing at least 39 people and leaving thousands injured, according to the latest count. Sign up here. https://www.reuters.com/world/europe/cyclone-battered-mayotte-bracing-new-tropical-storm-2025-01-10/

2025-01-10 11:40

MUMBAI, Jan 10 (Reuters) - India's foreign exchange reserves (INFXR=ECI) , opens new tab fell for the fifth consecutive week to a 10-month low of $634.59 billion as of Jan. 3, data from the Reserve Bank of India (RBI) showed on Friday. The reserves declined by $5.7 billion in the reported week, after falling by a cumulative $17.8 billion in the prior three weeks. Reserves have fallen by about $70 billion from their all-time high of $704.89 billion in late September. The rupee has faced persistent headwinds over recent weeks, as the dollar has strengthened and capital flows have slowed following a slowdown in India's economic growth. The central bank has routinely intervened in the foreign exchange market via state-run banks to limit the rupee's losses. The magnitude of the RBI's forex intervention since October has been "substantial" and is resulting in "adverse effects", such as tighter banking system liquidity and higher short-term rates at a time of weakening growth, Nomura analysts said. This, in turn, is leading to more capital outflows and possibly "dollar hoarding" in anticipation of further depreciation in the rupee, Nomura said. Changes in foreign currency assets are caused by the central bank's intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves. The RBI intervenes on both sides of the forex market to curb undue volatility in the rupee. The rupee settled at 85.9650 to the dollar on Friday, after hitting a record low of 85.97 earlier in the session. The domestic unit fell 0.2% this week, its tenth consecutive weekly fall. The forex reserves also include India's reserve tranche position in the International Monetary Fund. Sign up here. https://www.reuters.com/world/india/indias-forex-reserves-slide-fifth-week-2025-01-10/

2025-01-10 11:36

Jan 10 (Reuters) - Mercedes-Benz's (MBGn.DE) , opens new tab core car sales fell in 2024, a tough year for the auto industry marked by waning demand in a weak economy, especially in China, the German luxury carmaker said on Friday. Despite this, Mercedes stock inched higher after the results and was up 4% by 1120 GMT, topping the German blue-chip index DAX (.GDAXI) , opens new tab. The shares had lost around 15% in value in 2024. Stifel analyst Daniel Schwarz pointed to a robust 34% quarterly sales rise in the carmaker's lucrative top-end segment after a poor performance in the third quarter had weighed on earnings. "The better (product) mix should support a sequential improvement," Schwarz added. A rare bright spot in the Mercedes release was a 3% quarterly rise in October-December sales in its core car unit, driven by a jump in top-end vehicle sales. Fourth quarter car sales were up 1% compared with the same period last year. It sold 1,983,400 cars during the year, down 3% on 2023, weighed down by a 7% drop in China and a 3% decline in Europe. Annual sales of battery-electric cars (BEV) dropped by 23% to 185,100 vehicles, adding pressure on the carmaker as new, harsher EU CO2 emission reduction targets take effect this year, which could potentially mean costly pooling deals or hefty fines for Mercedes if the BEV sales don't pick up. The automaker cut its full-year profit margin target twice in 2024 and said it will step up cost cuts, joining a growing number of European rivals blaming a weakening Chinese car market for falling profits and margins. Mercedes also plans to lower its mid-term profitability targets as market conditions are unlikely to improve in the near future, a source familiar with the matter told Reuters on Tuesday. The carmaker is due to report full-year 2024 financial results on Feb. 20. Sign up here. https://www.reuters.com/business/autos-transportation/mercedes-benz-2024-car-sales-fall-tough-year-automakers-2025-01-10/

2025-01-10 11:28

Global bond selloff impacts UK finances, raises bond yields Traders bearish on sterling after pound hit 14-month low Treasury reassures on stability, but market cautious LONDON, Jan 10 (Reuters) - Traders' confidence in the pound has taken its biggest dive this week since the 2022 UK budget crisis, according to the options market, as a global bond selloff added to growing unease over Britain's finances and sent bond yields to 16-year highs. The options market shows traders are positioned more bearishly against the pound than at any time since early 2023, as the market was emerging from the wild swings unleashed by then-Prime Minister Liz Truss' mini-budget in September 2022. This week, 10-year gilt yields have risen by a quarter point to a high of 4.925%, the most since 2008, echoing a sell-off in U.S. Treasuries that has rippled through global bond markets, punishing UK debt harder than most. The pound is set for a weekly drop of nearly 1%, having hit a 14-month low of $1.2239. Rising yields mean British finance minister Rachel Reeves is under pressure to find ways to meet the government's fiscal rules, which could complicate the Bank of England's task to manage monetary policy. The Treasury's assurance that it has an "iron grip" on the country's finances has returned some stability to UK assets. But the options market suggested traders were cautious. Three-month risk reversals , a play that reflects how much more traders are willing to pay to own options to buy the pound versus the cost of owning options to sell it, have fallen to -1.935, their lowest since January 2023. A negative number indicates the cost of owning an option to buy the pound is below that to sell it and points to trader bearishness towards sterling versus the dollar. "We are in the process of repricing sterling and UK assets for worse growth, a worse budget and a less stable political outlook than we had hoped for, say, in the middle of last year," Rabobank chief strategist Jane Foley said. "We'd seen this pressure building and when we had the headlines about the 30-year high since 1998, I think it just gave it more momentum, this adjustment," she said. STERLING BEARS Indicating bearishness towards sterling, risk reversals have fallen by the most in a week since September 2022 when they tumbled 2 full points to -4.625. "There is a huge amount of uncertainty about what the Bank of England could or should react to. And I think from that point of view, it's not that surprising that the options market is reflecting that uncertainty," Rabobank's Foley said. Deutsche Bank on Friday recommended selling the pound on a broad, trade-weighted basis. Traders are also paying more to hedge against big swings in the pound than at any time since the March 2023 banking crisis. One-month options volatility , a measure of demand for protection, hit a high of 10.9% on Thursday . By Friday, this had retreated to 9.7% and the sense among currency watchers is there might be enough of a sense of calm to offer sterling some respite for now. ING strategist Francesco Pesole said sterling could see buyers come in around $1.225-1.230, as long as gilts remained calm. Sign up here. https://www.reuters.com/markets/rates-bonds/trader-confidence-sterling-takes-dive-bond-market-turmoil-2025-01-10/

2025-01-10 11:22

US 10-year yield of 5% could be problematic for stocks Put options building in March contract of US 10-year futures Implied volatility rises in 10-year swap options Higher volatility reflects demand for upside rate protection NEW YORK, Jan 10 (Reuters) - Investors in the futures options market are betting the benchmark U.S. 10-year Treasury yield is headed higher to 5% in the near term, reflecting worries that the incoming Trump administration's policies will increase an already bloated fiscal deficit and revive inflation. Traders are watching that key 5% level in the 10-year note, which, if hit, could be bad news for U.S. stocks, much like it was in October 2023 when the 10-year yield climbed to 5.02%. That coincided with the benchmark S&P 500 (.SPX) , opens new tab index dropping to a five-month low. Higher interest rates in general also mean increased borrowing costs for consumers and businesses. In swaptions, or options on interest rate swaps, the market is also pointing to higher 10-year rates, although not as straightforward as those on Treasury futures. As President-elect Donald Trump nears his Jan. 20 inauguration, market participants have become increasingly anxious about his pledge to impose widespread tariffs on imports, a move widely viewed as inflationary, as they wager that Treasuries will sell off, pushing yields higher. "It's all about the unknowns and the policy fog," said Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia. "That uncertainty revolves around the scope of tariffs and what that may mean ultimately for inflation." Tax cuts are also one of Trump's campaign promises, which should benefit consumers and businesses overall. But if tax cuts are not financed by spending reductions, they will likely expand the federal deficit. That means more Treasury debt issuance flooding the market to manage the spending gap, pushing interest rates higher. Analysts said open interest, the amount of outstanding positions held by traders, is building in the March contract for 10-year Treasury futures put options, with strikes in the 105 to 106 price levels, according to traders, citing their data on Thursday . Those strikes target the 10-year yield hitting between 4.75% and 5.00%. Treasury put options are typically used to position for a decline in bond prices that leads to higher implied yields. The U.S. 10-year yield was little changed on Thursday at 4.689% , after hitting a roughly eight-month peak of 4.73% on Wednesday. BEARISH SENTIMENT More puts have been bought than call options that would gain value when futures prices fall and implied yields rise. That is especially the case in the March contract where the put-to-call ratio of 1.23 suggests bearish sentiment on 10-year Treasury note futures. Put premiums, or the price of the options contract, are also more expensive than those on calls, with a ratio of 1.69 in favor of puts. "A 10-year yield of 5% is not our forecast, but I don't think it's outside the realm of possibility that we can get there," said Jan Nevruzi, U.S. rates strategist at TD Securities in New York, citing Trump's policies and the Federal Reserve indicating it could pause its rate-cutting cycle. "With the shift higher in rates, we have seen trading around options that are close to the 5% yield. It certainly is a psychological barrier that people will look to trade around." In the swaptions market, the implied volatility of one-month options on 10-year swap rates had increased to 24.06 basis points (bps) on Thursday, from 20.89 bps on Dec. 12, signaling expectations of increased activity on this maturity in the short term. Rate swaps, which typically track Treasuries, measure the cost of exchanging fixed-rate cash flows for floating-rate ones, or vice versa. They are used by investors to hedge interest rate risk. Volatility is a key input in the price of an option. The higher the volatility, the greater the uncertainty over a given period. As volatility climbs, there are bets on a move higher in 10-year swap rates in a month by paying for so-called "high payer strikes" of about 25 bps more on 10-year options, analysts said. It's a gamble that 10-year swap rates will be 25 bps higher in a month, and is likely because 10-year Treasury yields will probably increase as well. Current 10-year swap rates are 4.18%. The cost of that 25-basis-point strike climbed to 23.13 bps on Thursday, from 20.8 bps on Dec. 12, when it fell to a roughly five-month low. "The implied volatility on swaptions is skewed toward higher rates," said Amrut Nashikkar, managing director of fixed income strategy at Barclays in New York. "What that tells you is that there is demand for positioning against higher rates and there is a risk premium people are willing to pay to buy protection against a move higher." Sign up here. https://www.reuters.com/markets/rates-bonds/options-market-positioned-us-treasury-10-year-yield-hit-5-near-term-2025-01-10/

2025-01-10 11:18

SAO PAULO, Jan 10 (Reuters) - JPMorgan analysts upgraded their assessment of Argentine state-run oil firm YPF in a note to clients, saying the energy industry in the South American country has room for further growth as part of the country's "economic tranformation". The U.S. investment bank raised its YPF recommendation to "overweight" from "neutral," and more than doubled its price target to $59.50 per American Depositary Receipt from $25.00 previously. In 2024, YPF's shares soared more than 150% amid a major rally in Argentine stocks, as market participants celebrated measures implemented by libertarian President Javier Milei since he took office in December 2023. Markets welcomed a tough austerity drive and deregulations implemented by Milei to try to stabilize public accounts and Argentina's economy as it emerges from a painful recession. Even after the big gains last year, JPMorgan analysts said they believed the oil and gas sector could grow further as it was crucial to the South American country's "economic transformation". "We do not think that it is too late to invest in Argentina oil and gas... In our opinion, (it) will continue to be a very interesting space for equity investors in 2025," they said. The YPF upgrade reflects the company's strong position in the industry and growth opportunities as it shifts its focus from conventional fields to shale, JPMorgan added, as well as more favourable realised oil price assumptions. Sign up here. https://www.reuters.com/world/americas/jpmorgan-upgrades-ypf-optimism-about-argentinas-oil-gas-sector-2025-01-10/