2025-01-07 18:22

Fitch skeptical of quick debt-limit resolution due to narrow Republican majority Temporary funding measures highlight obstacles in fiscal agreements Credit default swap spreads widen amid debt-ceiling concerns NEW YORK, Jan 7 (Reuters) - A unified government under President-elect Donald Trump is unlikely to lead to a quick resolution of the U.S. debt-ceiling debate given a narrow Republican House majority and continued disagreements within the party on spending policies, said ratings agency Fitch. As part of a 2023 budget agreement, Congress temporarily lifted the debt ceiling until Jan. 1, 2025. While the U.S. Treasury can continue covering its obligations for several more months, Congress must revisit the issue this year to avoid a debt default. Fitch, which downgraded the U.S. government credit profile in 2023 after a debt-ceiling crisis, said on Tuesday it was skeptical that a debt-limit suspension or increase, as well as other key fiscal policy decisions expected this year, will be implemented quickly. "The U.S. faces significant fiscal policy challenges in 2025 ... We believe it is unlikely that these will be resolved expeditiously because of long-standing weaknesses in the federal government’s budgetary process and a narrow Republican House majority," it said in a statement. Hopes that one-party control of government could make it easier to agree on raising the debt ceiling were dented last month when Congress passed spending legislation in a down-to-the-wire vote that averted a destabilizing government shutdown. Several Republicans rejected Trump's demand to use the bill to lift the nation's debt ceiling. The last-minute resolution was consistent with the ratings agency's expectations that Congress would rely on temporary funding measures, and demonstrated "the potential obstacles to securing agreements on fiscal measures, both within Congress and between Congress and the President," Fitch said. The cost of insuring exposure to U.S. government debt has started to climb this week, with spreads on U.S. six-month and one-year credit default swaps - market-based gauges of the risk of a default - widening by three and four basis points, respectively, compared to last week, S&P Global Market Intelligence data showed on Tuesday. The 2023 debt-ceiling showdown spurred a selloff in stocks and bonds, pushed the U.S. to the brink of default and hurt the country's credit rating. Fitch said it expects U.S. policymakers to eventually reach an agreement on the debt ceiling as well as on other key fiscal policy items, such as the extension of 2017 tax cuts set to expire this year. But a still-challenging political environment means decisions are likely to be reached on an issue-by-issue basis, it said, "underscoring the U.S.’ deterioration in governance on fiscal matters over recent years." Sign up here. https://www.reuters.com/markets/us/fitch-warns-us-debt-ceiling-stalemate-despite-republican-controlled-government-2025-01-07/

2025-01-07 18:14

BRASILIA, Jan 7 (Reuters) - Brazil's Finance Minister Fernando Haddad said on Tuesday that the country's economic growth likely hit 3.6% in 2024, while the primary deficit for the year is expected to have reached 0.1% of gross domestic product (GDP). This means the government of leftist President Luiz Inacio Lula da Silva probably met its goal of eliminating the primary deficit, excluding interest payments, as the target allows for a tolerance margin of 0.25% of GDP, or a deficit of up to 28.8 billion reais. Speaking in an interview with TV channel GloboNews, Haddad said his goal was to leave the economy "in better shape than I received," which would involve controlling spending "in the right way, without harming low-income workers." Haddad emphasized the need for the government to improve its communication at a time when global markets remain highly "sensitive." He said that the external environment is more challenging and the entire world is concerned about how the U.S. economy will be managed, with news on this front having a quick and significant impact on asset prices. After a long-anticipated package of spending cuts disappointed markets late last year, further weakening the country's currency, Haddad said the inclusion of income tax exemptions in the announcement may have contributed to the backlash, as well as the delayed disclosure of the measures. Nevertheless, he called the reaction of the Brazilian real "exaggerated" and expressed confidence that the foreign exchange rate would eventually "accommodate." Last year, the currency slumped 27% against the U.S. dollar, one of the worst performances among emerging markets, weighing on inflation expectations and contributing to the tightening of monetary policy, now under the leadership of governor Gabriel Galipolo, appointed by Lula and a former deputy at the Finance Ministry. Haddad said that the government will not always agree with the central bank's diagnosis but emphasized that each has its role, reiterating that Lula has already highlighted his commitment to respecting policymakers' decisions. Sign up here. https://www.reuters.com/world/americas/brazils-2024-growth-seen-36-fiscal-target-met-says-finance-minister-2025-01-07/

2025-01-07 18:07

SAO PAULO, Jan 7 (Reuters) - Beef and chicken exports from Brazil, the world's largest supplier of both meat types, may break new records in 2025, two industry groups said on Tuesday after the release of annual trade data. Their optimism reflects the positive effects of lower grain prices and a weak Brazilian currency, which could continue to bolster meat exports and local companies including JBS (JBSS3.SA) , opens new tab and BRF (BRFS3.SA) , opens new tab. China remained Brazil's main destination for both beef and chicken exports, according to the trade groups. Beef exports to China alone brought in $6 billion, the data showed. Overall, Brazil exported a total of 2.89 million tons of beef last year, up more than 26% compared with the previous year, according to government data compiled by the domestic beef lobby Abiec. Sales totaled $12.8 billion, 22% more than in 2023. "It was a historic year for the national beef industry, for the livestock sector and for Brazil," said Abiec President Roberto Perosa in a statement. "Even though it is still early to make a prediction, I believe that 2025 has everything we need to break the record by volume and also by revenue." Abiec said the Brazilian government is in talks to open up key markets like Japan, Vietnam, Turkey and South Korea. Chicken meat exports, in turn, rose 3% to 5.294 million tons in 2024, according to chicken and pork lobby ABPA. Chicken export revenue was also a record $9.928 billion, up 1.3% compared with 2023. "The year's trade balance confirms ABPA's expectations and also points to new levels of average shipment volumes exceeding 440,000 tons per month," said ABPA President Ricardo Santin. "The indicators remain positive for 2025, with potential new monthly increases and expectation of numbers relatively higher than in the previous year." Sign up here. https://www.reuters.com/markets/commodities/china-lower-grain-prices-bolster-brazil-beef-chicken-export-prospects-2025-01-07/

2025-01-07 17:51

Jan 7 (Reuters) - U.S. President-elect Donald Trump said on Tuesday he will move quickly to revoke an offshore oil and gas drilling ban announced by outgoing Democratic President Joe Biden. "Banning offshore drilling will not stand. I will reverse it immediately," Trump said at a news conference. He added: "I will revoke the offshore oil, gas drilling ban in vast areas on day one." Republican Trump takes office on Jan. 20, but could find it difficult to reverse Biden's order to withdraw 625 million acres (253 million hectares) of ocean from new offshore oil and gas development. The 70-year-old Outer Continental Shelf Lands Act allows presidents to remove areas from mineral leasing and drilling but does not grant them the legal authority to overturn prior bans, according to a 2019 court ruling - meaning a reversal would likely require an act of Congress. Trump said he would take the matter to court if necessary. Trump also said his administration would open up oil and gas development in the Arctic National Wildlife Refuge and would seek to block new wind projects. "We're going to try and have a policy where no windmills are being built," Trump said. Sign up here. https://www.reuters.com/business/energy/trump-i-will-revoke-offshore-oil-gas-drilling-ban-vast-areas-day-one-2025-01-07/

2025-01-07 15:13

ORLANDO, Florida, Jan 7 (Reuters) - U.S. financial markets last year were more sensitive to economic surprises than usual, and as Donald Trump prepares to begin his second term as U.S. president investors should buckle up for more of the same in 2025. Especially in Treasuries. The 10-year yield's sensitivity to inflation and activity data surprises last year was the highest in more than 20 years, according to Goldman Sachs. Although inflation has fallen, growth fears have ebbed, and the Federal Reserve has started cutting interest rates, these sensitivities persist. Again, especially in Treasuries. While equities' sensitivity to inflation surprises has fallen as price pressures have cooled, it remains high by historical standards. And stocks' sensitivity to growth surprises, though still modest, has begun to tick up to near pandemic-era levels. What does this mean for the coming year? While benchmark gauges of implied equity and bond volatility are muted, markets are in a more tenuous position than they were a year ago. By many measures, such as pricing, sentiment and valuations, they are extremely stretched. U.S. stocks have never been riding higher or represented a bigger share of the global market cap, and the Fed's 100 basis points of interest rate cuts since September have been met with a counterintuitive 100-basis-point rise in the 10-year Treasury yield. Does this mean America's key markets are primed for correction? Maybe. But what's easier to say with confidence is that we're going to see wider intra-day trading ranges and short-term reversals as investors contend with the biggest wild card of all: Trump's agenda. 'VOLATILITY MAN' History shows there is a "solid" relationship between macro and market volatility, as Citi's Stuart Kaiser points out. And with the world still in the dark as to how Trump's trade and tariff policies will pan out and how the Fed will respond, macro uncertainty is alive and well. Indeed, the two biggest "tail risks" for world markets cited in Bank of America's latest fund manager survey were "global trade war triggers recession" and "inflation causes Fed to hike." Both captured 37% of respondents' votes, significantly more than the 10% garnered by "geopolitical conflict," the third most-cited risk. "With numerous large policy shifts on the horizon, markets should be prepared for a lot more volatility ahead," Deutsche Bank's George Saravelos said on Monday. It is true that the initial year of Trump's first term, 2017, turned out to be a good one for Wall Street, as the S&P 500 index rose 19%, despite Trump's unpredictable actions. But that was a period of low inflation, low interest rates, and solid growth. Such low macro volatility is unlikely to be replicated this time. And given the stretched nature of today's markets, even modest economic surprises could spark big moves. Just look at the sharp swings in U.S. stocks and the dollar on Monday in response to a media report – later dismissed by Trump – implying that his proposed tariff regime would be less severe than feared. But even if macro "vol" does increase, will it be enough to puncture the generally bullish 2025 market consensus? Perhaps not, suggests Phil Suttle, a Washington-based economist. "(Markets) will be quite volatile but without much significant net direction, as the perceived odds of these different (tariff) scenarios oscillate," Suttle wrote on Monday in a note titled "Volatility Man." It is also possible that investors will increasingly ignore Trump's social media posts on markets, economic policy or the Fed, as they eventually did in his first term, especially if real-world economic indicators remain stable. But it's far too early for that right now. Given the combination of stretched markets and an unpredictable commander in chief, markets will feature a lot of sound and fury in 2025. It could be a bumpy ride. (The opinions expressed here are those of the author, a columnist for Reuters.) Sign up here. https://www.reuters.com/markets/us/trump-trade-uncertainty-exposes-stretched-markets-volatility-shocks-mcgeever-2025-01-07/

2025-01-07 12:43

SEOUL, Jan 7 (Reuters) - South Korea's financial regulator has asked prosecutors to conduct an investigation into Korea Zinc (010130.KS) , opens new tab over allegations that its now scrapped plan to issue new shares involved unfair practices, Korea Economic Daily said on Tuesday. In November, the chairman of Korea Zinc's board Yun B. Choi dropped a plan to issue new shares worth $1.8 billion that had sparked an investigation by the financial watchdog and a share sell-off. The world's top zinc refiner had announced the share plan in October in a move perceived by analysts as a strategy to fend off a takeover by Young Poong (000670.KS) , opens new tab and MBK Partners, just two days after Korea Zinc bought back shares at a higher price. The Financial Supervisory Service said in October it was investigating whether Korea Zinc had omitted its plan to issue new shares intentionally when it offered to buy back shares via a tender offer. The FSS referred the matter to prosecutors, alleging that Korea Zinc's management and board had violated capital market law, according to the report. A spokesperson at the FSS declined to comment on the story or to elaborate, as the probe is still underway. A Korea Zinc spokesperson had no immediate comment. Korea Zinc plans to hold a special shareholders' meeting on Jan. 23 to discuss the appointment of directors proposed by Young Poong and private equity firm MBK Partners amid an escalating fight for control of the company. Sign up here. https://www.reuters.com/markets/commodities/regulator-requests-probe-into-korea-zinc-korea-economic-daily-reports-2025-01-07/