2024-12-23 12:02

Dec 23 (Reuters) - Sterling looked lacklustre against the dollar on Monday as a survey reported a decline in domestic UK business confidence and traders digested a recent Federal Reserve-induced rally in the greenback. British business confidence fell to its lowest level of 2024 in December, although employers were a bit more optimistic about the wider economy, according to a survey published on Monday. GDP figures on Monday also showed that the British economy flat-lined in the third quarter of the year, revised down from an earlier estimate of 0.1% growth. "Our hunch is that 2025 will be a better year for the economy than 2024. But more recent data suggest the economy doesn't have much momentum as the year comes to a close," said Paul Dales, chief UK economist at consultancy Capital Economics in a note. On Friday, the pound touched a one-month low of $1.2475, before it turned direction and closed the day 0.5% higher versus the greenback, after a busy week of central bank action. Sterling struggled to sustain that rebound on Monday and was last down 0.18% versus the dollar at $1.2544. The Bank of England held interest rates steady on Thursday, but the central bank's Monetary Policy Committee was more split over the decision than markets had expected. Traders now price in roughly 56 basis points (bps) in rate cuts next year, compared with around 45 bps just before the decision. Across the pond a hawkish Fed in contrast lowered rates as expected on Wednesday but signalled caution ahead, spurring a rally in the dollar, with the dollar index closing the week 0.8% higher. The pound, one of the year's best performing major currencies against the dollar, is now down 1.45% year to date versus the greenback. The euro edged slightly lower against the pound on Monday, with one euro at 82.90 pence . European Central Bank President Christine Lagarde said the euro zone was getting "very close" to reaching the ECB's medium-term inflation goal, according to an interview published in the Financial Times on Monday. In a holiday-curtailed week, trading volumes are likely to thin out as markets ready for the start of next year. Sign up here. https://www.reuters.com/markets/currencies/sterling-struggles-regain-steam-against-dollar-2024-12-23/

2024-12-23 11:47

TSX ends up 0.6% at 24,748.98 Energy sector advances 2% Materials group adds 0.7% Eight of 10 major sectors end higher Dec 23 (Reuters) - Canada's main stock index rose on Monday, led by gains for resource shares as the seasonal optimism of investors offset an uncertain outlook for the Canadian economy and domestic political uncertainty. The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) , opens new tab ended up 149.50 points, or 0.6%, at 24,748.98, extending its rebound from a six-week low on Thursday. U.S. markets also notched gains after a stopgap government funding bill averted a U.S. government shutdown. "We're seeing the beginnings of a 'Santa Claus rally' as stocks continue to show strong momentum into year-end," said Brandon Michael, senior investment analyst at ABC Funds, referring to the tendency for stocks to advance in the period around the Christmas Day holiday. The TSX has climbed 18.1% since the start of the year. Still, that is less than the roughly 25% advance for the S&P 500. "While the TSX is up today, it's lagging behind, and that's reflecting narrower breadth and a lack of exposure to high-growth sectors like AI, robotics, and quantum computing in Canada," Michael said. "Additionally, the Canadian economy is facing challenges, not being helped by the current political situation, and the Canadian dollar is under pressure with the need for potentially more aggressive rate cuts." Minutes from the Bank of Canada's December meeting showed the decision to opt for a larger than usual 50-basis-point interest rate cut reflected a weaker outlook for growth than forecast in October. Canadian Prime Minister Justin Trudeau, whose party looks set to lose power early next year, is under increasing pressure from his own legislators to step down and let someone else take over. The energy sector rose 2% even as the price of oil settled 0.3% lower at $69.24 a barrel. The materials group, which includes metal mining shares, also notched gains, advancing 0.7%. Eight of 10 major sectors ended higher. Sign up here. https://www.reuters.com/markets/tsx-futures-little-changed-ahead-october-gdp-data-2024-12-23/

2024-12-23 11:27

Russia-Ukraine gas transit deal expires at end of year Ukraine has refused to extend the agreement Russia willing to continue delivering gas via Ukraine MOSCOW, Dec 23 (Reuters) - Russia said on Monday that the situation with European countries that buy its gas through a transit deal via Ukraine is very complicated and needs more attention, after talks between President Vladimir Putin and Slovak Prime Minister Robert Fico. Ukraine has said it will not be renewing a five-year transit deal for Russian gas to Europe, which is due to expire at the end of the year, as it does not want to aid Moscow's military effort. The flow through Ukraine accounts for around half of Russia's total pipeline gas exports to Europe. Slovakia, Italy, Austria and Czech Republic will be the most affected if it ends. Kremlin-controlled Gazprom (GAZP.MM) , opens new tab also exports gas to Europe via the TurkStream pipeline on the bed of the Black Sea. Kremlin spokesman Dmitry Peskov said he could not give more details about Sunday's talks between Putin and Fico, which also touched on bilateral relations and the Ukraine conflict. Fico said on Sunday that Putin had confirmed Russia's willingness to continue to supply gas to Slovakia, although the Slovak leader said this was "practically impossible" once the gas transit agreement between Russia and Ukraine expires. It was not clear what potential solution the two leaders might have discussed. Hungary has also been keen to keep the Ukrainian route, although it will continue to receive Russian gas from the south, via the TurkStream pipeline. Ukraine's President Volodymyr Zelenskiy said last week it might be possible to renew the transit deal, but only on condition that Russia was not paid for the gas until after the war is over, a condition Moscow is unlikely to accept. "You heard the statement from the Ukrainian side, and you know about the positions of those European countries that continue to buy Russian gas and that consider this necessary for the normal operation of their economies," Peskov told reporters. "Therefore, there is now a very complicated situation here that requires increased attention." Putin said last week it was clear there would be no new deal with Kyiv to send Russian gas through Ukraine to Europe. Sign up here. https://www.reuters.com/business/energy/russian-gas-sales-europe-are-complicated-kremlin-says-after-putin-fico-talks-2024-12-23/

2024-12-23 11:21

Investors expect US economic exceptionalism to persist in 2025 Fed's rate cut pace crucial for stock momentum Strong dollar could challenge US multinationals and global inflation efforts NEW YORK, Dec 31 (Reuters) - U.S. investors are preparing for a swathe of changes in 2025, from tariffs and deregulation to tax policy, that will ripple through markets as President-elect Donald Trump returns to the White House, putting the focus on whether the U.S. economy can continue to outperform. The changing of the guard in Washington has big implications for how stocks, bonds and currencies fare in the new year and may require investors to rejig portfolios. Forecasts call for another buoyant year for stocks, the dollar to maintain its recent strength over the coming months and Treasury yields to march higher. Here is a chart-based overview of key market themes and segments that investors are closely monitoring: U.S. EXCEPTIONALISM Investors largely expect U.S. economic exceptionalism to persist in the new year, as robust consumer spending and a resilient labor market put U.S. growth on a firmer footing than that of many of its developed market peers. The U.S. economy is expected to find further support from any potential tax reform, including a reduction in the corporate tax rate. Such tax cuts - which would need to pass Congress - could support company earnings and sentiment on stocks. In contrast, although the euro-zone economy grew faster than anticipated in the third quarter, its outlook remains weak due to potential large tariffs from the Trump administration, escalating trade tensions with China and low consumer confidence. "We do expect U.S. growth to outperform the rest of the world in 2025, on the back of potentially favorable monetary and fiscal policy," said Sonu Varghese, global macro strategist at Carson Group. THE FED Front and center for investors in 2025 is how rapidly or deeply the U.S. Federal Reserve can cut rates. The Fed cut rates in December, continuing reductions after a period of aggressive rate hikes, but indicated it would slow the pace of further cuts. Stocks have been buoyed by expectations of easier monetary policy. But with benchmark Treasury yields rising sharply after the Fed meeting, the rate outlook threatens to undermine the momentum for stocks. KING DOLLAR Dollar bears have taken a battering this year and most FX market strategists forecast continued strength for the greenback. Many of the factors that powered a 7% gain for the currency against a basket of peers this year, including relatively robust U.S. economic growth and rising Treasury yields, are expected to continue supporting the dollar. Trump's tariffs and protectionist trade policies are also likely to bolster the buck. Prospects of heightened inflation could also hinder the Fed from keeping up with interest-rate cuts, even as other central banks proceed with cuts, further lifting the dollar. Getting the dollar's trajectory right is crucial for investors, given the currency's central role in global finance. A strong dollar could weigh on the outlook for U.S. multinationals as well as complicate other central banks' efforts to fight inflation as it makes their currencies cheaper. "Another year of spectacular gains in the dollar might break something in the global economy - but with major uncertainties clouding the horizon and another round of American exceptionalism largely priced in, further outperformance could be difficult to achieve," said Karl Schamotta, chief market strategist at payments company Corpay. VOLATILITY WATCH Investors got a taste on Wednesday of how quickly market stability can shift to turmoil. U.S. stocks fell sharply after the Federal Reserve projected fewer interest-rate cuts than expected and as concerns grew about a potential partial government shutdown. Global financial markets may extend generally tranquil trading conditions into the new year but analysts warn that a volatility shock is overdue. Analysts at BofA Global Research said they do not expect a repeat of the record-low stock-market volatility levels set in 2017, the beginning of Trump's first term. FX markets could be in for higher volatility next year as the twin forces of tariffs and central-bank actions come to bear. "The shock absorber in financial markets is going to be foreign exchange next year," said Fredrik Repton, senior portfolio manager with the global fixed income and currency management teams at Neuberger Berman. CRYPTO FEVER The speculative fever that gripped bitcoin and crypto-related stocks in 2024 is unlikely to abate in the new year, strategists said. "2024 was a banner year for speculation, which had morphed into a self-fulfilling frenzy in recent weeks," Steve Sosnick, chief strategist at Interactive Brokers. While these trades have sometimes run into trouble, most recently after the Fed's December meeting, investors have been willing to buy the dip. "When something has been working for so many people for so long, they are loath to give it up," Sosnick said. And work the trades have. Bitcoin hit a record high above $100,000 in December on expectations that Trump's election will usher in a friendly regulatory environment for cryptocurrencies. Crypto-related stocks have also been on a tear, with software company and bitcoin stockpiler MicroStrategy (MSTR.O) , opens new tab leading the charge with a more than 400% rise for the year. Sign up here. https://www.reuters.com/markets/us/how-investments-may-fare-during-trump-20-fed-easing-2024-12-23/

2024-12-23 11:10

Trump likely to try to push cryptocurrencies mainstream Industry seeks bitcoin stockpile, banking access, crypto council Regulations overhaul also possible Dec 23 (Reuters) - (This Dec. 23 story has been corrected to fix the spelling of 'Jonah Crane' in paragraphs 15 and 18) The cryptocurrency industry is pushing President-elect Donald Trump's team to kick start his promised crypto policy overhaul when he takes office next month with executive orders that would help push tokens mainstream, according to industry officials. Trump plans to issue a flurry of executive orders and directives on everything from immigration to energy on his first day in office on Jan. 20, Reuters reported this month. On the campaign trail, Trump courted crypto cash with promises to be a "crypto president," and the industry wants him to make good on that pledge with executive orders creating a bitcoin stockpile, ensuring the industry can access banking services, and creating a crypto council, the people said. They are pushing for those executive orders within Trump's first 100 days in office, and expect at least one could come on Jan. 20, said two other people with knowledge of the matter. "Given the tenor of the campaign, it would be imperative for executive orders to really set out what the actual priorities will be on day one and provide some kind of roadmap," said Rebecca Rettig, chief legal and policy officer at crypto company Polygon Labs. Worried about crime and volatility, President Joe Biden's regulators cracked down on crypto companies, but Trump has pledged to reverse course. His crypto policy team is already taking shape, with the announcement this month of crypto-friendly Securities and Exchange Commission chair Paul Atkins and White House crypto czar David Sacks. "There has been an effort in the Washington bureaucratic swamp to stifle innovation... but President Trump will deliver on his promise to encourage American leadership in crypto," Trump transition team spokesperson Brian Hughes said in a statement. Bitcoin, the world's largest cryptocurrency, hit new records above $107,000 this month after Trump reiterated his plan, first unveiled in a speech in July, for a strategic bitcoin reserve. Bitcoin has since fallen back below $100,000. Analysts are divided on whether Trump could use executive powers to create the reserve, potentially via the Treasury Department, or whether an act of Congress would be necessary. One industry group, the Bitcoin Policy Institute, has gone as far as to draft a text of a potential executive order Trump could use to establish such a stockpile. That draft would designate bitcoin as a strategic reserve asset and require the Treasury Secretary to spend $21 billion over a year to amass a national bitcoin stockpile, according to the draft seen by Reuters. Zack Shapiro, the Bitcoin Policy Institute's head of policy, said the United States should get ahead of geopolitical rivals in monetizing bitcoin, "rather than have the price run up without the United States having any reserves." He declined to say if the group had shared the draft with Trump's team. Trump also said in July that he would not let banks "choke" crypto firms out of the traditional financial system, and some executives expect he will also try to address that issue with an executive order. Crypto companies have long complained that banks won't work with them due to regulatory scrutiny, although regulators say banks are free to lend to crypto firms that follow the law. While an executive order directing bank regulators to go easy on crypto would send a signal to agency officials and provide them with political cover, it's unlikely to have legal force since federal bank regulators are independent, some executives warned. "(They) are not going to change policy on the ground on day one," said Jonah Crane, partner at financial firm Klaros Group. "But they will tell you what direction this administration wants to head." Trump has also said he'll create a crypto industry council and his team is discussing how to structure and staff it. Previous administrations have stood up specialized councils via executive orders, executives noted. More broadly, Trump could also try to address crypto complaints that existing regulations are not fit for the industry with an executive order articulating core principles for crypto regulation, similar to an order Trump issued in 2017 directing regulators to review banking rules. "I wouldn't be surprised if you get something like an executive order early on that directs the agencies to re-examine their rules in this space," Crane added. Sign up here. https://www.reuters.com/technology/us-crypto-industry-eyes-possible-day-one-trump-executive-orders-2024-12-23/

2024-12-23 11:08

MUMBAI, Dec 23 (Reuters) - Sugarcane yields in India are declining due to last year's drought and this year's excessive rains, which could reduce the country's sugar production below consumption levels for the first time in eight years, farmers and industry officials said on Monday. Lower-than-expected output by the world's second-largest sugar producer could eliminate the possibility of India allowing exports in the current season ending in September 2025, supporting global sugar prices , . Maharashtra, Karnataka, and Uttar Pradesh account for more than 80% of the country's total sugar production, with lower cane yields in these states prompting trade houses to reduce their output estimates for the 2024/25 season. The production could fall to around 27 million metric tons from the last year's 32 million tons and below annual consumption of more than 29 million tons, said India head of a global trade house, who declined to be named. "During the summer months, the cane crop faced prolonged stress due to the lack of water," B.B. Thombare, president of the West Indian Sugar Mills Association told Reuters. "When the monsoon season began, there was excessive rainfall and limited sunshine, which also adversely affected the crop's growth." The adverse weather curtailed cane yields by 10 to 15 tons per hectare, Thombare said. The western state of Maharashtra and neighbouring Karnataka, which together produce nearly half of India's sugar, received lower-than-average rainfall in 2023, bringing down reservoir levels. "Usually, we harvest 120 to 130 tons of cane from one hectare of land, but this year yields have fallen to 80 tons despite all our efforts," says Shrikant Ingle, who cultivated cane on five acres of land in Maharashtra's Solapur. Drought did not affect the crop in Uttar Pradesh, the country's leading sugar-producing state in the north. However, plantations in the state were impacted by red rot disease, which reduced sugarcane yields, said a senior state government official. "To control the spread of the disease, we are advising farmers to adopt new cane varieties," the official said. The downward revision in the production estimate has eliminated the possibility of any exports in the current season, the head of the trade house said. Sugar industry seeks 2 million tons of exports, while the government says it may allow limited exports, if any surplus remains after ethanol needs are met. Sign up here. https://www.reuters.com/world/india/weather-woes-crush-indias-sugar-production-export-hopes-2024-12-23/