2024-12-18 11:30

A look at the day ahead in U.S. and global markets from Mike Dolan For all the extreme bullishness about 2025, Wall Street is just a bit edgy as the Federal Reserve looks set to deliver its final interest rate of 2024 and give a glimpse into next year. Remarkably, the Dow Jones Industrial Average's (.DJI) , opens new tab 9-day losing streak is the longest negative run since 1978 - but the index is still just under 4% from record highs set earlier this month. Even though the broader S&P500 (.SPX) , opens new tab remains closer to its latest peaks, that strength has been largely concentrated in its handful of megacaps. The equal-weighted S&P500 (.EWGSPC) , opens new tab is down more than 4% from its record on Dec. 2 and the small cap Russell 2000 (.RUT) , opens new tab is off 5.5% from the highs of late November. As Treasury yields have backed up sharply again over the past fortnight - even as the latest U.S. industrial production and retail sales excluding autos missed forecasts for last month - the yearend is looking more anxious than ebullient new year forecasts suggest. Although stock futures were up a touch ahead of Wednesday's bell, the VIX volatility gauge (.VIX) , opens new tab has moved back above 15 this week for the first time in a month. Ten-year Treasury yields remained above 4.4%. Even though the Fed is nailed on to announce another quarter-point rate cut to a new 4.25-4.5% policy rate range later on Wednesday, its guidance on what happens next year and its updated projections from individual policymakers will carry more weight in markets. As it stands, the Fed's most recent quarterly projections put the end 2025 rate down another 100 basis points to 3.4% - but markets don't believe that now and implied rates for the end of next year are as high as 3.90%. How much the Fed revises up that view later on Wednesday will be the critical takeaway from today's decision, with a close eye too on where the policymaking committee sees the long-term neutral rate. Fed officials are widely expected to lift that long-term policy rate view above 3% for the first time in eight years - effectively raising the bar on what it sees as neutral, and below which the central bank would be deliberately stimulating the economy. With such a "hawkish cut" now expected and Treasury yields pumped up, the dollar (.DXY) , opens new tab held firm on Wednesday too. The other big central bank meetings of the week are expected to be relatively hawkish affairs too. Another tick higher in British inflation for November, alongside Tuesday's punchy wage growth data, cemented expectations the Bank of England will remain an outlier among major western central banks and hold its rates steady on Thursday. Sterling slipped, however, as UK government bonds were hit and 10-year yield gilt spreads over Germany widened to the peaks of the disastrous British budget blowout in 2022. UK stocks (.FTSE) , opens new tab, (.FTMC) , opens new tab , however, were firmer on Wednesday. Japan's yen hovered just under 154 per dollar with the Bank of Japan expected to hold the line in its policy rates on Thursday but signal further hikes are due early next year. Even though the Nikkei (.N225) , opens new tab fell, there was a deals buzz about as Honda (7267.T) , opens new tab and Nissan (7201.T) , opens new tab were reported to be in talks to deepen ties, including a possible merger - another sign of how Japan's once unbeatable auto industry is being reshaped by challenges from Tesla and Chinese rivals. A combined Honda and Nissan would create a $54 billion company with annual output of 7.4 million vehicles, making it the world's third-largest auto group by vehicle sales after Toyota (7203.T) , opens new tab and Volkswagen (VOWG_p.DE) , opens new tab. China and Hong Kong stocks (.CSI300) , opens new tab, (.HSI) , opens new tab rebounded as investor sentiment was lifted by the previous day's Reuters report on the government planning a record budget deficit for 2025 and retaining its 5% GDP growth target. And Beijing today made fresh calls on state-owned companies to boost market value. Elsewhere, the record low Brazilian real and ailing bond market there were under mounting pressure over the government's fiscal plans and the central bank's offsetting steep interest rate rises. Brazil's central bank reaffirmed its tough monetary policy stance on Tuesday, with policymakers highlighting unanimous concern over higher inflation expectations and a weakening currency, which continued to fall despite fresh interventions. The bank last week doubled the pace of monetary tightening, raising the benchmark interest rate by 100 basis points to 12.25%, and signaled matching increases at its next two meetings. But despite the bank's tough stance and a series of currency interventions after its policy decision, Brazil's risk premium has continued to rise, pushing the real to record lows and driving interest rate futures higher. Brazil's Treasury projected on Monday that gross debt in Latin America's largest economy will only begin to decline in 2028, following an increase of 10 percentage points during President Luiz Inacio Lula da Silva's current term. In Europe, banking news grabbed the eye. Italian bank UniCredit (CRDI.MI) , opens new tab said on Wednesday it had raised its potential stake in Germany's Commerzbank (CBKG.DE) , opens new tab to 28% by signing new derivative contracts and has applied to the European Central Bank to be allowed to get to 29.9% of its German rival. Key developments that should provide more direction to U.S. markets later on Wednesday: * US November housing starts and permits, Q3 current account * Federal Reserve's Federal Open Market Committee policy decision and statement, policymakers quarterly projections, press conference from Fed Chair Jerome Powell * U.S. corporate earnings: Micron Technology, Lennar, General Mills Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2024-12-18/

2024-12-18 11:28

MUMBAI, Dec 18 (Reuters) - Soaring gold prices have led many Indian families to opt for lightweight and lower-carat jewellery to stay within their budgets, industry officials said. "I wanted to gift my daughter 80 grams of gold, but I was forced to scale it down to 50 grams because of price increase in the past two years," said Mumbai-based Shubhangi More, choosing a necklace with a traditional design for her daughter's wedding. Gold prices in the world's second biggest buyer of the precious metal have surged 22% so far this year, after rising 15% in 2023. Most Indian buyers prefer traditional jewellery, but now they want it crafted in lightweight designs to fit their budgets, said Bachhraj Bamalwa, partner at jewellery retailer Nemichand Bamalwa & Sons. "Recognising this preference, we are stocking more lightweight jewellery sets while scaling down our inventory of heavier designs," Bamalwa said. Advances in manufacturing technology have enabled jewellery makers to craft traditional designs in lighter weights, said Sachin Jain, CEO of the World Gold Council's Indian operations. Buyers are also switching to lower carat jewellery to reduce costs, jewellers said. Guddi Devi, a teacher from Jamalpur in the northern state of Bihar, bought 18-carat jewellery for her daughter's wedding instead of 22-carat. "I preferred the 18 carats of jewellery because it was cheaper compared to the 22 carats and is much stronger than it," she said. Indians traditionally prefer jewellery made in 22-carat gold, which contains 91.7% pure gold, while 18-carat gold contains 75% pure gold and 25% other metals. The price of 18-carat gold is nearly a fifth lower than that of 22-carat gold. "Lower prices and greater durability are making 18-carat jewellery increasingly popular. Its share in total sales has risen to over 15%, compared to just 5% to 7% two years ago," said Surendra Mehta, secretary at the India Bullion and Jewellers Association. Sign up here. https://www.reuters.com/markets/commodities/indians-opt-lighter-lower-carat-jewellery-gold-prices-soar-2024-12-18/

2024-12-18 11:26

LONDON, Dec 18 (Reuters) - British manufacturers reported the biggest fall in output since the COVID-19 pandemic in late 2024 and they are even more downbeat about the start of next year, according to a survey that adds to signs of a loss of momentum in the economy. The Confederation of British Industry said a gauge of output over the three months to December in its monthly industrial trends survey - published on Wednesday - fell to -25, its lowest since August 2020, down from -12 in the three months to November. Manufacturers' expectations for output over the coming three months dropped to -31, the weakest since May 2020, from +9. Other surveys have shown a loss of confidence among British employers after finance minister Rachel Reeves announced an increase in social security contributions that firms must pay on in her first budget on Oct. 30. Official data has shown Britain's economic output contracted in September and October in the run-up to the budget. "Manufacturers are facing a perfect storm of weakening external demand on the one hand, amid political instability in some key European markets and uncertainty over US trade policy," CBI lead economist Ben Jones said. "And on the other hand, domestic business confidence has collapsed in the wake of the Budget, which has increased costs and led to widespread reports of project cancellations and falling orders," he said. The CBI's measure of order books tumbled to -40 in December from -19 in November, the lowest since November 2020. But expectations among firms for how much they will increase the prices they charge over the next three months rose to the highest since April at +23 this month, up from +11 in November. The Bank of England expects Britain's headline inflation rate to rise in 2025 but it has said it plans to cut borrowing costs gradually. Official data published earlier on Wednesday showed inflation rose to an eight-month high in November. The CBI survey was based on the responses of 331 manufacturers and was conducted between Nov. 25 and Dec. 11. Sign up here. https://www.reuters.com/world/uk/uk-factories-report-plunge-output-adding-economic-slowdown-signs-2024-12-18/

2024-12-18 10:40

Dec 18 (Reuters) - Sterling fell versus the dollar before the Federal Reserve's policy meeting later on Wednesday, which could suggest a less aggressive monetary easing path in the U.S., while British inflation figures were in line with analyst expectations. Consumer prices rose by an annual 2.6% in November, although services inflation held at 5.0%. Money market bets on the Bank of England interest rate outlook were roughly unchanged, with 57 basis points (bps) of monetary easing expected by the end of 2025 from 55 bps just before the release of the inflation figures. IRPR Front-end UK rates were softer, with 2-year gilt yields down 3 bps to 4.41%. The 10-year yields were at 4.51%, not far from 4.594%, their highest since October 2008. "Today's data will only reinforce the Monetary Policy Committee's (MPC) message of patience and gradualism," said Sanjay Raja, chief UK economist at Deutsche Bank, arguing the MPC "is some way away from declaring victory on inflation." "Price pressures are resurfacing again – with employers likely to start ramping up prices at the start of the year to account for the employer National Insurance Contributions' (NIC) increase," he added. The pound softened against the euro , with the single currency up 0.23% to 82.70 pence. The euro hit 82.51 pence last week, its lowest since March 2022. Investors still expect the pound to be firm as the yield divergence with the euro area will be significant. While markets price around 55 bps of cut by the BoE in 2025, they discount a European Central Bank deposit rate at 1.8% in December next year from the current 3%. Analysts also flagged that recent data showing an acceleration of UK wage growth offered a reason for hawks to get louder in the MPC. The rise was all in the private sector, where pay trends are more linked to economic trends. Sterling dipped 0.2% to $1.2684 versus the dollar . "The BoE policy outlook is muddled by weaker evidence that the NIC hike will also be inflationary," said Shaan Raithatha, senior economist at Vanguard. British companies have flagged an increase of 1.1 billion pounds in labour costs related to a rise in employers' social security contributions and minimum wages following Finance Minister Rachel Reeves' maiden budget in October. Sign up here. https://www.reuters.com/markets/currencies/sterling-drops-before-fed-policy-meeting-after-uk-inflation-data-2024-12-18/

2024-12-18 10:35

STOCKHOLM, Dec 18 (Reuters) - The Swedish government on Wednesday cut its forecast for economic growth in 2025 to 2.0% from 2.5% seen previously and said it looked like the economy would be weak for some time. GDP growth for 2024 was meanwhile seen at 0.6%, down from 0.8% seen in September, the finance ministry projections showed. It predicted headline inflation of 1.9% this year and 2.0% in 2025. It in September forecast 1.9% and 1.7% respectively. "It looks like the economy will be weak for some time," Finance Minister Elisabeth Svantesson said. Sign up here. https://www.reuters.com/markets/europe/sweden-government-cuts-growth-forecast-2025-2024-12-18/

2024-12-18 10:33

Mayotte beset with problems even before storm Territory "abandoned", senator says Migration fuels unrest Climate change makes territory more vulnerable PARIS, Dec 18 (Reuters) - Mayotte was already struggling with overcrowding, illness and poverty before a devastating cyclone hit the French island territory at the weekend. Now the aftermath of Cyclone Chido has led to accusations that Paris has neglected its far-flung overseas territories, leaving them with little protection when natural disasters strike. "Mayotte was not prepared," said Racha Mousdikoudine, president of the Mayotte Is Thirsty water advocacy group. More than 20 deaths have been confirmed after Chido hammered the Indian Ocean archipelago but officials say hundreds or even thousands more could be dead. Authorities are delivering aid and sending personnel to stave off hunger, disease and lawlessness. Their inability to give even a vaguely accurate death tally days after the storm hit underlines the challenges they face in what is France's poorest overseas territory. Rights groups have long accused Paris of turning its back on overseas departments like Mayotte, which was colonised in 1843 and where more than 75% of its roughly 321,000 people today live below France's national poverty rate. Mayotte has France's lowest GDP per capita - 10,600 euros - compared with 63,300 euros in the Ile-de-France region that includes Paris. "A cyclone, fuelled by climate change, struck an abandoned French territory," Melanie Vogel, a senator from the Europe Ecology party, wrote on X. The archipelago has become a magnet for illegal immigration from the Comoros islands, fuelling anger among residents over crime, inflation and stretched public services. Other French island territories have also been rocked by protests this year. In New Caledonia in the Pacific, riots erupted over long-standing demands for independence. In Martinique and Guadeloupe in the Caribbean, people have grown exasperated by higher costs and lower living standards than those in mainland France. CLIMATE CHANGE Those existing inequalities are likely to be magnified by climate change, experts say. According to the Intergovernmental Panel on Climate Change, hotter temperatures threaten small islands with harsher cyclones and rising sea levels. "I think that not enough investment has been made to protect Mayotte from the worst effects of climate change," said Samira Ben Ali, a youth climate advocate from Mayotte, who blamed the severity of the storm on unusually high sea temperatures. "And as we have seen right now, everything has been destroyed." The French Development Agency's (AFD) 2022-2026 Mayotte strategy plan found the archipelago was particularly vulnerable to climate change. Powerful cyclones threaten Mayotte's port and airport. "Damage to these infrastructures could paralyze the territory's economy," it said. Rising temperatures had already caused droughts that were exacerbating a chronic lack of fresh water, the AFD said. Last year, in response to the water crisis, France's government froze the price of water sold in shops and used the military to fly in bottled water for tens of thousands of thirsty residents. Anthony Foucher, a researcher at Climate and Environment Sciences Laboratory in France, said more intensive farming on Mayotte over the last 20 years had degraded its soil, leaving it more exposed to flash floods and water contamination. CHOLERA FEARS Mayotte also suffers from outbreaks of hepatitis A, cholera and typhoid fever that are virtually non-existent back in France, a 2022 Senate report found. More than a quarter of the population is obese, an affliction usually associated with far richer regions, the report found. The Comoros migration - around 100,000 people live in Mayotte without papers, according to authorities - was adding to pressure on the healthcare system, the report said. The migration wave, which led to violent unrest in 2018, has also contributed to a deterioration in Mayotte's public security, a 2021 Senate report found. Violent robberies rose nearly 300% between 2008 and 2019, while sexual violence jumped by nearly 200% over the same period, the report said. With half the population under 18, and a third under 10 years of age, "the economic development of the Mayotte territory remains insufficient to offer sufficient future prospects to this young and large population," it said. Sign up here. https://www.reuters.com/world/europe/cyclone-compounds-french-mayottes-problems-poverty-overcrowding-dwindling-2024-12-18/