2024-11-20 09:10

FRANKFURT, Nov 20 (Reuters) - The European Central Bank warned on Wednesday about a "bubble" in stocks related to artificial intelligence (AI), which could burst abruptly if investors' rosy expectations are not met. The warning came as part of the ECB's twice-yearly Financial Stability Review, a laundry list of risks ranging from wars and tariffs to cracks in the plumbing of the banking system. The central bank for the 20 countries that share the euro noted the stock market, particularly in the United States, had become increasingly dependent on a handful of companies perceived as the beneficiaries of the AI boom. "This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble," the ECB said. "Also, in a context of deeply integrated global equity markets, it points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed." The ECB noted investors were demanding a low premium to own shares and bonds while funds had cut their cash buffers. "Given relatively low liquid asset holdings and significant liquidity mismatches in some types of open-ended investment funds, cash shortages could result in forced asset sales that could amplify downward asset price adjustments," the ECB said. Among other risks, the ECB flagged the euro area was vulnerable to more trade fragmentation - a key source of concerns for policymakers and investors since Donald Trump won the U.S. Presidential election earlier this month. The President-elect had made tariffs a key element of his pitch to voters during the campaign and several ECB policymakers have said these measures, if implemented, would hurt growth in the euro area. The ECB also noted euro area governments - particularly Italy and France - would be borrowing at much higher interest rates over the coming decade, strengthening the need for prudent fiscal policies. Sign up here. https://www.reuters.com/world/europe/ecb-warns-bubble-ai-stocks-funds-deplete-cash-buffers-2024-11-20/

2024-11-20 07:52

OSLO, Nov 20 (Reuters) - Equinor (EQNR.OL) , opens new tab has restored full output capacity at its Johan Sverdrup oilfield in the North Sea following a power outage, a company spokesperson said on Wednesday. Output was halted on Monday at western Europe's largest oilfield due to an onshore outage that disrupted electricity supply to the platforms, boosting global oil prices. Equinor early on Tuesday said two-thirds of oil output capacity was restored. Later in the day full capacity was established, it said on Wednesday. "The entire production facility at Johan Sverdrup resumed operations yesterday and is now producing steadily at normal levels," the company spokesperson said. Sign up here. https://www.reuters.com/business/energy/norways-sverdrup-oilfield-restores-full-output-capacity-2024-11-20/

2024-11-20 07:39

BI maintains rates amid global economic uncertainty Rupiah stability prioritised over potential rate cuts Analysts see low chance of rate cut in December JAKARTA, Nov 20 (Reuters) - Indonesia's central bank left interest rates unchanged on Wednesday, as expected, saying changed global dynamics after the U.S. election meant it had to focus on stabilising the currency, and analysts saw little chance of a near-term rate cut. Bank Indonesia (BI) kept the benchmark rate (IDCBRR=ECI) , opens new tab steady at 6.00%, as predicted by 25 of 34 analysts polled by Reuters. It also left unchanged overnight deposit and lending rates. "The focus of monetary policy is directed at strengthening the stability of the rupiah exchange rate from the impact of heightened geopolitical and global economic uncertainty with the political developments in the United States," Governor Perry Warjiyo told a press conference. BI had cut rates by 25 bps in September, just ahead of the start of the U.S. Federal Reserve's rate-cutting cycle. While BI will persist in evaluating the feasibility of further rate cuts, Warjiyo said the evolving global situation has resulted in BI's easing capacity becoming "more limited" than previously. The rupiah has been weakening since early October, though so far remains above lows hit earlier in 2024. The currency, as well as the main stock index (.JKSE) , opens new tab, held steady after BI's decision. "As expected, BI's top priority was to maintain the rupiah," SMBC economist Ryota Abe said. "We think it is hard for BI to consider a rate cut at the December meeting. The prolonged high interest rates will likely weigh on the economy as its momentum is already slowing." Warjiyo said under President-elect Donald Trump, the U.S. could be more inward looking, citing plans for high tariffs on imported products, tax cuts and a wider fiscal deficit, which could limit the Fed's easing cycle and affect global inflation. Warjiyo said the rupiah's recent weakness was due to broad U.S. dollar strength and capital flight to U.S. dollar assets since the election, but said it was manageable and all monetary instruments would be used to support the currency's stability. On the domestic front, BI maintained its outlook for economic growth in 2024 in a range of 4.7% to 5.5%, with an improvement in 2025, and expected inflation to remain within its 1.5% to 3.5% target range through to 2025. Annual growth in Southeast Asia's largest economy was 4.95% in the third quarter. While the pace remains solid, it was far slower than the 8% rate that new President Prabowo Subianto has said he wants to achieve. DBS Bank senior economist Radhika Rao said BI had clearly flagged that while the inflation outlook left room for a rate cut, the global uncertainties meant it had to focus on financial stability. She saw receding likelihood of further cuts in the rest of 2024. However, some economists argued BI should opt for an earlier cut. Hosianna Situmorang, Bank Danamon's economist, said BI's easing window was narrowing at a time when domestic growth prospects were weakening. "In this context, a timely rate cut in the future by BI would be essential to manage these challenges, support economic expansion and restore consumer confidence," she said, adding that Bank Danamon was reassessing its BI rates forecast. Sign up here. https://www.reuters.com/markets/rates-bonds/indonesia-central-bank-holds-rates-steady-expected-2024-11-20/

2024-11-20 07:39

UK CPI 2.3% in October vs Reuters poll 2.2% Bank of England had also expected 2.2% Underlying inflation measures rise too Sterling jumps and investors trim BoE rate cut bets BoE has stressed it will move gradually on rates LONDON, Nov 20 (Reuters) - British inflation jumped by more than expected last month to rise back above the Bank of England's 2% target and underlying price growth gathered speed too, showing why the BoE is moving cautiously on interest rate cuts. Consumer prices rose by an annual 2.3% in October, pushed up almost entirely by an increase in regulated domestic energy tariffs, after a 1.7% rise in September which was the first time the inflation rate had fallen below the BoE's target since 2021. Sterling strengthened by almost a third of a cent against the U.S. dollar after the data was published before giving back most of that rise. Interest rate futures priced in a slightly slower pace of rate cuts and bond prices fell. The BoE's most recent forecast and a Reuters poll of economists had both pointed to a weaker CPI reading of 2.2%. James Smith, research director at the Resolution Foundation think tank, said a rise had been expected as last year's energy price falls dropped out of the annual calculation and the price cap increased in October. "But the clean sweep of higher headline, core and services inflation has delivered a triple dose of bad news for families and policymakers alike," he said. The increase took inflation to a six-month high and represented the biggest month-to-month rise in the annual CPI rate since inflation peaked in October 2022. Services inflation - which the BoE views as a key measure of domestically generated price pressure - rose to 5.0% in October from 4.9% in September, the Office for National Statistics said, in line with BoE and market expectations. But core inflation, which excludes energy, food, alcohol and tobacco prices, picked up to 3.3% from September's 3.2%, bucking market expectations for a fall. The BoE said this month it expected headline inflation to tick up to 2.4% and 2.5% in November and December. Price growth is likely to approach 3% in the second half of next year, it says. Some private-sector economists think inflation will rise close to 3% in early 2025. GLOBAL UNCERTAINTY The BoE has said the first budget of Britain's new government will probably add to inflation next year and U.S. President-elect Donald Trump's threat to impose sweeping import tariffs adds to uncertainty about the outlook. Monica George Michail, an associate economist at Britain's National Institute of Economic and Social Research think tank, said interest rates might stay elevated for longer. "This outlook reflects forecasted inflationary pressures stemming from the recently announced budget, in addition to heightened global uncertainty, particularly surrounding the Trump presidency," she said. The new government of Prime Minister Keir Starmer has promised to speed up Britain's economic growth but has come under fire from employers for the higher employment taxes that they will have to pay from April next year. The BoE has said that could lead to higher prices as well as job losses. Chief Secretary to the Treasury Darren Jones said the government was trying to reduce the impact of the higher cost of living, including with a latest increase in the minimum wage, "but we know there is more to do." Mel Stride, the Conservative opposition's would-be finance minister, said the government's fiscal watchdog had already been predicting higher inflation as a result of the budget. "What is worrying about today's announcement is that inflation is running ahead of expectations and official forecasts state these figures are not expected to improve," he said. There is also upward pressure on prices from the jobs market where many employers face a shortage of candidates. Data last week showed British pay grew at its slowest pace in more than two years in the three months to the end of September. But BoE Chief Economist Huw Pill said wage growth was stuck at levels that were too high for the central bank. Investors on Wednesday were pricing around 60 basis points of BoE rate reductions by the end of 2025, equivalent to between two and three cuts, down from about 65 basis points of cuts expected by investors before the inflation data. Two-year British government bond yields, which are sensitive to interest rate speculation, rose by around 4 basis points. Governor Andrew Bailey on Tuesday stressed the BoE's message that borrowing costs are likely to come down only gradually. There were signs of some weaker inflation pressures in the pipeline. Prices charged by factories for their goods fell by 0.8% in the 12 months to October, the biggest drop since October 2020 during the COVID pandemic. Sign up here. https://www.reuters.com/world/uk/uk-inflation-rises-23-october-2024-11-20/

2024-11-20 07:35

Nov 20 (Reuters) - Britain's energy regulator Ofgem said on Wednesday it had begun consultations over a new investment fund of up to 8 billion pounds ($10.16 billion) that could help the country's net zero prospects and aid energy transmitters to cut delays and costs. The proposed fund, worth between 5 billion pounds and 8 billion pounds, would provide allowances for transmission owners to buy in advance equipment such as switchgear, cables and steel, thereby accelerating deliveries of projects, Ofgem said , opens new tab. The regulator also added that the fund, consultation for which will run until Dec. 18, would help the government achieve clean power by 2030, and net zero targets eventually, among other things. The consultation comes after Ofgem said last month it would offer developers of renewable energy storage projects a guaranteed minimum income to spur investment in technologies that would help Britain meet its climate targets. Ofgem has proposed that it would be clear in its rules to ensure that the latest fund is used only for intended purposes, and that any unused allowances would be returned to consumers so as to minimise any impact on their energy bills. ($1 = 0.7875 pounds) Sign up here. https://www.reuters.com/business/energy/uk-energy-regulator-begins-consultations-new-102-bln-fund-2024-11-20/

2024-11-20 07:32

Daily volumes via Ukraine have not changed Nominations to Austria stable Gazprom halted flow to Austria's OMV on Saturday MOSCOW, Nov 20 (Reuters) - Russian gas exports to Europe via Ukraine were stable on Wednesday, data from Kremlin-controlled producer Gazprom (GAZP.MM) , opens new tab showed, with nominations for flows to Austria from Slovakia also unchanged. Gazprom halted supply to Austria's OMV (OMVV.VI) , opens new tab on Saturday over a contractual dispute, the Vienna-based company said, while Gazprom has not commented. It is not clear where the gas volumes intended for OMV have been redirected. Slovak state-owned firm SPP has said it was still receiving gas from Russia and suggested others were buying more because there was still "great interest" in Russian gas in Europe. Gazprom said it would send 42.4 million cubic metres of gas to Europe via Ukraine on Wednesday, the same volume as on Tuesday. Nominations, or requests, for flows to Austria from Slovakia were stable versus Tuesday levels, at about 13% below levels seen before Russia halted gas supplies to OMV. Nominations to the Czech Republic from Slovakia were in line with levels seen this month. Nominations for gas flows into Slovakia from Ukraine were steady versus previous days while nominations for flows leaving Slovakia were also little changed, data from transmission system operator Eustream showed. Sign up here. https://www.reuters.com/business/energy/russian-gas-supply-eu-via-ukraine-steady-amid-row-with-omv-2024-11-20/