2024-11-20 07:11

JOHANNESBURG, Nov 20 (Reuters) - South Africa's rand was little changed early on Wednesday ahead of highly anticipated local inflation and retail sales data. At 0851 GMT, the rand traded at 18.05 against the dollar , not far from its previous close. Trade in the local currency has been volatile in recent sessions as risk appetite waned amid escalating tensions between Russia and Ukraine. Local investor focus will be on Statistics South Africa, which will release October inflation figures at 0800 GMT and retail sales data at 1100 GMT. Economists polled by Reuters expect annual inflation to have cooled down to 3.1% last month, towards the lower end of the South African Reserve Bank's (SARB) preferred 3%-6% target range. The SARB will announce its final monetary policy decision for the year on Thursday, with markets bracing for an interest rate cut of 25 basis points. "Investors will focus on the SARB’s future guidance and the inflation outlook, which could influence bond yields and the ZAR," Andre Cilliers, currency strategist at TreasuryONE, said. South Africa's benchmark 2030 government bond was marginally stronger in early deals, with the yield down 1 basis point to 9.1%. Sign up here. https://www.reuters.com/markets/currencies/south-african-rand-steady-ahead-inflation-retail-sales-data-2024-11-20/

2024-11-20 07:04

LONDON, Nov 20 (Reuters) - Pity the poor forecasters compiling 2025 investment outlooks. Little of their hastily-compiled post-election annual outlooks may endure beyond the end of this year. Investors seized upon the unexpected size and sweep of this month's U.S. election win by Donald Trump and his Republican Party to double down on a variety of so-called Trump trades. If true to his word, it was assumed, Trump's promises of corporate tax cuts, tariff hikes and immigration curbs would expand an already vast budget deficit, whack Treasury bonds and flatter firms' bottom lines and stock prices. At the same time, investors also bet that the unintended consequences of tariff hikes and immigration crackdowns could rekindle inflation, hamstring the Federal Reserve's monetary policy easing campaign and push both the interest rate horizon and the dollar higher. It all sounds quite neat - and it's played out to some extent in an economy that's already running hot, thanks largely to the outgoing Biden administration. Since the first week in October, when Trump reclaimed his position as bookmakers' favorite in the race for the White House, the dollar index (.DXY) , opens new tab has jumped 5%, 30-year bond yields have added half a percentage point, the S&P 500 index (.SPX) , opens new tab has climbed 3% and Trump's presumed cryptocurrency sympathies have prompted Bitcoin to balloon by more than 50%. The problem is that for these trades to endure through 2025, investors still need to make a trifecta of good guesses. With two months still to go before Trump takes office, markets first have to figure out which of his pledges will actually materialize and to what degree. And of the ones that do show up, there is the trickier problem of guessing their macroeconomic impact. And then investors need to go one step further and determine whether financial trades made on the back of it all are sequenced and skewed the right way. After all, the past few decades are littered with seismic moments that produced market reactions almost no one would have predicted. Even if someone somehow bet on a global pandemic occurring in 2020, for example, it's unlikely that they would have simultaneously forecast a 15% surge in world stocks in the same year (.MIWD00000PUS) , opens new tab. UNRAVELLING THREADS So what will become of the big macro Trump trades? Even ardent Trump supporters radically differ on both the likely and even desired outcomes of his main economic proposals. One of the main punts is rising Treasury yields. This is largely based on non-partisan estimates of the budget cost , opens new tab of Trump's various tax-cut promises, including rolling over his 2017 cuts and slashing corporate tax rates. With a Republican clean sweep of Congress, it now seems plausible that these plans will come to fruition, and Treasuries have clearly felt the heat as a result. But, as Eurizon hedge fund manager Stephen Jen points out, there's been virtually no market focus on the plans for draconian spending cuts - which, even if partly successful, could cut across the standing projections nagging bond markets. Jen calculated it was "possible, even if not probable," that the annual budget gap could actually be dragged back to less than 1% of GDP by 2028 even on a partial implementation of much-touted spending cuts and a government "efficiency" drive. "The net impact on inflation and bond yields could very well be negative," he posited. If that seems fanciful right now, it should at least question straight-line cause-and-effect in the other direction. Moreover, what if the proposed mass layoffs of 25%-50% of some 2.3 million federal workers tips an already cooling labor market into a deeper funk? Or what if it generates job insecurity that severely damages household confidence? Far from leaning back against fiscal stimulus, that scenario could see the Fed's reaction function shift in the other direction And pulling these threads undermines a host of other trades - most obviously an assumption the dollar will continue moving higher from here. If the economy falters, perhaps because of a global trade war that backfires on the U.S. via Chinese or European retaliation and dampened overseas demand, other tenets of the "Trump trade" start to unravel too. And if you think tax cuts will win out either way, you have to assume a Republican sweep in Congress is strong enough to get those cuts over the line. The Republican majority in the U.S. House of Representatives is below 10, far less than during Trump's first term and, back then, 12 Republicans actually voted against his Tax Cuts and Jobs Act of 2017. ANNUAL GUESSING GAME Pity the poor forecaster indeed. As Wall Street investment banks start to roll out 2025 outlooks this week, what appears like a consensus for another 10% rise in U.S. stock indexes seems to rely on markets muddling through the fog on some middle ground that's less than half the annual gains of the past two years. And they have all been wise to attach get-out clauses. JPMorgan's global economists include an "alternative scenario" that supposes the billed political disruption just ends up being a giant shock to the world economy. "If the U.S. turns aggressively inward by sharply curtailing trade and attempting large-scale deportations, the fallout would be a far more adverse global supply shock," wrote Bruce Kasman and the rest of the JPMorgan team. "The disruptive impact of this shock would be amplified by retaliation and a global sentiment slide. The risk of a large and broad-based negative shock to business sentiment is the major threat to the global expansion next year." That's not what the Trump trade says on the tin. The opinions expressed here are those of the author, a columnist for Reuters Sign up here. https://www.reuters.com/markets/there-may-be-no-durable-trump-trade-mike-dolan-2024-11-20/

2024-11-20 07:03

Wheat harvest set to drop to 83 mln tons from 92.8 mln in 2023 Profitability of grain crops is approaching zero - Rostagro CEO Some farmers ponder a change of strategy towards "niche" crops MOSCOW/IRTYSH village, Nov 20 (Reuters) - Russian farmers say they will sow less wheat after heavy losses this year, switching to more profitable crops such as peas, lentils, or sunflowers. Such decisions will have direct implications for global wheat prices and inflation in major buyers like Egypt, as Russia is the world's top exporter of the grain. The trend represents a challenge for President Vladimir Putin's plan to expand exports and cement Russia's position as an agriculture superpower, giving it more international clout amid confrontation with the West over its actions in Ukraine. The country's wheat harvest will decline to 83 million tons this year due to frosts and drought, down from 92.8 million tons in 2023 and a record 104.2 million tons in 2022. New forecasts point to a clouded outlook for next year as well. Although Russia has been exporting wheat at a near record pace in the recent months, exports are expected to slow due to a bad harvest and export curbs aimed at containing domestic price growth, including an expected cut in export quota by two-thirds from January 2025. At a farm in Siberia's Omsk region, which was hit by heavy rain during the peak of the harvesting season, farmer Maxim Levshunov takes advantage of a rare sunny day to collect what remains in the fields. He chuckles as he picks up ears of wheat that sprouted early due to the moisture. Now, most of his crops are only suitable for animal feed, meaning the farm will receive a fraction of the price it had hoped for. "We'll probably start moving away from wheat, cutting back as much as possible. So, we'll be thinking about what more profitable crops we can replace it with right now," Levshunov told Reuters. As this year's harvesting campaign comes to an end, Russian farmers are assessing their losses from the exceptionally bad weather and considering their next steps amid falling profit margins for wheat, Russia's main agricultural export. Winter wheat became the first victim as areas sown with it are set to shrink by 10% this year, the lowest since 2019, according to data from Rusagrotrans, Russia's flagship grain rail carrier. "There are losses on each ton. The selling price does not cover the cost," said Arkady Zlochevsky, head of the Russian Grain Union industry lobby, predicting that Russia's 26% share of the global wheat trade will shrink. MORE PROFITABLE CROPS Agriculture Minister Oksana Lut joked that farmers might pray to Saint Ilya, the patron saint of weather in Russia, to improve conditions for winter crops. The joke did not go down well with farmers, who are considering more pragmatic options. Some say they have already decided to plant less wheat next year. Others are waiting to see how global wheat prices perform in the next few weeks before making a final decision. "The profitability of grain crops is approaching zero. The company has reduced the volume of winter wheat sowing by 30%. There are two drivers now — soybeans and sunflower," said Dmitry Garnov, CEO of Rostagro Group, which owns land in the Penza and Saratov regions around the Volga River. Rising costs of equipment and fuel, high export duties, a rising benchmark interest rate that hit 21% in October as the country's central bank fights inflation, and the removal of some agricultural subsidies have also eaten into profit margins. "It is evident that in 2022-2024, the price has been practically the same, while the cost of grain production has increased by at least 28%," said Sergei Lisovsky, a member of the lower house of Russia's parliament from the Kurgan region. Lisovsky argued that the high export duty for grains, introduced in 2021, as well as rising transportation costs for regions with no direct access to seaports, were also factors behind low margins. "Therefore, as of today, farmers are not planting grain not because of the autumn drought, but because they are waiting to see what the price will be, and have not yet made a decision," Lisovsky added, referring to spring wheat sowing. NICHE CROPS In Russia's most fertile Krasnodar region, the profitability of wheat is still holding around 10%, but some large local farms are also pondering a change of strategy as droughts become more severe each year. "It is gradually getting warmer in the south, and we need to think about changing the structure of the sowing areas for the future," said Yevgeny Gromyko, executive from Tkachev Agrocomplex, one of Russia's largest landowners, and a former deputy agriculture minister. The niche crops have the potential to become new export success stories with Russia's allies among the BRICS countries, aiding the government in achieving Putin's goal of increasing agricultural exports by half by 2030. Russia overtook Canada this year as the top peas exporter to China while regulators in India, the leading importer of lentils, used to make daal, a staple for millions of people, gave a green light to Russian imports. Russia takes great pride in being the world's top wheat exporter, with the older generation recalling the food shortages of the Soviet era and the humiliating grain imports from Cold War foes like the United States and Canada. However, for struggling farmers, it is declining profits, not global status, that matter most. "Many farms that specialised exclusively in wheat crops have operated at a loss this year and will face very serious financial difficulties, potentially leading to bankruptcy," Levshunov said. Sign up here. https://www.reuters.com/markets/commodities/russian-farmers-ditch-wheat-other-crops-after-heavy-losses-2024-11-20/

2024-11-20 07:00

BAKU, Nov 20 (Reuters) - Marathon COP29 climate talks enter their final stretch on Wednesday when the Azerbaijani hosts are due to publish an update on negotiations so far as the summit seeks to agree a new goal on issues including climate finance. The talks, which began on Nov. 11, are due to end on Friday at 1400 GMT, but COP summits have a history of running long. Below is a breakdown of the known sticking points and what happens next: DRAFT TEXTS Officials spent the first week trying to agree deals across a range of different issues including finance, carbon markets, the future of fossil fuels and efforts to mitigate the rise in global temperatures. Now, the outstanding items have been handed over to ministers so they can use their political clout to try to get agreements across the line. The next steps are about trying to whittle down draft texts containing a huge range of wording options into a final document that can be adopted by consensus at the end of the summit. Draft texts will be published periodically by the Azerbaijani presidency as they zero in on an acceptable deal. CLIMATE FINANCE GOAL The primary aim of COP29 is to agree a new target for how much money should be provided to developing countries to help them adapt to climate-fuelled weather disasters and transition to cleaner energy systems. A previous goal to provide $100 billion per year expires in 2025. The new goal needs to be $1 trillion annually by the end of the decade, according to experts. The focus in the negotiating rooms has been on defining the structure of a new target, including what counts as climate finance and who needs to pay in. Only once that is agreed are parties expected to start talking about the size of the target. Among issues to iron out include whether countries such as China should be counted among the richer core donors, and the degree to which countries should provide finance in the form of grants or loans. A text has been scheduled for publication on Wednesday evening. FOSSIL FUELS Countries have so far struggled to agree on the right way to follow up on a deal at last year's summit to transition from fossil fuels. European states want to see that commitment referenced throughout any deal at Baku to reinforce the importance of following through with firm action. Others, including the Arab Group of states, argue it does not need to be. If past COPs are anything to go by, the moment any deal text is published, delegates will be searching for the phrase "fossil fuels" to see if there is any sign of backsliding. CARBON MARKETS Talks in Baku began with an early deal on some of the quality standards that would govern a global market for carbon credits, but there is still much to be agreed on, including how to track trades and disclosure rules. If fully agreed, market watchers expect a U.N.-backed global market could fund billions of dollars of projects that reduce greenhouse gas emissions from projects such as reforestation. Scrutiny of the details is intense amid concern that without watertight regulation carbon credits may not deliver the benefits they claim. FINAL HOURS COPs rarely finish on time. COP28 in Dubai closed almost a full day after the initial deadline; COP27 in Egypt overran by around 36 hours. In the final hours, delegations consult intensively in private with the presidency on the proposed deal, often through the night, in search of something that can be adopted by consensus. Once finalised, every country is called to the main hall to begin an hours-long process of formal approval. Sign up here. https://www.reuters.com/sustainability/climate-energy/cop29-climate-talks-enter-final-stretch-what-happens-next-2024-11-20/

2024-11-20 06:58

Iraq ramps up exports as seasonal demand eases, say traders and analysts Exports on track to breach 18 mln metric tons (380,000 bpd) in 2024 Market watching Karbala refinery production SINGAPORE, Nov 20 (Reuters) - Iraq's fuel oil exports are on track to hit all-time highs this year after the country ramped up shipments in October, as domestic demand eased while output rose, according to industry sources and ship-tracking data. The boost in exports of the residue fuel will support oil revenues for the Organization of the Petroleum Exporting Countries' (OPEC's) second-largest producer despite stagnant crude shipments this year, due to production caps under quotas set by OPEC and its allies, or OPEC+. Higher exports from Iraq will also add to global supply and ease elevated prices in Asia while reducing feedstock costs at refineries. Exports are set to breach 18 million metric tons (380,000 barrels per day) in 2024, a record-high annual volume that exceeds last year's record of more than 14 million tons, according to calculations based on data from Kpler and LSEG. Iraq state refiner SOMO did not immediately respond to a request for comment. Iraq's fuel oil is mainly high-sulphur and straight-run, which can be processed in refineries into higher-value products such as diesel. Most of Iraq's fuel oil cargoes have landed in Singapore and India. Iraq's fuel oil exports exceeded 2.15 million metric tons in October, the highest monthly volume on record, based on Kpler and LSEG data. This was coupled with a seasonal decline in domestic demand of about 100,000 barrels per day from the previous month, said Palash Jain, Middle East oil market consultant at FGE. "Given reduced domestic demand and higher HSFO (high-sulfur fuel oil) cracks, increasing fuel oil exports in October was economically advantageous for Iraq," he said. The refining margin, or crack, in Asia for producing 380-cst high sulphur fuel oil reached discounts of nearly $2 a barrel at the end of October, the narrowest in more than two years, LSEG data showed. Discounts widened to more than $5.50 a ton this week as more supply replenishment from various regions, including the Middle East and the West, was expected, traders said. Production at Iraq's Karbala refinery, which has a capacity of 140,000 barrels per day, also buoyed exports, industry sources said. "Iraqi fuel oil exports are comfortably heading for a record this year following increased domestic production from the reopening of Karbala refinery," said Roslan Khasawneh, senior oil analyst at Kpler. A Middle East refining source added that Iraqi exports going forward would also depend on whether the Karbala refinery runs its secondary units at full rates. Iraq has been curbing crude exports to compensate for overproduction under OPEC+ quotas, processing more crude into products at its refineries, said LSEG Oil Research. "We believe that in order to remain compliant due to its crude over-production, Iraq has upped its products output," said Emril Jamil, a senior oil analyst at LSEG. He expects Iraqi fuel oil exports to remain above 2 million tons in November, while FGE's Jain said volumes may taper off from October highs in the next couple of months when Iraq starts winter stockpiling to meet heating demand. Sign up here. https://www.reuters.com/business/energy/iraqs-fuel-oil-exports-head-record-year-after-oct-volumes-jump-2024-11-20/

2024-11-20 06:51

NAIROBI, Nov 20 (Reuters) - The Kenyan shilling strengthened slightly on Wednesday, data from the London Stock Exchange Group showed. The shilling traded at 128.70/129.70 at 06:45 GMT, according to LSEG data, compared to Tuesday's closing rate of 128.75/129.75. Traders previously said the East African currency would hold steady toward the end of the month as companies converted dollars into local currencies for statutory payments. Sign up here. https://www.reuters.com/markets/currencies/kenyan-shilling-strengthens-slightly-lseg-data-shows-2024-11-20/