2024-10-25 12:09

AMSTERDAM, Oct 25 (Reuters) - Lighting maker Signify (LIGHT.AS) , opens new tab is considering moving some of its production out of China if the company is confronted with a new round of U.S. tariffs, its chief executive said on Friday. Signify, the world's biggest maker of lights, is looking at production sites in India, Indonesia and changing existing operations in Mexico, CEO Eric Rondolat said on a call with analysts after the company reported third quarter earnings. Former U.S. President Donald Trump has proposed a tariff of up to 60% on imports from China, where Signify has much of its production, if he is elected for a second time on Nov. 5. "We have a ... plan A, we have a plan B, and we have a plan C, depending where the political decisions are going to go," Rondolat said. Signify had been affected by the introduction of tariffs under Trump in 2017-18, with about 40% of company sales in the Americas. Rondolat estimated tariffs continue to run at the rate of about 20-25% 'throughout our business." In response, the company looked at sourcing and producing in the U.S. or Mexico but only did so for a limited part of its portfolio as Chinese production remained more efficient and cost-effective. "Now things may change and we are preparing ourselves," he said. "We are very well positioned, and probably much better than when the tariffs increased the first time." He estimated the company and broader industry would be able to respond to new tariffs in 6-9 months. Signify's stock was up 9.4% on Friday following the earnings, which showed margins recovering after a cost-cutting program, despite persistent economic weakness in Europe and China. Sign up here. https://www.reuters.com/business/retail-consumer/new-us-tariffs-could-prompt-signify-move-some-production-china-ceo-says-2024-10-25/

2024-10-25 12:07

Commodity exporters' growth below regional rate IMF official says oil economies need to reform Drop in low-priced financing hurting poor nations NAIROBI/WASHINGTON, Oct 25 (Reuters) - Sub-Saharan African nations that depend on commodity exports need to reform their economies to tackle patchy regional economic growth, International Monetary Fund Africa Director Abebe Aemro Selassie said. The region is expected to grow by 3.6% this year, unchanged from last year and down from an April forecast of 3.8%, the IMF said in its latest World Economic Outlook released this week, with commodity economies lagging their diversified counterparts. The commodity intensive countries are growing at about half the rate of the rest of the region, the IMF said in the report, with oil exporters struggling the most in what it described as "subdued and uneven" regional growth. "South Sudan, Nigeria, Angola are all very much in that camp," Abebe told Reuters. While diversified economies such as Senegal and Tanzania are expected to grow at above the regional average, Nigeria will fall short, growing at 2.9%, according to the IMF's regional economic outlook for Sub-Saharan Africa launched on Friday. "They have had very large macroeconomic imbalances, financing challenges which have held back growth," Abebe said. He said the government in Nigeria needed to "squarely address" those challenges, since they had caused high inflation and put pressure on the cost of living. President Bola Tinubu's government has launched a series of reforms it says are aimed at lifting economic growth and attracting investment. South Africa, whose growth has been curbed by crippling electricity blackouts, is expected to grow by 1.1% this year, the IMF said. Armed conflicts are also weighing on growth, the IMF said, citing South Sudan's oil exports blocked by conflict in neighbouring Sudan, which hosts the crude export pipeline. "They (oil exporters) need to find new sources of growth, get more private sector investment - so working on reforms that will facilitate that is important," Abebe said. Other challenges facing African oil producers include the global transition to green fuels due to climate change, the report said. SMALL REBOUND Sub-Saharan Africa's economic growth is expected to improve slightly next year to 4.2%, the IMF report said. The report found that nearly half of the 20 fastest growing economies in the world this year were in Sub-Saharan Africa, but cautioned that faster growth rates were required to reduce widespread poverty and inequalities. One of the main obstacles to faster growth include a lack of access to affordable financing, the IMF said, as countries struggle with heavy debt loads and high debt servicing costs. While some countries have been able to sell bonds on international capital markets this year following a two-year hiatus caused by geopolitical shocks and elevated interest rates in advanced economies such as the United States, the new funding came at a high cost. "The old development finance architecture is not delivering, and, if anything, kind of is in the process of disintegrating," Abebe said, citing "very problematic levels" of official bilateral funding for poor countries. For countries such as Kenya, where deadly anti-tax hikes protests in June forced the government to withdraw its finance bill for this fiscal year, such development assistance from overseas has been falling in recent years, a senior U.N. official told Reuters. The solutions lay in ensuring that poor nations continue to access low-priced development financing from bilateral and multilateral lenders, Abebe said. "We need also to find ways in which when countries are facing liquidity rather than solvency challenges, more financing can be made available for them to support reforms so they can move on to better times," he said. Sign up here. https://www.reuters.com/markets/commodities/imf-urges-african-oil-exporters-reforms-boost-subdued-growth-2024-10-25/

2024-10-25 12:05

Sets upper band of target at 1.7 degrees Celsius Gives range for sectors; adds aviation, mining, chemicals Resets baseline year to 2022 given better data quality LONDON, Oct 25 (Reuters) - Morgan Stanley has lowered its expectations for cutting emissions from its corporate lending portfolio as the world is moving too slowly to a greener economy, the bank's chief sustainability officer told Reuters. A slowdown in electric vehicle sales, lagging adoption of biofuels in aviation and funding and policy hurdles in the power sector were just some of the factors hampering progress, Jessica Alsford said. While banks such as Dutch firm ING have trimmed lending to some clients, for example in the Oil and Gas sector, Morgan Stanley said in a report laying out its new targets it was mindful of not doing so too quickly. Yet, unless the pace of change picks up, its clients and the firm itself "may not meet net-zero-aligned targets", it added. Given the backdrop, its lending approach would now aim to be in line with capping global warming at 1.5 to 1.7 degrees Celsius, softening a previous target of a straight 1.5 degrees, the bank's first major climate update in three years showed. "The current technologies, the current policies are not fully aligned with 1.5 degrees, and by having that range of 1.5 to 1.7 it's acknowledging the challenges that the global economy faces whilst being aligned, still, with the Paris Agreement," Alsford said. The Paris Agreement aims to cap the average increase since industrial times well below 2 degrees by 2050. Despite record temperatures across the planet, many companies' emissions continue to rise and a U.N. report on Thursday showed the world's average temperature increase was currently on course to hit 3.1 degrees by 2100. SECTOR RANGES Alsford said Morgan Stanley would now have emissions reduction targets by 2030 for six sectors - Energy, Power, Autos, Chemicals, Mining and Aviation. The bank also reset the baseline from which the targets would be measured to 2022 from 2019, because the more recent year had much better data, Alsford said. It would also adopt a so-called "physical intensity" methodology that tracks emissions per unit of, for example, production or generation, Alsford said, bringing the bank into line with peers and clients. Under the new plan, the bank said it would now track the Energy sector emissions using two targets, one for the so-called Scope 1 and 2 emissions, those from the company's operations and energy use, and one for Scope 3, when their products are used. The sector's operational emissions were targeted to fall 12-20% by 2030, with end-use emissions down 10-19%, although the bank said issues including energy security pressures could impact results. Power sector emissions across its lending portfolio were targeted to fall between 45-60%, although funding and policy support would be needed to meet rising demand, including that required by artificial intelligence technologies. Autos were targeted to fall 29-45%, although the bank warned electric vehicle adoption rates were lagging the rate needed to meet the sector's share of the global target. In the Aviation sector, emissions were targeted to fall 13-24%, driven by use of sustainable aviation fuel. While the IEA has said this should hit 10% by 2030, the bank noted some airlines were only targeting usage of 5-7.5%. "There remain significant challenges ahead to ensure that supply can meet demand at cost parity, which will be a key determinant for airline companies to achieve their interim emission reduction targets and thus for us to achieve our own aviation target," the bank said. Chemical sector emissions were targeted to fall 18-28%, although results will depend on scaling nascent technologies including green hydrogen and capturing and storing emissions. For the Mining sector, the bank said it hopes to cut portfolio emissions by 23-31% by actions including boosting the use of renewable power. Sign up here. https://www.reuters.com/sustainability/climate-energy/morgan-stanley-lowers-climate-target-warns-sluggish-transition-2024-10-25/

2024-10-25 12:01

Event-risk packed fortnight looms for markets Bond and currency volatility gauges rising Vanguard portfolio manager has moved more into cash LONDON, Oct 25 (Reuters) - Investors globally are piling into the U.S. dollar and betting on rising volatility ahead of a crucial two weeks in which the United States and Japan elect leaders, three major central banks decide on interest rates and the new UK government presents its budget. The U.S. currency hit a three-month high this week in response to a strong U.S. economy and potential win for Republican former president Donald Trump in the Nov. 5 election. Meanwhile, gauges derived from financial contracts called options, which are used to hedge against swings in the market, show investors are anticipating a jump in currency and bond volatility over the next month. Still, stocks have remained broadly calm on strong U.S. data and earnings, though the VIX (.VIX) , opens new tab index of expected equity market swings sits above its 2024 average, signaling possible turbulence ahead. "We're going to have quite an incredible, volatile two weeks," said Ales Koutny, head of international rates at Vanguard, who said he had sold some assets in favour of cash. "We're going to start getting some increased vol, and that’s only going to settle down the week after the (U.S.) election." TRUMP TRADES Trump is neck and neck with Democrat Vice President Kamala Harris in the polls. Yet investors are taking their cues from betting markets, where the odds have shifted in Trump's favour. The dollar has rallied more than 3% so far in October as bond yields have climbed towards three-month highs, partly because markets are preparing for potentially higher U.S. tariffs flagged by Trump if he wins that could push up inflation and force the Federal Reserve to keep rates higher. Trade worries have helped drive a gauge of expected volatility in the euro over the next month to its highest in 18 months . "We've shifted the portfolio defensively," said James Athey, fixed income portfolio manager at Marlborough, adding that he expects the dollar to rise further and has reduced his exposure to U.S. government debt in favour of German bonds. Investors wary of inflation and populism are rushing into gold , opens new tab, Bank of America said on Friday, while Citi data showed hedge funds were piling into the dollar. Markets might be underestimating risks posed by geopolitics and impending elections, the International Monetary Fund warned this week. US JUGGERNAUT The bigger driver for the dollar, however, has been relentless U.S. economic strength. Stronger-than-expected jobs data, retail sales numbers and jobless claims figures have caused investors to dial back Federal Reserve rate cut bets. The Nov. 1 jobs data for October could be a flashpoint - feeding into the Fed's rate decision six days later, where traders now expect a 25-basis-point rate cut, having previously seen a strong chance of a second 50-bps reduction. Bond yields have bounced around as traders struggle to judge the Fed, pushing a measure of expected volatility in the $27 trillion Treasury market to 10-month peaks (.MOVE) , opens new tab. And the CBOE Skew index (.SKEWX) , opens new tab, measuring demand for financial contracts called options that pay out when stocks suffer big falls, is near levels that usually signal anxiety. Overall stocks have remained comparatively placid, with the S&P 500 index down a modest 0.9% this week. Strong earnings from the likes of Tesla (TSLA.O) , opens new tab have kept the equity market calm, Janus Henderson multi-asset manager Oliver Blackbourn said, as well as robust U.S. data. Artemis fixed income manager Liam O'Donnell said he had bought five-year Treasuries in the last two days and thought markets were exaggerating how high U.S. rates would stay were Trump to win. POLLS, POLICY Britain's Labour government meanwhile presents its first budget on Wednesday after winning power in July, before the Bank of England 's interest rate decision on Nov. 7. Memories of a bond market rout after Prime Minister Liz Truss’s disastrous budget in 2022 hang over the event. British government bond yields rose sharply on Thursday after finance minister Rachel Reeves said she would change the fiscal rules to allow her to borrow more to invest. Allianz Global Investors, PIMCO, abrdn and Artemis say they are keen on gilts, betting yields have risen too far. "We have recently initiated a long duration position in gilts," said Linda Raggi, senior investment manager for fixed income at Pictet Asset Management. "We believe the budget will be focusing on supporting growth (and) think gilts have room to outperform once the event risk passes." Japan's politics and central bank also loom large, after a rate hike and yen surge helped spark market chaos around the world in August. Japan's ruling Liberal Democratic Party may lose its majority in Sunday's snap election and potentially form a coalition with opposition parties who back monetary stimulus. The Bank of Japan is expected to hold rates steady on Oct. 31 and traders will watch for hints on the outlook that could shift the yen, which has slumped more than 8% since mid-September. Sign up here. https://www.reuters.com/markets/rates-bonds/global-markets-election-volatility-analysis-pix-2024-10-25/

2024-10-25 11:55

The central bank says further rate hikes possible Inflation is not slowing down Inflationary expectations highest since the start of the year Key rate higher than at the start of the conflict in Ukraine MOSCOW, Oct 25 (Reuters) - Russia's central bank hiked its key interest rate by 200 basis points on Friday to 21%, the highest level since the early years of President Vladimir Putin's rule, when Russia was recovering from the chaos that followed the collapse of the Soviet Union. The move, driven by massive increases in state spending, especially on the military, also brings the rate above the level seen during the market panic at the start of what Russia calls its "special military operation" in Ukraine in February 2022. The central bank said the hike was needed to fight inflation, currently at 8.4%, adding that inflationary expectations among the public have reached their highest level since the start of the year. "Further tightening of monetary policy is required to ensure that inflation returns to target and to reduce inflation expectations," the regulator said. Russia, which has just hosted a summit of the BRICS group of countries, has by far the highest key interest rate among the core BRICS members, who also include China, India, Brazil and South Africa. The regulator said another hike was possible at its next policy meeting and also updated its inflation forecast for 2025 to 4.5-5.0%, signalling that its 4% policy target was out of reach next year. "The central bank admitted that it will not be able to bring inflation back to target next year," said economist Evgeny Kogan, calling the move "a capitulation in the face of inflation". INFLATIONARY BUDGET Economists also noted that the regulator's forecast for the average key rate in 2024 created room for a further hike to 23% before the end of the year. The central bank's governor Elvira Nabiullina told a news conference there were "no limits" for the key rate level. Most analysts polled by Reuters had expected a 100 bps hike. The central bank said it took into account the new draft budget, seen as inflationary due to a higher-than-expected deficit of 1.7% of GDP for this year and massive hikes in utility tariffs. The new benchmark rate is the highest since it was introduced in 2013, replacing the refinancing rate as the main market guidance. Soon after Putin took power in 2000, he launched economic reforms to stabilize Russia's economy after the 1998 financial meltdown that enabled the central bank to bring the refinancing rate to below 20% in Feb. 2003 and keep it below that level until now. The current weakness of the Russian currency, with the official exchange rate against the U.S. dollar down by over 12% since early August, is also viewed by analysts as a strong inflationary factor. RATE HIKE Friday's hike also highlights political support for the central bank's leadership, which faced unprecedented pressure from some of Russia's most powerful businessmen, including the heads of the country's largest oil and defence companies, to halt the tightening cycle. Official data shows, however, that despite the rate hikes, corporate lending has not slowed. The International Monetary Fund (IMF), which cancelled its mission to Russia last month after protests by several European countries, reduced its forecast for Russian economic growth by 0.2 percentage points to 1.3% in 2025 from 3.6% this year. The Fund cited slowing consumption and investment growth amid a less tight labour market and more moderate wage growth. It said its projections assumed the central bank maintained a tight monetary policy stance. Both the IMF and the central bank described the current state of Russia's economy as "overheated". Russia officially sees economic growth slowing to 2.5% from an expected 3.9% this year. The central bank raised its interest rate to 20% in February 2022 to calm markets unsettled by Russia's actions in Ukraine and to stop capital outflow. It lowered the rate to 17% in April 2022. Sign up here. https://www.reuters.com/markets/rates-bonds/russian-central-bank-hikes-benchmark-rate-21-highest-since-2003-2024-10-25/

2024-10-25 11:48

Oct 25 (Reuters) - India's JSW Steel (JSTL.NS) , opens new tab reported a bigger-than-expected slide in second-quarter profit on Friday hurt by weak domestic prices and muted demand and cut its capex spending for the current fiscal year. The country's biggest steelmaker by market cap reported a six-fold decline in profit to 4.39 billion rupees ($52.23 million) for the quarter ended June 30. Analysts, on average, had expected profit to decline 78%, as per LSEG data. Steelmakers in India have been battling an influx of cheap imports, mostly from China, followed by South Korea and Vietnam, denting local prices. This has led the steel ministry to back a temporary "safeguard duty" to help curb Chinese imports. An investigation has also been initiated on certain products imported from Vietnam to analyse their impact on domestic industry. Domestic steel prices dropped to an over three-year low in the quarter, as per data from commodities consultancy BigMint. JSW Steel now sees its capex spending for the fiscal year 2025 at 160 billion rupees-170 billion rupees, lower than the 200 billion rupees forecast earlier. The cut is due to the transfer of a project to port operator JSW Infrastructure (JSWN.NS) , opens new tab and re-scheduling of an expansion project, the company said. Steel demand in the July-September period also remained lackluster as higher-than-normal rainfall in the country slowed activity in the infrastructure and auto sectors - key clients for steelmakers. Revenue from operations fell 11% to 396.84 billion rupees, which also fell short of analysts' average estimate of 423.26 billion rupees. However, its earnings before interest, taxes, depreciation and amortization (EBITDA) beat analysts' view helped by a dip in total expenses, said Parthiv Jhonsa lead analyst for metal and mining at Anand Rathi. EBITDA for the quarter stood at 54.37 billion rupees, higher than analysts' expectation of 50.81 billion rupees. Total expenses dropped 5.3% to 386.44 billion rupees. JSW Steel's shares ended the session down 1.5%. Sign up here. https://www.reuters.com/markets/commodities/indias-jsw-steel-posts-bigger-than-feared-q2-profit-drop-2024-10-25/