2024-10-14 10:14

BENGALURU, Oct 14 (Reuters) - Bank Indonesia (BI) will leave interest rates unchanged on Wednesday despite inflation falling to its lowest level since 2021, as receding expectations of aggressive U.S. Federal Reserve easing weaken the rupiah, a Reuters poll found. Inflation eased to a multi-year low of 1.84% in September and has been within BI's target of 1.5% to 3.5% throughout 2024, suggesting the central bank could further lower rates before year-end. Despite BI's intervention to stabilise the rupiah last week, the currency has fallen more than 3% from a September peak following a strong U.S. employment report. That suggests the Asian central bank is unlikely to implement back-to-back rate cuts having surprised markets with its first easing in more than three years in September. Marking a shift in expectations, over 75% of economists, 24 of 31, in an Oct. 7-14 Reuters poll predicted the central bank would keep its benchmark seven-day reverse repurchase rate (IDCBRR=ECI) , opens new tab at 6.00% on Oct. 16. In the previous poll, taken after the central bank's cut last month, more than 50% of respondents anticipated another reduction this week. BI was also forecast to keep the overnight deposit facility and lending facility rates unchanged at 5.25% and 6.75%, respectively. "Recent market developments have shifted the odds in favour of BI keeping its policy rate unchanged ... Stronger-than-anticipated U.S. labour market data triggered a market repricing of U.S. rate expectations and renewed pressure on the rupiah," ANZ said in a note to clients, adding that longer-term they continued to see 5.00-5.25% as a reasonable range for the terminal policy rate. "BI has an easing bias, and further rate cuts are just a matter of time. Should global risk sentiment rebound in the days leading up to BI's October meeting, a 25 bp rate cut is certainly possible." Among those who predicted BI will hold rates this week, a majority, 12 of 20, were expecting a half-point cut by year-end. Median projections showed rates were expected to fall to 5.00% by end-June - consistent with the previous poll - while the Fed was seen cutting rates by 150 basis points by the end of 2025. "We anticipate that BI will only proceed with a rate cut when signals from the Fed on a rate cut ... become more definitive," said Josua Pardede, chief economist at Bank Permata. Inflation was expected to average 2.5% this year and 2.6% next year while economic growth was seen steady at 5.0% in 2024 and 5.1% in both 2025 and 2026. The growth forecasts were broadly unchanged from a July survey but the inflation outlook was lowered. (Other stories from the October Reuters global economic poll) Sign up here. https://www.reuters.com/markets/rates-bonds/bank-indonesia-hold-key-rate-6-oct-16-amid-rupiah-concerns-2024-10-14/

2024-10-14 10:10

A look at the day ahead in U.S. and global markets from Mike Dolan With U.S. Treasury markets closed on Monday, Wall Street stocks are set to cruise on higher into the unfolding corporate earnings season - but may first have to take early direction from China's weekend stimulus update. The Colombus Day holiday closes Federal offices and the bond market but the New York Stock Exchange and Nasdaq remain open and stock futures are higher first thing, building on the S&P500's (.SPX) , opens new tab latest charge to new record highs. Financials led the way on Friday as the early burst of big bank and asset manager earnings was cheered - with 3-6% share price gains on Friday for the likes of JPMorgan, Wells Fargo and BlackRock. On Monday, however, China's markets struggled for direction as Saturday's much-heralded press conference on fiscal measures to accompany the recent frantic monetary easing turned out to be a bit of a damp squib. A little short on the sort of details investors had been betting on, Finance Minister Lan Foan reiterated Beijing's broad plans to revive the ailing economy, with promises made on increases to government debt and support for consumers and the property sector. Chinese mainland stocks (.CSI300) , opens new tab gyrated initially and eventually ended more than 1% higher. But Hong Kong's Hang Seng (.HSI) , opens new tab ended 0.75% in the red. The offshore yuan weakened slightly against a red-hot dollar. Depending on who you talk to, you'll get a different readout on Beijing's rescue plans. But what's not in doubt is that they are badly needed. The latest economic news from China shows the country still flirting with outright price deflation through September, as headline annual consumer prices fell below forecast to just 0.4% and annual factory gate price inflation continued to slump a whopping 2.8% rate during the month. What's more, China's exports missed too - growing at the slowest pace in five months in September and suggesting manufacturers are no longer rushing out orders ahead of tariffs from trade partners. But at a paltry 0.3%, annual imports growth slowed too and were a third of expectations. While some banks such as Goldman Sachs have nudged up next year's real GDP forecasts due to the stimulus measures, the price picture raises questions about nominal growth and still suggests the government's 5% growth targets will be hard to hit. And the geopolitics doesn't help much. China's military launched a new round of war games near Taiwan on Monday, saying it was a warning to the "separatist acts of Taiwan independence forces" - drawing condemnation from the Taipei and U.S. governments. Taiwan's giant chipmaker TSMC (2330.TW) , opens new tab, the main producer of advanced chips used in artificial intelligence applications, reports earnings on Thursday and is expected to show a 40% leap in third-quarter profit thanks to soaring AI-related demand. Oil prices weakened on the latest sweep of Chinese data and policy details, with some of the weekend premium on Middle East concerns dissipating on Monday too. Speculation over how Israel will respond to recent Iranian rocket attacks continues to simmer, however, with attention on Monday focussing on a U.S. decision to send both U.S. troops and anti-missile systems to Israel Even though last week's U.S. inflation numbers ran a bit hotter than forecast, the energy price picture remains relatively contained and annual U.S. crude prices have now been falling at a 10%-plus pace for more than six weeks. In Europe, markets are shaping up this week for the third European Central Bank interest rate cut of the year on Thursday. European stock (.STOXXE) , opens new tab were flat - warily eyeing both the muddy Chinese picture as trade tensions between Brussels and Beijing jar, but also likely further credit easing at home. LVMH (LVMH.PA) , opens new tab, Hermes (HRMS.PA) , opens new tab, Kering (PRTP.PA) , opens new tab and other French luxury stocks exposed to China fell between 1.4% and 3.6% on Monday. The euro ebbed slightly into the ECB decision, with another quarter point cut in the official deposit rate to 3.25% now more or less fully priced. French debt markets and risk spreads shrugged off Friday's decision by Fitch credit ratings firm to lower the outlook on France's sovereign rating following the country's latest deficit-cutting budget plan last week. In Britain, Prime Minister Keir Starmer will vow to scrap regulation that holds back growth and investment when he hosts some of the world's biggest businesses on Monday at a conference designed to boost Britain's appeal. Back stateside, a relatively quiet Monday is likely as a result of the semi holiday. The earnings season resumes in earnest on Tuesday with updates from Goldman, Bank of America, Citigroup, State Street, Johnson & Johnson and others. Politics also gets more intense as the November 5 election nears. Although national opinion polls and those in swing states still show little between Democrat Kamala Harris and Republican Donald Trump, betting markets are making Trump slight favorite again for the first time since July. Key developments that should provide more direction to U.S. markets later on Monday: * Federal Reserve Board Governor Christopher Waller and Minneapolis Fed President Neel Kashkari speak Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2024-10-14/

2024-10-14 07:07

Butter prices hit record highs in Europe, up 83% year-on-year Bakers may be squeezed pre-Christmas by rising costs Dairy producers favour more profitable cheese over butter Analysts expect prices to ease as output increases PARIS, Oct 14 - Butter prices have rocketed in recent months, trading at record highs across Europe in bad news for bakers and pastry makers as they prepare for Christmas celebrations and already face high chocolate and sugar costs. Strong demand for butter, tight stocks and dairy processors' preference to use more milk for the most profitable products such as cheese have driven the price surge, analysts say. European butter was trading on world markets at a record $8,706 per metric ton by Sept. 29, up 83% on year, latest official European Commission data , opens new tab showed. Prices were also higher year-on-year in Australia and New Zealand but came off summer highs. While large food companies have covered much of their butter supplies before starting to produce Christmas cakes and ice creams, the impact for small producers will be significant with a rise in prices unavoidable, said Paul Boivin, director of the French bakers and pastry federation FEB. Milk output declined last year in most parts of the globe including Europe, the United States and New Zealand - the world's largest milk and butter exporter - as low prices and high feed costs discouraged many dairy farmers. Global milk output rebounded slightly in 2024 but remained tight compared to growing demand, prompting producers to favour allocating milk to the most competitive products like cheese instead of butter, Rabobank dairy analyst Michael Harvey said. SPREAD OF DISEASES EU milk production grew 0.7% between January 2023 and July 2024, the latest EU data showed. Over the same period butter output fell 1.6% with stocks at historically low levels, while cheese production gained 3.2%. The U.S. Department of Agriculture this month raised its forecast for 2024 U.S. butter prices to $3 per pound, up 15% from last year, due partly to fewer cows and less milk produced by each animal. "Tighter milk supplies and firm demand are expected to carry the higher price outlook into 2025," USDA said. Revenues in the global butter market are set to reach $42 billion in 2024, up more than 8% from 2022, and the market is expected to grow annually by 7% by 2029, according to data platform Statista. European butter prices were also somewhat supported by fears of a further decline in milk supply due to a spread of diseases in dairy cows in Western Europe, including bluetongue and Epizootic Hemorrhagic Disease (EHD), analysts said. However, the number of outbreaks of bird flu in U.S. dairy cows was not large enough to impact the national level of milk production, USDA economist Michael McConnell said. Butter prices should ease from record highs as dairy producers boost output to benefit from high prices but it could take several months to see a significant fall, said Susan Kilsby, analyst at ANZ bank in New Zealand. Sign up here. https://www.reuters.com/markets/commodities/bakers-brace-costly-christmas-butter-prices-surge-2024-10-14/

2024-10-14 06:33

Gold hits its highest since Oct. 4 China stimulus update fails to inspire investors China's Sept export growth slowed sharply, imports undershoot Oct 14 (Reuters) - Gold prices steadied near one-week highs on Monday amid a risk-off mood sentiment driven by an underwhelming China fiscal stimulus, while investors awaited comments from U.S. Federal Reserve officials for hints on its interest rate outlook. Spot gold edged lower 0.1% at $2,652.31 per ounce by 1155 GMT, after hitting its highest since Oct. 4 at $2,666.72 earlier in the session. U.S. gold futures fell 0.3% to $2,669.20. "The stimulus when it was first announced was welcomed by the markets, however data from China painted a picture of a Chinese economy that is stalling so it's not going according to the plan," said Ricardo Evangelista, senior analyst at ActivTrades. "With the slowing down of China, what you see basically is a drop in risk appetite." China's export growth slowed sharply in September while imports also unexpectedly decelerated, undershooting forecasts by big margins, while China's broad economic stimulus promises made over the weekend failed to inspire investors. China is the world's biggest consumer of the safe-haven bullion, which tends to gain when investors sell risky assets. Chinese data present a double-edged sword, on one hand weak Chinese data could reduce demand for gold, on the other a broader slowdown in China could unsettle markets, enhancing the appeal of gold as a safe haven, Zain Vawda, market analyst at MarketPulse by OANDA, said. "Overall, there are still more factors supporting higher gold prices than those weighing against it." Traders are now looking out for comments from Fed officials this week for more clues on future interest rate cuts, along with U.S. retail sales data. Investors see about 88% chance of the Fed cutting rates by 25 basis points in November, as per the CME FedWatch tool. Lower borrowing rates boost the appeal of holding gold, which yields no interest. Spot silver fell 1.3% to $31.13 per ounce and platinum shed 0.7% to $978.20. Palladium fell 1.7% to $1,050.65. Sign up here. https://www.reuters.com/markets/commodities/gold-dips-firmer-dollar-attention-fed-cues-2024-10-14/

2024-10-14 06:24

BSP to cut rates by 25 bps to 6.00% on Oct 16 - economists say BENGALURU, Oct 14 (Reuters) - The Philippine central bank will cut its key policy rate by 25 basis points both in October and December to support economic growth as inflation is expected to stay under control, according to a majority of economists in a Reuters poll. Expectations of inflation returning to the Bangko Sentral ng Pilipinas' (BSP) 2%-4% target helped the central bank kick-off its easing cycle in August. Ever since, inflation has dropped to 1.9%, supporting the prospect of further rate reduction. Governor Eli Remolona recently said that a 25-basis-point reduction would be a norm if the economy was not poised for a hard landing. All 23 economists in the Oct. 8-14 Reuters poll expect the BSP to cut its overnight borrowing rate (PHCBIR=ECI) , opens new tab by 25 basis points (bps) to 6.00% on Oct. 16. That would be followed by another quarter-point cut to 5.75% in December, according to median forecasts, with a strong majority, 16 of 21 economists seeing the policy rate at 5.75%, four expecting it at 6.00% and one at 5.50%. "The decline in headline inflation reinforces our view that the BSP will continue to cut rates this year after kicking off its easing cycle early. We reiterate our forecast for BSP to cut by 25 bps at each of the last two meetings of the year," said Euben Paracuelles, chief ASEAN economist at Nomura. "The Fed's rate cuts also support further easing by the BSP, but we still think it is unlikely to be more aggressive with 50 bps clips - just like the Fed last month." While the U.S. Federal Reserve was expected to reduce rates by another 150 bps by end-2025, the BSP was forecast to match its American counterpart in cumulative cuts. Meanwhile, inflation was forecast to remain close to the central bank's mid-point target of 3.0% and average 3.4% this year and 3.0% next. Economic growth was expected to average 5.8% and 5.9% this year and next, respectively, missing the government's growth target of 6%-7%. "With growth set to struggle and inflation likely to remain low, further easing (by the central bank) is likely over the remainder of this year and in the first half of next year," noted Gareth Leather, senior Asia economist at Capital Economics. "On the plus side, lower interest rates (the central bank began its easing cycle in August) and falling inflation (which should boost household incomes) should provide some support to consumption." (Other stories from the October Reuters global economic poll) Sign up here. https://www.reuters.com/markets/asia/philippine-central-bank-trim-rates-twice-this-quarter-2024-10-14/

2024-10-14 05:32

Euro falls ahead of ECB meeting, rate cut expected China's fiscal stimulus briefing disappoints investors Bitcoin and ether hit two-week highs NEW YORK, Oct 14 (Reuters) - The U.S. dollar touched a 10-week high on Monday in thin trading, extending its weeks-long bullish run sparked by data showing a modestly slowing economy that lined up with bets for moderate interest rate cuts by the Federal Reserve. Volume was light with several markets, including Japan and Canada, closed on Monday. The U.S. bond market is shut for Indigenous Peoples' Day. The greenback rose against the Chinese yuan after China's weekend stimulus announcements disappointed investors. The dollar index, a gauge of the greenback's value against six major currencies, rose to 103.36 , the highest since Aug. 8. It was last up 0.2% at 103.23, while the euro dropped to a 10-week low below $1.09, and was last down 0.3% at $1.0902 . The European Central Bank is expected to lower rates this week, but the Fed remains the market's focus. The U.S. rate futures market has priced in an 87% chance the Fed will ease by 25 bps at the November meeting, and a 13% chance it will pause and keep the fed funds rate at the target range between 4.75% and 5%, according to LSEG estimates. The Fed slashed interest rates by an aggressive 50 basis points at its last policy meeting about four weeks ago. For the rest of the year, the futures market expects about 45 bps in cuts and another 98.5 bps in rate reductions for 2025. That was way down from the roughly 200 bps in cuts that the market implied before the September Fed meeting and the blockbuster U.S. nonfarm payrolls report that reset easing expectations to a much shallower cycle than previously thought. Expectations for smaller interest rate cuts have supported the dollar in the last few weeks, but that adjustment is likely on its last legs, analysts said. "I suspect that it's (rate adjustment) almost over and we're back on the downtrend. But I do think there is still one more gasp," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. "We might trigger stops at $1.09 in the euro, or $1.30 in sterling. But I am looking ahead and the next U.S. jobs data is about 120,000. It's going to be a weak number." Minneapolis Fed President Neel Kashkari on Monday reinforced the market's thinking on the U.S. central bank's easing policy. "As of right now, it appears likely that further modest reductions in our policy rate will be appropriate in the coming quarters to achieve both sides of our mandate," Kashkari said in a speech at a Central Bank of the Argentine Republic conference, referring to the Fed's mission of keeping unemployment and inflation low. ECB MEETING In the euro zone, the euro fell for the 11th time in 12 sessions as investors moved to price in a 25 bp interest rate cut from the ECB with near-certainty at its Thursday meeting as data pointed to deteriorating euro zone activity. Current indicators indicate continued weakness in the German economy in the past quarter, the economy ministry said in its monthly report on Monday. Meanwhile, credit ratings agency Fitch revised France's outlook to "negative" from "stable" on Friday, citing increases in fiscal policy and political risks. The pound dipped 0.1% against the dollar to $1.3054 . Against the yen , the dollar climbed to its highest since early August to 149.96 yen in thin trading, as Japanese markets were shut for a bank holiday. It was last up 0.5% at 149.89 yen. Next on the market's radar are U.S. retail sales and jobless claims data, and the ECB's policy review, all due on Thursday. In Asia, trading was dominated by Beijing's fiscal stimulus briefing. China's offshore yuan fell 0.3% against the dollar, and was last at 7.0906. Without quantifying the proposed fiscal stimulus, Finance Minister Lan Fo'an told a press conference there will be more "counter-cyclical measures" this year. "China's weekend stimulus announcement proved underwhelming as policymakers demonstrated an increased commitment to supporting growth, but failed to deliver the hard numbers markets had been hoping for," said Karl Schamotta, chief market strategist, at Corpay in Toronto. The onshore yuan has fallen nearly 1% against the dollar since Sept. 24, when the People's Bank of China kicked off China's most aggressive stimulus measures since the pandemic. In digital currencies, bitcoin rose to a two-week high and was last up 4.6% at $65,881. Ether surged 7% to $2,629 also touching a two-week peak earlier in the session. Sign up here. https://www.reuters.com/markets/currencies/dollar-extends-gains-while-investors-parse-chinas-stimulus-plans-2024-10-14/