2024-10-01 17:40

BELLINZONA, Switzerland, Oct 1 (Reuters) - The Swiss National Bank cannot rule out the possibility of taking interest rates into negative territory while the risks for Swiss inflation are tilted downwards, new Chairman Martin Schlegel said on Tuesday. The SNB, a frontrunner in the interest rate cutting cycle underway at the U.S. Federal Reserve and the European Central Bank, last week lowered its interest rate for the third time this year and signalled further cuts could be coming. But the SNB has limited options to do more to lower borrowing costs and take the heat off the safe-haven Swiss franc when interest rates are already at just 1.0%. "We can't rule out any measures," Schlegel told an event in Bellinzona when asked if the SNB would consider reintroducing negative interest rates it exited two years ago. "We can't rule out negative rates either," he added, speaking at his first appearance after taking over as head of the central bank from longstanding chairman Thomas Jordan. Switzerland is no stranger to negative rates, having used them previously to help to cool the franc. The country excited negative rates in September 2022, joining other central banks in raising rates to combat inflation. Schlegel said downward risks for inflation are currently greater than the risk of the inflation rate going above the SNB's 0-2% target. "Definitely the downwards risks are higher than the upwards risks," he said. Swiss inflation slowed to 1.1% in August and has been within the central bank's 0-2% target range for the last 15 months. The SNB currently forecasts inflation to decline further to 0.6% in 2025 and be at 0.7% in 2026. Markets have currently priced in an 85% probability the SNB will cut rates again to 0.75% at its next meeting in December. Schlegel stressed the importance of the SNB's price stability goal, saying this was the biggest contribution it can make to the Swiss economy and society. He said interest rates were the central bank's primary tool, although the bank was also prepared to intervene in currency markets when necessary. He also acknowledged the challenges the strong franc posed for Swiss exporters, but said the main problem facing companies was tepid demand abroad. "I'm aware the franc can be difficult for these companies. But the main factor is the weak foreign demand," he said. ($1 = 0.8419 Swiss francs) Sign up here. https://www.reuters.com/markets/europe/swiss-national-bank-chairman-sees-downward-risk-inflation-2024-10-01/

2024-10-01 17:20

Canadian dollar gains 0.2% against the greenback Recovers from a one-week low at 1.3539 Price of U.S. oil jumps 3.8% Bond yields trade mixed across flatter curve TORONTO, Oct 1 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices climbed on the escalating Middle East conflict and domestic data showed factory activity rising for the first time in 17 months. The price of oil, one of Canada's major exports, climbed 3.8% to $70.78 a barrel following reports Iran was preparing to launch a missile attack on Israel. "The Iran-Israel conflict has triggered a risk-off sentiment in the financial markets, leading to a drop in U.S. yields and a spike in oil prices," said Tony Valente, a senior FX dealer at AscendantFX. "This combination is contributing to a rise in the CAD." The Canadian dollar was trading 0.2% higher at 1.35 per U.S. dollar, or 74.07 U.S. cents, recovering after touching its weakest level since Sept. 24 at 1.3539 earlier in the day. The yen was the only other Group of 10 currency to notch gains against the U.S. dollar (.DXY) , opens new tab as investors favored safe-haven currencies, but the loonie's advance was larger. The G10 currencies include 10 of the most heavily traded currencies in the world. The greenback benefited from data showing a solid U.S. economy a day after Federal Reserve Chair Jerome Powell pushed back against the likelihood of another 50-basis point rate cut in November. The S&P Global Canada Manufacturing Purchasing Managers' Index increased to 50.4 in September from 49.5 in August, its first move above the 50.0 no-change mark since April 2023. The data "indicated improvements in new orders, employment, and overall confidence in the manufacturing sector since August," Valente said. Canadian bond yields were mixed across a flatter curve, playing catch-up with moves in U.S. Treasuries on Monday when the Canadian market was closed. The 2-year rose 1.1 basis points to 2.920%, while the 10-year was down 3.5 basis points at 2.921%. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-outperforms-g10-peers-oil-prices-jump-2024-10-01/

2024-10-01 16:34

RIGA, Oct 1 (Reuters) - The European Central Bank has a "clear-cut" case for cutting interest rates at its next meeting as the euro zone's economy may face a tipping point, ECB policymaker Martins Kazaks told Reuters. Investors have fully priced in a cut for ECB's Oct 17 meeting after a streak of lower than expected inflation and growth data, as well as increasingly clear messaging from ECB policymakers including President Christine Lagarde. Kazaks, Latvia's central bank governor, noted wage growth had come down and profit margins shrunk while an economic recovery remained elusive in large parts of the euro zone, creating a "clear-cut" case for a rate reduction this month. "I very much agree with the market pricing that the decision in October will be very clear," Kazaks said in an interview in Riga. "Of course I'm not going to pre-judge the decision today, but it's very clear-cut and in my view the risks to growth are important and need to be addressed." After two years fighting runaway prices, the ECB cut rates in June and September, judging inflation was finally on its way to its 2% goal. Data on Monday put it at 1.8% in September. But growth has also weakened, particularly in the euro zone's manufacturing powerhouse Germany. Kazaks feared that euro zone companies may start shedding workers as the prospect of a recovery evaporates, in a snowball effect that would dampen growth further. "If corporates start to shed labour, this snowball may start rolling," he said. "I would be very cautious about this tipping-point risk." He said that, even after a 25-basis-point cut, the ECB's rate on deposits, then at 3.25%, would remain at a level that restricts economic activity, which should help dampen inflation in the services sector. On the other hand, he saw no need to change the pace and cut rates by a larger increment as the ECB has time to make further moves. Sign up here. https://www.reuters.com/markets/europe/ecbs-kazaks-backs-rate-cut-economy-faces-tipping-point-2024-10-01/

2024-10-01 14:46

WASHINGTON, Oct 1 (Reuters) - U.S. construction spending unexpectedly fell in August amid a sharp drop in outlays on single-family housing projects, but declining borrowing costs could stimulate activity in the months ahead. The Commerce Department's Census Bureau said on Tuesday construction spending dipped 0.1% after a downwardly revised 0.5% drop in July. Economists polled by Reuters had forecast construction spending would edge up 0.1% after a previously reported 0.3% decrease. Construction spending increased 4.1% on a year-on-year basis in August. Spending on private construction projects slipped 0.2% in August after declining 0.7% in July. Investment in residential construction fell 0.3% with outlays on new single-family projects slumping 1.5%. The rising supply of new homes on the market is discouraging builders from breaking ground on new housing projects. That, together with buyers holding out for lower mortgage rates could, in the near term, limit the boost from declining borrowing costs. The Federal Reserve last month cut interest rates for the first time in four years. The U.S. central bank is expected to reduce rates again in November and December. Mortgage rates are at two-year lows, while the inventory of new homes is at levels last seen in early 2008. Spending on multi-family housing units fell 0.4%. But spending on home renovations increased. Investment in private non-residential structures like offices and factories dipped 0.1%. Spending on public construction projects advanced 0.3% after rising 0.5% in July. State and local government spending rose 0.3% and outlays on federal government projects increased 0.5%. Sign up here. https://www.reuters.com/markets/us/us-construction-spending-falls-august-single-family-homebuilding-2024-10-01/

2024-10-01 14:03

WASHINGTON, Oct 1(Reuters) - U.S. manufacturing held steady at weaker levels in September, but new orders improved and prices paid for inputs declined to a nine-month low, which together with falling interest rates bode well for a rebound in activity in the coming months. The Institute for Supply Management (ISM) said on Tuesday its manufacturing PMI was unchanged at 47.2 last month. A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.3% of the economy. It was the sixth consecutive month that the PMI remained below the 50 threshold, but above the 42.5 level that the ISM said over time generally indicates an expansion of the overall economy. The survey has, however, exaggerated the weakness in manufacturing, with the so-called hard data such as factory production and durable goods orders showing the sector largely moving sideways. Gross domestic product data last week showed manufacturing output rising at a 2.6% annualized rate in the second quarter, an acceleration from the 0.2% pace posted in the January-March quarter. Further gains are likely after the Federal Reserve cut interest rates last month for the first time since 2020. The U.S. central bank is expected to deliver two more rate cuts in November and December. The ISM survey's forward-looking new orders sub-index increased to 46.1 last month from 44.6 in August. Output eyed a recovery, with the production sub-index rising to 49.8 from 44.8 in August. Manufacturers faced low cost pressures, though a port strike by members of the International Longshoremen's Association that began on Tuesday could snarl the supply chains and boost prices for inputs. The survey's measure of prices paid by manufacturers decreased to 48.3, the lowest level since December 2023, from 54.0 in August. Its gauge of supplier deliveries increased to 52.2 from 50.5 in the prior month. A reading above 50 indicates slower deliveries. The factory employment slump deepened, which could pose a downside risk to manufacturing payrolls in September. The survey's manufacturing employment measure dropped to 43.9 from 46.0 in August. The index has been in contraction territory for four straight months, with respondents in the ISM survey reporting their companies were "continuing to reduce head counts through layoffs, attrition and hiring freezes." A Reuters survey showed economists expected manufacturing payrolls to drop by 5,000 jobs in September after decreasing 24,000 in August. The poll estimated overall nonfarm payrolls to have increased by 140,000 jobs last month after rising 142,000 in August. The government's closely watched employment report is scheduled to be published on Friday. Sign up here. https://www.reuters.com/markets/us/us-manufacturing-steady-september-prices-paid-measure-lowest-nine-months-2024-10-01/

2024-10-01 13:01

PARAMARIBO, Oct 1 (Reuters) - France's TotalEnergies (TTEF.PA) , opens new tab and U.S. APA Corp (APA.O) , opens new tab on Tuesday announced a positive investment decision for Suriname's most promising oil and gas project, Block 58, which is expected to inaugurate the nation's offshore output. The small South American country wants to follow in the footsteps of neighboring Guyana, where a consortium led by Exxon Mobil (XOM.N) , opens new tab in 2019 began developing more than 11 billion barrels of recoverable oil and gas resources, turning the country into a prominent producer. Total has said the investment decision for the $10 billion project would be made in the fourth quarter, aiming to begin output in the first half of 2028. Reuters on Monday disclosed the financial greenlight. A Floating Production Storage and Offloading (FPSO) facility being built in Asia for the project is expected to be one of the company's largest, CEO Patrick Pouyanne added. TotalEnergies and APA plan to develop the Sapakara and Krabdagu fields, renamed as "Gran Morgu", with combined recoverable resources estimated above 700 million barrels. The announcement was made at Suriname's presidential cabinet in presence of President Chan Santokhi, Pouyanne and APA's CEO John Christmann. Sign up here. https://www.reuters.com/business/energy/totalenergies-apa-greenlight-10-bln-oil-gas-project-suriname-2024-10-01/