2025-10-02 10:19
Lengthier shutdown stands to weigh more on economy Lack of data could put Fed in bind heading into monetary policy meeting Weak ADP private payrolls data could take on more prominence NEW YORK, Oct 2 (Reuters) - Investors have anticipated for weeks the risks of a U.S. government shutdown , opens new tab to markets. Now that it is here, they are hoping it will be brief. A shutdown that lasts at least several weeks could cause confusion about the Federal Reserve's monetary policy path as the central bank will be without government data that helps guide its decisions, while also posing a possible drag on economic growth the longer it extends. Sign up here. "We have the markets trading at extended valuations at all-time highs with an economy that seems to be showing some pretty clear signs of slowing," said Eric Kuby, chief investment officer at North Star Investment Management. "That slowness in the economy is going to be exacerbated by the lack of government spending, and the longer it goes on, the more difficult it is to overcome those challenges." The shutdown, impacting a wide swath of government operations, is leading to the furlough of federal workers, while U.S. President Donald Trump, whose campaign to reshape the government is on track to push out some 300,000 workers by December, has warned congressional Democrats that a shutdown could lead to more job cuts. Shutdowns in the past have typically had limited impact on the markets, with the S&P 500 stock index (.SPX) , opens new tab roughly flat on average during shutdowns since 1976, according to LPL Financial. More recently, since 1995, the S&P 500 finished higher during every shutdown, according to John Luke Tyner, portfolio manager at Aptus Capital Advisors. However, this impasse could present a different risk, some investors say. The shutdown comes alongside concerns about America's fiscal health - highlighted by a downgrade earlier this year of the country's sovereign debt - and as companies absorb the impact of tariffs. "It's the cumulative, compounding effect of all of these events - the U.S. credit rating downgrade, the changes to the trade regime and now the shutdown - that worry me," said Brian Shipley, chief investment officer of Coldstream Wealth Management. Shipley said if it extends past the two-to-four week time frame seen in the past, it opens up a question about how investors globally will view the U.S. He said he has shifted some assets out of Treasury bills to a portfolio manager with a wide mandate to own assets including international bonds. LENGTHY SHUTDOWN COULD DRAG ON GDP The shutdown's hit to growth will depend on its length, analysts said. Oxford Economics estimated that a partial government shutdown reduces economic growth by between 0.1 and 0.2 percentage points per week. A shutdown that lasts the entire quarter would reduce fourth-quarter real gross domestic product by 1.2 to 2.4 percentage points, Oxford Economics said in a note, while cautioning that a shutdown of that length has never occurred before. A long-lasting shutdown may weigh more on consumer sentiment, said Lauren Goodwin, economist and chief market strategist at New York Life Investments. The 2018-2019 shutdown that lasted over 30 days coincided with a 7% hit to confidence in the University of Michigan consumer survey, Goodwin said in written commentary. The 19 partial or full government shutdowns over the past 50 years have gone on for an average of about eight days, according to analysts at Canaccord Genuity. Analysts at BBH said in a note that a shutdown of more than two weeks "increases the downside risk to growth." That in turn, BBH said, raises the likelihood of a more accommodative Fed which can further weigh on the U.S. dollar. DATA DELAYS COULD MUDDY FED VIEW Indeed, many investors were focused on how the shutdown might sway Fed policy with the central bank due to meet at the end of the month and the likelihood now of delays to key data, starting with the U.S. employment report that had been scheduled to be released on Friday. That expected gap in government releases could place more emphasis on alternative data including the ADP National Employment report published on Wednesday, which showed private payrolls dropped by the most in 2-1/2 years in September. "If the shutdown drags on, the weakness in the ADP will be all the Fed has to go on," Capital Economics analysts said in a note. Peter Cardillo, chief market economist at Spartan Capital Securities, doubted the shutdown would last two or three weeks, "but if it should, that puts the Federal Reserve in a big bind." As of Wednesday, Fed funds futures indicated investors widely expect a standard quarter-percentage-point cut at the central bank's October 28-29 meeting, according to LSEG data. To be sure, investors said that any economic hit to growth would likely be recouped at least to some extent once the government reopened. "The longer they go on, they do present more risk," said Jack Ablin, founding partner and chief investment strategist at Cresset Capital. However, Ablin added, "just like the shutdown isn't permanent, any market impairment won't be permanent either." https://www.reuters.com/business/prolonged-us-government-shutdown-could-raise-market-risks-2025-10-02/
2025-10-02 10:00
FRANKFURT, Oct 2 (Reuters) - The European Central Bank said on Thursday it had picked a Portuguese startup focussed on artificial intelligence to help prevent fraud in its planned digital euro currency. The contract with Feedzai, worth up to 237.3 million euros ($278.69 million), is one of several announced by the ECB on Thursday to advance a project that it sees as key for the euro zone's financial autonomy from the United States. Sign up here. Under it, Feedzai and its subcontractor PwC will provide an AI model for scoring digital euro payments by their fraud risk, based on any deviation from a customer's typical behaviour, interactions and history. This is aimed at helping payment service providers decide whether to approve a transaction in digital euros, essentially an exchange between electronic wallets backed by the central bank. The four-year agreement, with an option to extend it to 15 years, has an estimated value of 79.1 million euros and a cap at 237.3 million euros. Four further digital euro contracts worth between 27.6 million euros and 220.7 million euros were awarded to other companies, including French IT consulting firm Capgemini (CAPP.PA) , opens new tab. Under such framework agreements, the ECB won't pay contractors until the project starts. The central bank is still awaiting legislative approval for its digital euro, which it has pitched as a response to Visa and Mastercard's dominance and to U.S. President Donald Trump's promotion of stablecoins pegged to the dollar. It hopes to receive the go-ahead around the middle of next year, with a view to launching the digital currency in 2029. Registered in Portugal, Feedzai says it processes $8 trillion worth of payments every year for clients including Portuguese bank Novobanco and Abu Dhabi's Wio Bank. On Thursday, it also announced $75 million in funding from Lince Capital, Iberis Capital and Explorer Investments among others. ($1 = 0.8515 euros) https://www.reuters.com/business/finance/ecb-picks-ai-startup-prevent-digital-euro-frauds-2025-10-02/
2025-10-02 09:49
FRANKFURT, Oct 2 (Reuters) - The European Union's financial risk watchdog called on Thursday for urgent safeguards on stablecoins only partly issued in the bloc, echoing a warning from the European Central Bank, which is worried that their failure could induce a run on reserves. Stablecoins are a type of cryptocurrency designed to hold a steady value by being pegged to a reserve asset such as a currency or basket of assets. Sign up here. The EU has put in place one of the world's strictest regimes on crypto assets but policymakers worry that issuers originating from outside the bloc enjoy easier regulation and could import financial risk. "The General Board stressed that third country multi-issuer schemes – with fungible stablecoins issued both in the EU and outside – have built-in vulnerabilities which require an urgent policy response," the European Systemic Risk Board, headed by ECB President Christine Lagarde, said in a statement. EU rules require stablecoins to be fully backed by reserves. Lagarde said the bloc should hold companies that issue stablecoins both in the EU and abroad to the same standards. In "multi-issuer" schemes, an EU and a non-EU entity jointly issue stablecoins, and the strict EU regulation does not extend to the non-EU issuer, tilting the playing field. The main worry is that in the event of a run on the asset, investors will choose to redeem in the EU, since it has the strongest safeguards. However, reserves held in the EU may not be sufficient to meet concentrated demand, creating a liquidity squeeze in the bloc and potentially forcing the ECB to respond. "Multi-function groups may operate under regulatory regimes which are much more lenient than for financial conglomerates, raising the question of divergent prudential standards," the ESRB added. https://www.reuters.com/business/finance/eu-risk-watchdog-calls-urgent-safeguards-stablecoins-2025-10-02/
2025-10-02 09:39
LONDON, Oct 2 (Reuters) - British businesses have the joint weakest hiring intentions since 2020 and expect the fastest consumer price inflation since early 2024, according to a Bank of England survey on Thursday which highlights the challenges facing the central bank. The monthly survey showed that businesses in the three months to September expected to keep employment steady over the next 12 months, the first time since January that they had not expected to increase staffing. Prior to that, such a reading had not been recorded since 2020. Sign up here. More volatile single-month data showed expectations for a 0.5% rise over the next 12 months after a 0.5% drop in August. Official tax data has shown falling numbers of employees for the past seven months while the unemployment rate - which is based on a survey with long-standing problems - has risen to its highest since 2021 at 4.7%. BoE policymakers are hoping that a weaker labour market will reduce the pace of wage growth and help bring down inflation, which the central bank forecast to hit 4% in September, double its target. But Rob Wood, chief UK economist at Pantheon Macroeconomics, said the survey results were likely to reinforce policymakers' caution about cutting interest rates further this year. "Wage and price pressures remain stubborn, recruitment difficulties slightly worsened despite weak employment and firms' inflation expectations rose," he said. Businesses in the BoE's September Decision Maker Panel survey saw consumer price inflation rising by 3.4% over the next 12 months, the same expected rate as in August. Three-month average expectations showed expected inflation for the coming year of 3.4%, the most since February 2024, while businesses said they planned to raise their own prices by 3.7%, unchanged from their plans in the three months to August. (This story has been corrected to show that hiring intentions are the joint weakest since 2020, not the outright weakest, in paragraphs 1 and 2, and to change businesses' expectations for inflation in September to 3.4%, from 3.5%, in paragraph 8 after the BoE corrected its data) https://www.reuters.com/sustainability/sustainable-finance-reporting/uk-firms-hiring-plans-are-weakest-since-2020-boe-survey-shows-2025-10-02/
2025-10-02 07:42
Congo Brazzaville moving on new gas rules New floating LNG unit expected in November Country aims to ramp up gas, oil output CAPE TOWN, Oct 2 (Reuters) - The Republic of Congo expects parliament to pass a new gas code this month, the oil minister said, as the country seeks to attract more investment in a sector at the heart of its national development agenda. The code provides a legal framework for gas exploration, production and development in the Central African country, which also hopes to double oil production to 500,000 barrels of oil equivalent by the turn of the decade. Sign up here. "We are guided by a strong conviction: the future of Congo cannot rely solely on oil, it must also rely on gas," Bruno Jean-Richard Itoua, minister of hydrocarbons, told an African energy conference in Cape Town in a speech that was seen by Reuters. "This is why we have placed gas valorization at the very heart of our strategy," he said on Wednesday. Gas production in the country has been underpinned by Eni's offshore Marine XII concession which contains the Nene and Litchendjili fields, currently in production, and the undeveloped Minsala and Nkala discoveries. In August, Eni (ENI.MI) , opens new tab announced the departure from China of its Nguya floating liquefied natural gas unit for the second phase of its Congo LNG project. This unit will raise current production fourfold to 3 million metric tons annually by year-end. Itoua said the project will strengthen the country's role on the international gas market and help meet domestic electricity, clean cooking and industrial feedstock needs. "This project is more than just an industrial achievement, it is a symbol of our determination to diversify our energy mix." Besides Eni, Chinese company Wing Wah, French oil major TotalEnergies (TTEF.PA) , opens new tab and Trident Energy are active in the country. Itoua said the next oil and gas licensing round would be launched before the end of the year, without elaborating. https://www.reuters.com/business/energy/republic-congo-pass-new-gas-code-soon-it-seeks-lure-investment-2025-10-02/
2025-10-02 07:29
PARIS, Oct 2 (Reuters) - French police have arrested the Chinese captain of a sanctioned tanker suspected of operating for Russia's "shadow fleet", authorities said on Thursday, after the navy boarded the vessel anchored off western France. Prior to sailing toward France, the Boracay, was approximately 50 nautical miles (90 km) south of Copenhagen on September 22 when drone activity forced the closure of the city's airport around 1830 GMT, according to data from MarineTraffic. Sign up here. It was also observed heading south along Denmark's western coast on the evening of September 24 when drones were reported flying north of Esbjerg and near several nearby airports. French and Danish authorities have yet to say whether the vessel, which has been sanctioned by Britain and the European Union, is suspected of involvement in the drone incursions. Brest Prosecutor Stephane Kellenberger, whose office is handling the investigation into the Boracay, said the vessel was boarded last Saturday by a French Navy frigate off the coast of the island of Ouessant. The vessel's crew provided inconsistent information about its nationality during interactions with French maritime authorities, with the French Navy eventually concluding it was unflagged, Kellenberger said. The ship's captain and first officer, both Chinese nationals, were arrested for failure to justify the vessel's nationality and refusal to comply with the orders of a commanding officer during a ship inspection at sea, he said. However, the Brest prosecutors office has only decided to prosecute the captain for failure to comply, and released the first officer, Kellenberger said. His hearing is scheduled for February 23. Any other investigative angles fall outside the remit of the Brest prosecutor's office, Kellenberger added. MACRON CHEERS PROBE President Emmanuel Macron has welcomed the probe into the vessel, estimating that Russia's "shadow fleet" contains 600 to 1,000 ships. On Thursday, he said it was important to get to the bottom of what happened in Denmark, adding that Russia's shadow fleet represents an important part of Moscow's business model and pressure should be placed upon it. The Kremlin said on Wednesday it had no information about the vessel but added that the Russian military had to act sometimes to restore order when foreign countries had taken what spokesman Dmitry Peskov described as "provocative actions." https://www.reuters.com/world/two-crew-members-detained-russian-tanker-have-been-arrested-french-pm-says-2025-10-02/
