2023-12-29 09:48

BEIJING, Dec 29 (Reuters) - China will adjust the weightings of two key yuan index baskets in 2024, the country's foreign exchange trade platform said on Friday, to better reflect trade patterns. From Jan. 1, the China Foreign Exchange Trade System (CFETS), which is overseen by the central bank, will lower the U.S. dollar's weighting in the CFETS currency basket to 19.46% from 19.83% and cut the euro's weighting to 18.08% from 18.21%, according to an online statement. The adjustments will "further enhance the representativeness of the yuan currency basket index," CFETS said in the statement. China lowered weightings for the dollar and euro in the CFETS basket in 2023. Such adjustments are unlikely to create sharp volatility in yuan trades, but they may affect the setting of the yuan's official daily midpoint fixing, which caps the spot trade in a narrow range of 2% around that level, market watchers said. The CFETS index (.CFSCNYI) finished the year at 97.42, down 1.27% this year, according to Reuters calculation based on official data. During the same period, the onshore yuan has lost 2.7% to the dollar and looks set for the second straight yearly drop. China has adjusted the CFETS basket multiple times since it introduced the trade-weighted yuan index in December 2015 to better reflect external trade conditions. In addition, the CFETS said it would also tweak BIS currency basket RMB index after the Bank for International Settlements (BIS) adjusted currency weightings at the start of this year. In detail, CFETS will remove the Croatian kuna while adding the Bosnian marka, Moroccan dirham, North Macedonian denar, and Serbian dinar to the basket. https://www.reuters.com/markets/commodities/china-adjust-currency-weighting-cfets-yuan-basket-2024-2023-12-29/

2023-12-29 08:48

FRANKFURT, Dec 29 (Reuters) - Signa Development, a key division of European property company Signa, filed for insolvency on Friday in a Vienna court with debts of around 1.16 billion euros ($1.28 billion), the KSV creditor protection association said. Signa on Thursday had said that the development division, as well as its big business Signa Prime, would be filing for insolvency this week, in what was a significant twist in the unravelling of founder Rene Benko's real estate empire. Signa Development has 39 projects in the works, according to KSV. Projects are located in Vienna, Berlin, Wolfsburg, Germany, and elsewhere, according to Signa's website. The holding company of Signa - a group of some 1,000 companies, with high-profile projects and department stores across Germany, Austria and Switzerland - filed for insolvency last month with around 5 billion euros in debt. Other divisions have since followed suit, making Signa the biggest casualty so far in Europe's real estate crisis. ($1 = 0.9030 euros) https://www.reuters.com/markets/deals/signa-development-files-insolvency-with-13-bln-debts-ksv-2023-12-29/

2023-12-29 07:43

LONDON, Jan 2 (Reuters) - There's not much time to get over the New Year's partying: the most closely watched U.S. economic release and key euro area inflation data are on the calendar this week, suggesting a busy start to 2024. With hopes high for big central banks to start cutting interest rates soon, euphoric financial markets could soon be tested, while the timing of a Bank of Japan rate increase remains in focus. Here's your look ahead to the first trading week of the new year with Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam, Ira Iosebashvili in New York and Dhara Ranasinghe in London. 1/ GOLDILOCKS, STICK AROUND The health of the U.S. jobs market is crucial to gauging whether a Goldilocks scenario continues into 2024, putting Friday's December non-farm payrolls report in the spotlight. Economic growth has cooled and inflation has eased, fueling a massive cross-asset rally and allowing the Federal Reserve to pencil in more rate cuts for 2024. At the same time, the economy has shown little evidence that months of tighter monetary policy are spawning a severe downturn. Signs of deviation from that scenario - in the form of exceedingly strong jobs growth or a sudden drop in employment - could shake investors’ confidence in a soft landing. Economists polled by Reuters expect the U.S. economy added 158,000 jobs in December versus 199,000 in November. 2/ INFLATION SURPRISE? For all the joy in markets, data also out on Friday is expected to show euro zone inflation accelerated in December for the first time since April. A Reuters poll sees it jumping to 3% from 2.4% in November, snapping a sharp drop which saw inflation undershoot expectations for three straight months. Economists reckon the rise will largely result from energy support measures a year ago, particularly in Germany, where the government had covered household gas bills, meaning a lower "base" to which December 2023 prices are compared. So, investors will have to sift through the data to assess how current price pressures are evolving. Any surprise higher would unnerve traders, who are expecting more than six quarter-point ECB rate cuts in 2024. The good news: core inflation, excluding volatile food and energy prices, should continue dropping. The narrowest measure is seen falling to 3.4%, which would be the lowest since March 2022. 3/ WARNING SIGN What goes up, must come down. Rate-cut exuberance means markets start the new year on a high - stocks are at their highest in over a year, government bond yields are at multi-month lows. Perhaps complacency is too strong given elevated geopolitical risks, the prospects for corporate defaults to rise and key elections starting with Taiwan on Jan 13. The VIX index, a well-known market fear gauge, hit over three-year lows in December, and the MOVE Treasury market volatility indicator is well below a March peak. The coming days will put investor confidence to the test. And if a new year is a moment to reflect on a year gone by, don't forget the curve balls (banking crisis, Hamas-Israel war, Argentine election result) that caught many by surprise. 4/ HIDDEN HAWK? Building bets for an imminent end to the Bank of Japan's negative rates policy were batted back in December, when it stuck to a resolutely dovish stance. Yet Governor Kazuo Ueda, with a penchant for the unexpected, offered a tantalizing morsel to hawks, saying that "generally speaking" a stimulus exit could include an element of surprise. So, while the surface message continues to be one of patience, borne out by data showing inflationary pressures waning, comments from the BOJ ahead of its Jan. 23 meeting are in focus. In fact, in a Dec. 27 interview, Ueda hinted again that the results of spring wage negotiations are not essential to a hawkish shift, and that "quite a lot of information" could be gleaned from the BOJ's regional branch manager meeting in mid-January. 5/ SAME TARGET, BIGGER CHALLENGE With China's economy on track to meet Beijing's 5% growth goal in 2023, government advisers seem confident in calling for the same target in 2024. A big issue, though, is that there won't be the same flattering annual comparison with the COVID-lockdown slump of 2022. That means tough choices for policymakers, particularly around loading up on more debt, as Beijing struggles to shift from construction-led development to consumption-fueled growth. A private-sector survey on Tuesday showed China's factory activity expanded at a quicker pace last month, while official data over the weekend showed manufacturing activity shrank for a third straight month in December. Investors, expecting more stimulus, will be watching China headlines closely. Domestic demand is still tepid and the property market, where 70% of household wealth is parked, is teetering near collapse. Official growth targets won't be announced until March, but what measures emerge before then will say a lot about China's strategy - and the risks of falling foul of a Moody's threat for a ratings downgrade. https://www.reuters.com/business/take-five/global-markets-themes-takealook-2023-12-29/

2023-12-29 06:11

China's coffee consumption jumped 15% in latest season New coffee shops open at break-neck speed, face harsh competition College students boost demand for coffee in large and mid-sized cities Top exporter Brazil ships over 1 mln bags to China for 1st time SHANGHAI, Dec 29 (Reuters) - Chinese coffee consumption is growing quickly, spurring cut-throat competition between local and foreign coffee chains that have opened thousands of branded shops in recent months and surpassed the number of coffee stores in the United States. Analysts expect China's growing thirst for coffee to be a key driver of future demand for the beans as coffee shops expand beyond Beijing and Shanghai to dozens of mid-sized cities where young professionals have warmed to the beverage. China's rising coffee demand is an opportunity for international chains like Starbucks and Tim Hortons that are investing heavily in China, though they face a steep challenge from rapidly expanding local brands. Data from the International Coffee Organization sent to Reuters shows coffee consumption in China grew 15% in the year-long season ended in September from the previous cycle to 3.08 million bags. "The Chinese consumer is increasingly adopting Western life styles and coffee is obviously one of the beverages that represent that," said Jason Yu, greater China managing director of market research firm Kantar Worldpanel. The number of branded coffee shops in China grew a staggering 58% in the last 12 months to 49,691 outlets, according to Alegra Group, a company that tracks growth of coffee chains. There is harsh competition between the local chains and international chains, said Matthew Barry, a beverages analyst for Euromonitor. Each one is trying to grab as big a share as they can of the growing market, he said. Alegra Group estimates China's Luckin Coffee (LC0Ay.MU) added 5,059 stores in the last 12 months, while another Chinese chain, Cotti Coffee, opened 6,004 outlets in the period. "The scale of the opportunity is such that both (local and international chains) will have to be very aggressive in facing off against the other and I think that should ensure a very dynamic marketplace in the next few years," Barry said. U.S.-based Starbucks (SBUX.O) opened 700 stores in China in the last year and said it is on track to operate around 9,000 stores in the country by 2025, while Canada's Tim Hortons plans to have 3,000 stores in the country in four years. Seizing market share is one of Luckin's core targets, Chief Executive Jinyi Guo said during the firm's third quarter earnings call. Store openings are now happening in China's smaller cities, Jason Yu said, which still have millions of inhabitants each. "So that basically means in those places there's still a lot of white space for coffee chains to grow," he said. Zixi Zhao, a 20-year old Beijing student, said he drinks coffee every day. "I started drinking when I went to college," he said. "I don't drink much tea in general, but my mom, my dad, my grandmother they all drink tea." Ruoxuan Zhao, a 19-year-old student from Beijing, said drinking coffee was part of the fast-paced lifestyle of young people in China, who welcome the caffeine boost. HAPPY GROWERS The development is good news for coffee producers already benefiting from high prices due to adverse weather in some growing regions. Arabica coffee futures are trading near the highest in eight months, while robusta coffee hit the highest in 15 years last week. China imports coffee mostly from Africa and South America. Brazil's coffee exporters group Cecafe said that shipments to China will nearly triple in 2023 to surpass 1 million bags for the first time, making China its eighth-largest market. The United States Department of Agriculture sees China using 5 million bags of coffee in the new season (2023/24), which would make it the world's seventh-largest consumer. Chinese coffee consumption still pales when compared to top consumers the United States and Brazil that use more than 20 million bags per year. But the growing demand signals China is undergoing a cultural change similar to other tea-loving Asian countries including Japan and South Korea. https://www.reuters.com/markets/commodities/chinas-new-thirst-coffee-spurs-cut-throat-cafe-competition-2023-12-29/

2023-12-29 06:09

Europe-bound diesel, jet fuel cargoes divert from Red Sea Israel intensifies attacks in Gaza Total U.S. oil demand rose 3.4% in October vs prior year -EIA NEW YORK, Dec 29 (Reuters) - Crude futures lost over 10% in 2023 in a tumultuous year of trading marked by geopolitical turmoil and concerns about the oil output levels of major producers around the world. Brent crude on Friday, the last trading day of the year, settled at $77.04 a barrel, down 11 cents or 0.14%. U.S. West Texas Intermediate crude settled at $71.65 a barrel, down 12 cents or 0.17%. Both contracts slipped more than 10% in 2023 to close out the year at their lowest year-end levels since 2020. Brent had climbed 10% and WTI by 7% last year, supported by supply concerns following Russia's invasion of Ukraine. A Reuters survey of 34 economists and analysts forecast Brent crude will average $82.56 in 2024, down from November's $84.43 consensus, as they expect weak global growth to cap demand. Ongoing geopolitical tensions could provide support to prices. Analysts have also questioned whether the Organization of the Petroleum Exporting Countries and allies, or OPEC+, will be able to commit to the supply cuts they have pledged to prop up prices. OPEC+ is currently cutting output by around 6 million barrels per day, representing about 6% of global supply. OPEC is facing weakening demand for its crude in the first half of 2024 just as its global market share declines to the lowest level since the pandemic on output cuts and Angola's exit from the group. Meanwhile, the war in the Middle East prompted jitters about potential supply disruptions in the final few months of 2023 that are expected to last into 2024. "We are going to see continued volatility as we go into 2024 with the geopolitical events and the fear that the conflict could spread throughout the region," said Andrew Lipow, president of Lipow Oil Associates. This month, attacks by Yemen's Houthi militant group on shipping vessels transiting the Red Sea route forced major firms to reroute their shipments. Although certain companies are preparing to resume movements through the Suez Canal, some crude oil and refined product tankers are still opting for the longer route around Africa to avoid potential conflicts in the region. Geopolitical tensions in the Middle East escalated on the last day of 2023 as Israel intensified its attacks in southern Gaza, putting upward pressure on prices. Data released on Friday by the U.S. Energy Information Administration (EIA) that showed strong oil demand in October offered some support to prices in intra-day trading, said UBS analyst Giovanni Staunovo. Total U.S. oil demand rose 3.4% in October versus the prior year, the report said. U.S. crude oil output fell slightly in October to 13.248 million barrels per day, after it set monthly records in August and September. Energy firms this week added oil and natural gas rigs for the first time in three weeks, energy services firm Baker Hughes (BKR.O) said in a report on Friday, indicating output could rise in the future. For the year, however, the rig count was down by 157 after gaining by 193 in 2022 and 235 in 2021. https://www.reuters.com/markets/commodities/oil-prices-end-year-10-lower-demand-concerns-snap-winning-streak-2023-12-29/

2023-12-29 06:03

Money markets see Fed interest rate above 3% for years Govt spending, inflationary pressures may keep rates high High rates for longer means more pain for borrowers Dec 29 (Reuters) - Borrowers looking for relief from higher interest rates may be set for disappointment with financial markets indicating rates will stay elevated for years to come. However much they fall in 2024, pricing in money markets highlights a view that the decade of near-zero interest rates prevailing after the great financial crisis is unlikely to return while inflationary pressures and government spending stay high. That risks further pain for many public and private borrowers who locked in past lower rates and have yet to feel the full impact of the record-paced central bank hikes of the last two years. Traders have in recent weeks doubled down on bets for steep rate cuts next year, encouraged by slowing inflation and a dovish shift from the U.S. Federal Reserve. Expectations that rates will drop at least 1.5 percentage points in the United States and Europe have boosted bond and equity markets. But while the Fed is expected to cut its key rate to around 3.75% by the end of 2024, it will only fall to around 3% by the end of 2026, then rise back to around 3.5% thereafter, money market pricing suggests. , That is in stark contrast to rates staying near zero for most of the decade following the global financial crisis, only gradually rising to 2.25%-2.50% in 2018. European Central Bank rates are seen at roughly 2% by end-2026, from 4% currently - a reduction but hardly a sign of any return to the unorthodox experiment with negative rates seen from 2014 to 2022 . "It's just normalizing policy. It's not going into easy monetary policy," Mike Riddell, senior portfolio manager at Allianz Global Investors, said. Such expectations are consistent with a scenario where the so-called 'neutral' interest rate, which neither stimulates nor slows economic growth, has risen since before the COVID-19 pandemic, economists say. The U.S. economy so far avoiding a recession many expected in the face of aggressive policy tightening has also supported that argument. Higher inflation risks on the back of geopolitical tensions and reshoring, looser fiscal policy and potential improvements in productivity from the likes of AI are among factors that may be lifting the neutral rate, often dubbed 'R-star'. Some notion of the neutral rate, though impossible to determine in real time, is key to understanding an economy's growth potential and a central bank's decision on how much to reduce rates going forward. Whether the neutral rate has moved is subject to much debate and not everyone is convinced it has risen. Crucially, market expectations are higher than the Fed's 2.5% estimate for long-term interest rates, though several policymakers have put it above 3%. In the euro area, ECB policymakers point to a neutral rate of around 1.5%-2%. "I'm sceptical that there's been much of a change in R- star," former Fed economist Idanna Appio, now portfolio manager at First Eagle Investment Management, said. Appio is puzzled why markets are pricing in continued high rates while many measures of inflation expectations suggest it should return to central banks' targets. It's too early to call a rise in productivity, she added. Gauging where rates will head in the coming years is far from easy and markets can get things wrong. But their expectations warrant caution for borrowers, who are accustomed to and still benefiting from the low rates of recent years. "It means that corporates will need to refinance at reasonably to sometimes significantly higher rates than what they had in the books over the last five years," Patrick Saner, head of macro strategy at Swiss Re, said. "In this context, the higher rates environment actually matters quite a lot, particularly when it comes to corporate planning." https://www.reuters.com/markets/rates-bonds/higher-forever-markets-see-few-rate-cuts-after-2024-2023-12-29/