2023-12-29 02:36

NEW YORK/LONDON, Dec 29 (Reuters) - The dollar edger higher on Friday but is set to end 2023 with its first yearly loss since 2020 against the euro and a basket of currencies, on expectations the U.S. Federal Reserve will begin cutting rates next year as inflation moderates. Questions for 2024 will be when the Fed begins cuts, and whether the first rate reduction is made to avoid over-tightening as inflation drops, or due to slowing U.S. economic growth. With markets already pricing in aggressive cuts, debate is also focused on how much further the dollar is likely to fall. “We’ve already weakened quite a bit in anticipation of a Fed cut cycle to come,” said Brad Bechtel, global head of FX at Jefferies in New York. The dollar's decline accelerated after the Fed adopted an unexpectedly dovish tone and forecast 75 basis points in rate reductions for 2024 at its December policy meeting. Markets are pricing in even more aggressive cuts, with the first reduction seen likely in March and 158 basis points in cuts expected by year-end. The Fed’s tone contrasted with other major central banks, including the European Central Bank (ECB) and Bank of England (BoE), which maintained they will hold rates higher for longer. But “I do think they will capitulate. European growth is just struggling too much and inflation’s coming down relatively fast … same in the U.K. in many ways,” said Bechtel. “If all three central banks are cutting, it's going to be very hard for the dollar to weaken significantly." Against a basket of currencies, the greenback on Friday gained 0.13% to 101.32 , rising from a five-month trough of 100.61 reached on Thursday. It is on track to lose 2.10% this year and is down 4.62% this quarter, the worst performance in a year. The euro dipped 0.19% to $1.1040, hovering just below a five-month peak of $1.11395 reached on Thursday. It is heading for a 3.04% gain for the year, its first positive year since 2020. "Markets are looking for a cut earlier in the U.S. and are less certain that the European Central Bank will cut as quickly, so that's why the dollar is very soft," said Niels Christensen, chief analyst at Nordea. "We also have positive risk appetite which is another negative for the dollar. Going into 2024, the soft dollar will be a theme towards the March central bank meetings," Christensen added. Policymakers at the ECB and the BoE did not signal any imminent rate cuts at their policy meetings this month, but traders are pricing in 162 bps of cuts by the ECB next year, with the probability of two cuts by April. The BoE is also expected to cut rates by 148 bps in 2024. "While it feels like the market might have moved too far too fast, the facts are that growth is non-existent in Europe, slowing in the U.S., and inflation is falling globally," said CJ Cowan, portfolio manager at Quilter Investors. "The ECB is famously slow to change policy course so almost two cuts priced by April looks aggressive, even if it might be the right thing to do." Sterling rose 0.08% to $1.2745 and was on track for a 5.39% yearly gain, its best performance since 2017. YEN IS AN OUTLIER The dollar is expected to post an annual 7.56% gain against the yen as the Japanese currency stays under pressure from the Bank of Japan's (BOJ) ultra-loose monetary policy stance. Market expectations are for the BOJ to exit negative interest rates in 2024, though the central bank continues to stand by its dovish line and has provided little clues on if, and how, such a scenario could play out. "The outlook for Japan is encouraging going into 2024, with expectations of robust economic growth and improving inflation that shows signs of being sustainable," said Aadish Kumar, international economist at T. Rowe Price. That said, even if the BOJ hikes rates into positive territory, they will still remain much lower than in the United States. “For all of 2024, if they got to positive 50 basis points I would be kind of surprised, but maybe that happens, and if the Fed gives us three rate cuts, you’re still looking at an interest rate differential of roughly 4.5% or so, which makes the yen very expensive to own,” said Jefferies’ Bechtel. The yen is a popular funding currency, and investors use proceeds from shorting the yen to purchase other assets. The Swiss franc is one of the best performing currencies this year, with the greenback losing 8.99% against the currency, the worst drop since 2010. In cryptocurrencies, Bitcoin fell 1.23% to $42,059. It is on track for a 154% gain this year. ======================================================== Currency bid prices at 3:00PM (2000 GMT) https://www.reuters.com/markets/currencies/dollar-snaps-two-year-winning-streak-2024-rate-cut-bets-2023-12-29/

2023-12-29 02:10

Dec 28 (Reuters) - The interest rate on the most common type of U.S. home loan fell for a ninth straight week this week to close out the year at their lowest level since May, according to data released Thursday by Freddie Mac. The interest rate on a 30-year fixed-rate mortgage averaged 6.61% as of Dec. 28, down from 6.67% a week earlier. The rate has declined each week since hitting the highest level in 22 years in late October, tumbling 1.18 percentage points in that span. Rates, which had tumbled to below 3% during the height of the COVID-19 pandemic, had surged starting in 2022 when the Federal Reserve began an aggressive rate hiking campaign to rein in inflation. The Fed recently signaled that it is done with rate hikes and is likely to start lowering them in 2024. Bond markets have responded with a ferocious end-of-year rally that has brought yields on the 10-year Treasury note used to set mortgage rates to below 4% from around 5% in late October. https://www.reuters.com/markets/us/mortgage-rates-slide-lowest-since-may-freddie-mac-2023-12-28/

2023-12-29 02:03

U.S. sanctions against ALNG2 prompted force majeure Russia, China lack technical expertise in large-scale LNG Lack of ice-class tankers also a problem SINGAPORE/MOSCOW Dec 27 (Reuters) - U.S. sanctions pose a major obstacle to Russia's plans to increase exports of seaborne liquefied natural gas (LNG) to offset the decline in pipeline gas exports to Europe, analysts said, as expectations mount of delays to a flagship project. The world's fourth largest LNG producer after the United States, Qatar and Australia, Russia has an ambition to increase its share of the global market to around a fifth from 8% now by tripling its output to more than 100 million metric tons by 2030-35. But whereas Moscow has successfully diverted oil exports, once intended for western Europe, to China and India, in the face of sanctions, the impact of restrictions on LNG is more severe because of the relatively small number of tankers that can carry LNG and Russia's lack of access to technology and finance. Russia's efforts to redirect gas sales to China, the world's second-largest energy consumer after the United States, have so far had limited success as protracted talks to more than double current sales to the country via the proposed Power of Siberia 2 pipeline have yet to deliver a solid contract. At the same time, Arctic LNG 2, which is controlled by Novatek (NVTK.MM), Russia's largest LNG producer, faces delay, three industry sources said on condition of anonymity because of the sensitivity of the issue. They said commercial LNG supplies from the project are expected no earlier than the second quarter of 2024 or later, whereas Novatek has said they would sail in the first quarter. With three trains, Arctic LNG 2's capacity is meant to be 19.8 million metric tons per year and 1.6 million tons per year of stable gas condensate. That makes it central to Russia's plans to boost energy revenues after state-owned Gazprom's (GAZP.MM) pipeline gas exports to Europe halved last year to just over 100 billion cubic metres (bcm). The Kremlin relies on energy sales, which accounted for 57% of Russia's total exporting revenues and 27% of gross domestic product in the last year. FORCE MAJEURE 'WAKE UP CALL' U.S. sanctions, which Russia has said reflect Washington's desire to eliminate rivals to its LNG, have already resulted in Novatek declaring force majeure on supplies from the project, industry sources told Reuters last week. Fearing a backlash from the sanctions, foreign shareholders suspended participation in the project, renouncing their responsibilities for financing and for offtake contracts for the plant, the daily Kommersant reported on Monday. Jason Feer of LNG shipping and brokering firm Poten & Partners said the declaration Russia could not meet contractual obligations was "a wake up call" for future Russian LNG projects. "Train 1 was by far the most advanced of the projects so the force majeure there is a sign that it will be very difficult to move ahead with any other projects for the time being," he said. "Russia also likely needs some foreign equipment and other support to complete other projects and sanctions make that difficult as well." Arctic LNG 2 is located on the Gydan peninsular, which stretches into the Kara Sea, north of Siberia. Novatek, which set itself up as an alternative to Gazprom, has a 60% stake in the project. China's state oil majors CNOOC Ltd (0883.HK) and China National Petroleum Corp (CNPC) each have a 10% stake, as do France's TotalEnergies (TTEF.PA) and a consortium of Japan's Mitsui and Co (8031.T) and JOGMEC. Its issues include the technical challenge of converting gas to a liquid by cooling it to minus 162 Celsius (minus -259.6 Fahrenheit). Sunny Xu, founder of Singapore-based small and medium-sized LNG solution provider C-LNG, said that China has the capacity to build liquefaction modules but lacks experience in designing and building since of advanced critical equipment needed - as does Russia, analysts say. "Chinese companies may have their own solutions, but how efficient that will be? That's a question mark," Xu said. Some of the Western companies, which possess technical expertise have left Russia over the conflict in Ukraine. French engineering group Gaztransport & Technigaz (GTT) (GTT.PA) suspended in January its contract with Russian shipbuilding company Zvezda for 15 ice-breaking liquefied natural gas (LNG) carriers. Feer said that it would be hard to replace GTT in LNG projects. "There are a few other companies offering containment systems but GTT are the leading firm and I do not know if the other systems have been accepted by major charterers and owners," he said. He said he was sceptical the project's first train could reach its capacity of 6.6 million tones to reach capacity this year, as Novatek has said it will. RACE TO BOOK TANKERS The project also has the challenge of securing gas carriers. Novatek has said 15 Arc7 ice-class tankers, able to cut through 2-metre thick ice, will be built at Russia's Zvezda shipyard for Arctic LNG 2. Six more Arc7 tankers were due to be built by Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering, including three ordered by Japan's Mitsui O.S.K. Lines and three by Russia's leading tanker group Sovcomflot (FLOT.MM). But three tankers ordered by Sovcomflot were cancelled due to sanctions against Russia, Hanwha has said in regulatory filings. Ronald Smith from Moscow-based BCS Global Markets brokerage, said that it is possible that the nearby and already operational Yamal LNG project might share some tankers with Arctic LNG 2. "Over time, I expect Novatek to acquire the full, needed fleet of Arc7 tankers," he said. "That might take a number of additional years beyond what the original timeline of Arctic LNG 2 envisioned, however." https://www.reuters.com/business/energy/russia-faces-mighty-obstacle-western-lng-sanctions-2023-12-28/

2023-12-29 01:54

Dec 28 (Reuters) - California's Contra Costa County (CCH) health officials delivered a letter to PBF Energy’s Martinez refining company on Thursday saying the number of incidents at the refinery in the past year was unacceptable and points to a lack of investment. CCH health officials made a surprise inspection visit of the refinery earlier this week. "CCH has documented 46 flaring incidents since November 2022 and 21 releases or spills of hazardous materials in the last year," said the letter published on the CCH website. It said PBF also reported flaring at a rate of nearly once per week. "The number of incidents at the refinery over the past year is unacceptable for a facility operating in Contra Costa County and points to an apparent fundamental lack of investment on the part of PBF in ensuring the reliability of its systems and maintaining a facility that is safe for its workers and the neighboring community." PBF officials were not immediately available for comment. CCH said PBF had to provide its regulators full access to the facility, documentation relating to deferred maintenance of equipment, access to employees and data relating to maintenance and safety practices. CCH said that in the case of an incident all costs associated with incident response will be borne by PBF. Additionally, due to the facility's history of spills and other mishaps, PBF is required to allow observers from CCH onsite at all times to provide them with access to any part of the facility upon request. CCH on Tuesday had launched an unannounced inspection at PBF Energy's (PBF.N) 156,400 barrel per day refinery aimed at requesting records and observing its operation with a focus on safety programs, reliability of equipment, and to follow up regarding several recent accidents. The facility released petroleum coke dust in October, following a similar incident in July. The Department of Justice is also investigating the refinery over a November 2022 release of a powdery substance later determined to be spent catalysts. https://www.reuters.com/markets/commodities/contra-costa-health-says-pbfs-martinez-refinery-incidents-unacceptable-2023-12-29/

2023-12-29 00:00

Dec 29 (Reuters) - Australia's Eagers Automotive (APE.AX) said on Friday a cyber incident impacting some of its IT systems is affecting the company's ability to finalise transactions for certain new vehicles, which have been sold and ready for delivery. Corporate Australia has seen an alarming rise in cyber security breaches since last year, even prompting the country's government to reform cyber security rules. Australia set up an agency in February this year to oversee government investment and help coordinate responses to hacker attacks. Eagers said the extent of the operational impact varied across regions and business units in Australia and New Zealand. The financial impact of the cyber incident for fiscal 2023 primarily relates to the deferral in the recognition of these transactions across the last five days of December, the automotive retailer said in a statement. The deferred transactions are expected to hit the company's statutory profit before tax for fiscal 2023, although it is not expected to be material, Eagers said. "The deferred transactions are expected to be recognised in the 2024 financial year once they have been appropriately finalised within our systems," the company said. Eagers, however, remains confident that it will deliver record underlying operating profit before tax for the 2023 financial year. https://www.reuters.com/technology/cybersecurity/australias-eagers-automotive-faces-operational-hurdles-after-cyber-security-2023-12-29/

2023-12-28 23:55

HALF MOON BAY, California, Dec 28 (Reuters) - At the famous Mavericks Beach surf spot, big waves thundering into the California coastline on Thursday attracted surfers and spectators alike to the legendary break 25 miles south of San Francisco. Waves were forecast to reach as high as 30 to 40-feet (9 to 12 meters) at Mavericks, according to the website Surfline. Spectators climbed a beachside cliff to peer through drizzle and heavy fog and watch the surfers catch the gnarly swells. "Super stoked to be out here. It's just awesome to have everyone else out here appreciating like what the California coast has to offer," said Lilly Baker, a 23-year-old student at the U.S. Military Academy from the California city of Oakland. Jet skis navigated choppy waters to propel surfers onto the steep waves. "This perspective is kind of weird because you can't really see how big the waves are from the cliffs over here, but we saw a jet ski kind of flip over so that was wild. Some of those sets were huge," said Andre Assadi, 22, a software engineer from Oakland." A high surf warning was in effect until early Friday for shoreline counties along the Central and Northern California coastline breaking waves of 28 to 33 feet, according to the National Weather Service, warning "these conditions are deadly!" "Being born in Berkeley, California, it's always been a bucket list item of mine to really go and see Mavericks firsthand and just see the beauty that the wave has to offer, it's always been a dream," said Eli Eccles, a 23-year-old student. "So it's awesome to be here today." https://www.reuters.com/world/us/big-waves-californias-mavericks-beach-draw-surfers-super-stoked-spectators-2023-12-28/