2023-12-17 13:59

NEW YORK, Dec 15 (Reuters) - A surge in U.S. government bonds has helped lift stocks and heightened investors’ appetite for risk. Now some are betting that further gains may be harder to come by unless the economy severely weakens, potentially upsetting the narrative of resilient growth that has propelled markets. An unexpected dovish pivot from the Federal Reserve earlier this week turbocharged the rally in Treasuries, sending benchmark 10-year yields to their lowest level since July. Yields, which move inversely to bond prices, now stand at 3.93%, some 110 basis points from a 16-year high hit in October. The tumble in Treasury yields has rippled far beyond the bond market as it pulled down rates on mortgages, eased financial conditions and pushed investors into stocks and other risky investments. The S&P 500 is up nearly 15% since its October lows and has risen nearly 23% this year, putting it within striking distance of a record high. Some investors, however, believe much of the dovish shift from the Fed may already be reflected in Treasury prices. Deeper cuts, they say, would be more likely if a rapidly slowing economy forced the Fed to accelerate its easing - an outcome that would run counter to the “soft landing” outlook that has buoyed stocks in recent months. "The market is pretty perfectly priced for a soft landing," said Stephen Bartolini, said lead portfolio manager of the U.S. Core Bond Strategy at T. Rowe Price. "The bulk of the move lower is complete and if we were to push yields from here it would have to be due to expectations that the economy is slipping into recession." The Fed’s new projections - published on Wednesday - pencil in a median 75 basis points of cuts next year, taking the fed funds rate to between 4.50% and 4.75%. Traders, by contrast, are betting rates will fall by 150 basis points, according to data from LSEG. Technical factors may also make it more difficult for the bond rally to sustain itself. The swift move will likely prompt some profit-taking on the part of investors due to concerns that the trade is overcrowded, strategists at BofA Global Research said in a note Friday. Some Fed officials have begun pushing back against the view that a pivot is imminent. New York Fed President John Williams on Friday said the U.S. central bank is still focused on whether it has monetary policy on the right path to continue bringing inflation back to its 2% target. “We have seen the easy money on this Fed pivot already made," said James Koutoulas, chief executive officer at Typhon Capital management, who believes further gains in Treasuries may require a growth scare that sparks a scramble for safe assets. "We expect to chop around a bit in the front of the curve until the economy materially weakens further.” Investors will be watching economic data next week, including personal consumption expenditures and initial jobless claims that may sway the Fed's outlook for inflation. A soft landing, in which growth remains resilient while inflation slows towards the Fed’s target rate, has become the base case scenario for Wall Street firms, including BMO Capital Markets and Oppenheimer Asset Management. The firms see the S&P 500 at 5,100 and 5,200 next year, respectively, compared to its current level of 4719. Some investors believe yields will continue to fall. Jack McIntyre, portfolio manager for Brandywine Global, said the week’s rapid drop in yields was likely aided by bearish investors unwinding their bets after being caught off guard by the Fed’s pivot. Short bets against two-year Treasuries hit record levels earlier this month, data from the Commodity Futures Trading Commission showed. Though yields might pare some of that move in the near-term, McIntyre expects the decline to resume as inflation cools, with the 10-year settling between 3.5% and 3.7% in the middle of next year. Arthur Laffer Jr., president of Laffer Tengler Investments, is less bullish on government bonds. The swift decline in yields is already loosening financial conditions, potentially making it more difficult for the Fed to cut rates next year without risking a snapback in inflation, he said. Laffer pointed to data such as the Atlanta Fed's GDPNow estimate, which shows fourth quarter GDP rising by 2.6%, more than one percentage point higher than in mid-November. The rally "is overdone and the market has moved too fast," he said. https://www.reuters.com/markets/us/wall-st-week-ahead-epic-treasury-rally-may-be-running-out-fuel-fed-pivot-priced-2023-12-15/

2023-12-17 13:50

BERLIN, Dec 17 (Reuters) - Germany's Economy Minister Robert Habeck said he aimed to replace a subsidy to makers of solar panels that fell victim to a court ruling last month that scrapped swathes of the budget, arguing support was needed to compete with Chinese manufacturers. "It's important for Germany to have at least a foundation share of its own production," Habeck said in an interview with the RND newspaper group, noting the sector's importance for job creation. While solar energy is booming, most of the panels are imported from China. Habeck said a premium should be made available to manufacturers who met certain quality standards. "Solar products from Germany meet certain standards that others do not," he said. "German manufacturers often manage without toxic chemicals or make particularly efficient panels ... Such contributions to resilience should be rewarded." The main victim of the Constitutional Court's budget ruling was a Climate and Transformation Fund whose purpose was to use left-over coronavirus pandemic funds to finance Germany's green transition. https://www.reuters.com/sustainability/climate-energy/germany-aims-replace-lost-solar-panel-subsidy-habeck-says-2023-12-17/

2023-12-17 13:20

Russia to make additional oil export cuts in December Novak says cut could be 50,000 bpd or more Cuts come earlier that those agreed at OPEC+ Novak: hopes Gazprom agrees key China pipeline soon MOSCOW, Dec 17 (Reuters) - Russia said on Sunday it would deepen oil export cuts in December by potentially 50,000 barrels per day or more, earlier than promised, as the world's biggest exporters try to support the global oil price. Saudi Arabia and Russia, the world's two biggest oil exporters, called in December for all OPEC+ members to join an agreement on output cuts after a fractious meeting of the producers' club. Russian President Vladimir Putin visited Riyadh shortly after the meeting of OPEC+, which brings together the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies. Russian Deputy Prime Minister Alexander Novak, Putin's top oil and gas point man, was quoted by Russia's three main news agencies as saying that Russia would deepen cuts beyond the 300,000 barrels per day of cuts already agreed for this year. "Already in December we will add additional volumes," Novak was quoted as saying by Interfax news agency. "By how much, we'll see based on the results of December - there may be an additional 50,000 bpd, maybe more." Russia had pledged to a cut of 300,000 bpd compared to the May-June exports - and to keep at that level until the end of the year. In December, Russia agreed to deepen those cuts to 500,000 bpd in the first quarter of 2024, the Russian agencies said. Due to promises made to OPEC+, Russia's oil exports in 2023 will total less than the 247 million tonnes used in Russia's main macro-economic forecasts, Novak said. Novak said he hoped that Gazprom (GAZP.MM) and Chinese producer CNPC could soon agree on the contract conditions for gas sales through the Power of Siberia-2 pipeline. Russia has been in talks for years about building the Power of Siberia-2 which will carry about 50 billion cubic metres of gas a year from Yamal in northern Russia to China via Mongolia. "We expect that the company should reach an agreement as soon as possible," Novak said. https://www.reuters.com/business/energy/russia-eyes-additional-oil-export-cuts-about-50000-bpd-december-novak-says-2023-12-17/

2023-12-17 12:28

MUMBAI, Dec 17 (Reuters) - India's Surat diamond bourse will create 150,000 new jobs and become a "one-stop shop" for artisans and businessmen, Prime Minister Narendra Modi said as he inaugurated the new bourse in Gujarat. Surat, in Gujarat state, where Modi originally hails from, cuts and polishes 90% of world's rough diamonds and the bourse will support its ambition to become the world's diamond capital. Constructed over 6.6 million square feet, the bourse is touted as the world's largest office building, surpassing the Pentagon which has an area of 6.5 million square feet. Once it starts operating facilities such as international banking, safe vaults and a jewellery mall, further jobs would be created, Modi said during the inauguration event. The inauguration comes as Surat's diamond industry is battling a slowdown in global demand for polished diamonds. India's April-October polished diamond exports fell 29% to $10 billion. Modi said that while Surat's diamond's industry had a leading position in diamond jewellery exports, silver cut diamonds and lab-grown diamonds, India's share of global gems-jewellery exports was just 3.5%. Surat could help increase India's share of gems-jewellery exports to "double-digits", Modi said. He added that he would continue to support the sector with a range of incentives and by declaring it a focus area for export promotion. https://www.reuters.com/world/india/indias-modi-says-new-diamond-bourse-gujarat-create-150000-jobs-2023-12-17/

2023-12-17 12:22

MOSCOW, Dec 17 (Reuters) - Russia has no interest in extending the Black Sea grain deal, the RIA news agency reported on Sunday, citing Russia's agriculture minister Dmitry Patrushev. He added that to a large extent this is a political decision, but Russia will continue to export its grain, as it has its buyers. "Our grain export volumes, taking into account the winding down of the grain deal, have by no means fallen, they even slightly increased," RIA quoted Patrushev as saying. Russia withdrew in July from the deal which had allowed Ukraine to safely export grain from its Black Sea ports. Russia says it quit the deal because the arrangement was not delivering grain to the poorest countries, and because it still faces barriers to its own exports of grain and fertiliser. https://www.reuters.com/markets/commodities/russia-is-not-interested-extending-black-sea-grain-deal-ria-2023-12-17/

2023-12-17 11:30

BEIJING, Dec 17 (Reuters) - Temperatures in parts of China, including in provinces Shanxi, Hebei and Liaoning, hit their lowest levels since records began, state broadcaster said on Sunday, as a cold snap gripped large swathes of the country. The city of Yichun in Heilongjiang could see a record low of minus 47.9 C (minus 54.2 F), recorded in January 1980, broken early next week, according to a meteorological forecaster from the area. The agriculture ministry launched an emergency response and the national disaster prevention body issued a directive to local authorities to prepare emergency plans, as well as snow and ice removal equipment. "Storage of thermal coal should be done in advance to ensure the normal power generation of power plants during the critical period," added the directive. It also called on local authorities "to ensure that the national energy supply and demand are stable and orderly." On Friday, President Xi Jinping called for an "all-out" emergency response to the cold snap that began at the start of the week with snowfall and icy roads along with heavy fog causing multiple accidents on the roads. But in a sign that conditions were improving in Beijing, the local forecaster reduced the severity of its weather warning for the residents and authorities said schools would reopen for in-person classes after shutting for several days last week. https://www.reuters.com/world/china/parts-china-gripped-by-record-low-temperatures-icy-snap-intensifies-2023-12-17/