2023-12-05 16:20

JOHANNESBURG, Dec 5 (Reuters) - The South African rand fell on Tuesday as third-quarter gross domestic product (GDP) contracted slightly more than expected and the U.S. dollar rose on global markets. At 1615 GMT, the rand traded at 18.9950 against the dollar , around 1% weaker than its previous close. The dollar last traded around 0.2% stronger against a basket of global currencies. Q3 GDP contracted 0.2% quarter-on-quarter in seasonally adjusted terms (ZAGDPN=ECI) and 0.7% year-on-year (ZAGDPY=ECI), versus expectations for a quarter-on-quarter decline of 0.1% and 0.2% annually. The latest figures mean Africa's most industrialised economy grew just 0.3% in the first nine months of the year, further evidence that its economic recovery from the COVID-19 pandemic has been among the worst in emerging markets. A PMI survey on Tuesday also showed South African private sector business activity flatlined in November, with a cooling of price pressures counteracted by supply chain disruptions due to a port crisis. On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI) ended down 1.1%. South Africa's benchmark 2030 government bond weakened, with the yield up 5 basis points to 10.01%. https://www.reuters.com/markets/currencies/south-african-rand-slips-before-third-quarter-gdp-data-2023-12-05/

2023-12-05 15:05

MOSCOW, Dec 5 (Reuters) - Moscow Exchange (MOEX.MM), Russia's largest bourse, said on Tuesday it would halt trading in the U.S. dollar should sanctions be imposed, after Washington targeted another Russian exchange, SPB, with restrictive measures last month. The U.S. Treasury in early November targeted SPB, Russia's second-largest stock exchange as part of sweeping new measures that also aim to curb Russia's future energy capabilities and sanctions evasion. Some Russian market players believe Moscow Exchange could be targeted next. The sanctions forced SPB, which specialises in trading foreign shares, to halt trading of shares on its exchange and tweak its strategy to focus on settlements in roubles. More than two thirds of clients' foreign currency funds are now blocked. "The U.S. dollar will not be traded if there are American sanctions, but it no longer plays such a role in the structure of the exchange's FX market (as it used to)," Igor Marich of Moscow Exchange told reporters. "The central bank in this case can count on the official exchange rate on over-the-counter transactions." The USD/RUB currency pair accounted for 78% of trading on Moscow Exchange in the first quarter of 2022. In October-November 2023, its share of trading was 32%, exchange data showed. Meanwhile, China's yuan has become the largest player. From a share of 1% in early 2022, CNY/RUB now accounts for 43% of trading on Moscow's FX market. https://www.reuters.com/markets/currencies/moscow-exchange-would-halt-usd-trading-if-sanctions-imposed-2023-12-05/

2023-12-05 15:02

Dec 5 (Reuters) - The U.S. services sector picked up in November amid an increase in business activity, although new orders remained flat and a gauge of input inflation dipped as the lagged effects of higher interest rates start to have a greater impact. The Institute for Supply Management (ISM) said on Tuesday that its non-manufacturing PMI rose to 52.7 in November from 51.8, which was a 5-month low. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the index edging up to 52.0. The Federal Reserve has raised its policy rate by 525 basis points over the past 20 months to the current 5.25%-5.50% range to quell high inflation largely caused by the impact of the COVID-19 pandemic. While the economy continued to flourish over the summer, economists expect demand to weaken this quarter, particularly for services, as consumers shift more of their spending back to goods. That would be welcomed by the U.S. central bank in its battle to bring inflation back to its 2% target rate given the stickiness of service sector inflation. There were encouraging green shoots for policymakers. A measure of new orders received by services businesses was 55.5 last month, unchanged from October, while a measure of prices paid for services businesses for inputs dipped to 58.3 from 58.6 in October. Consumer spending rose moderately in October, while the annual increase in inflation was the smallest in more than 2-1/2 years, government data showed last Thursday. So-called super core inflation, which is Personal Consumption Expenditures services excluding energy and housing, rose 0.1% after increasing 0.4% in the prior month A measure of services sector employment rose to 50.7 from 50.2 in October, the ISM survey also showed. https://www.reuters.com/markets/us/us-service-sector-picks-up-november-ism-2023-12-05/

2023-12-05 14:57

Dec 5 (Reuters) - Trucking company XPO Inc (XPO.N) won a bid to buy 28 service centers of bankrupt Yellow Corp for $870 million in a closely watched auction of the nearly 100-year-old firm's assets. XPO shares were down 3.8% in morning trade amid weakness in broader markets. Yellow, formerly known as YRC, filed for Chapter 11 bankruptcy protection in August after blaming the International Brotherhood of Teamsters union for its demise. The company was one of the nation's largest so-called less-than-truckload carriers in the U.S. and owned about 12,000 trucks and 35,000 trailers and its customers included Walmart (WMT.N) and Home Depot (HD.N). XPO expects the deal, which is subject to court approval, to add to core profit in 2024 and adjusted profit per share from continuing operations from 2025, according to a filing on Tuesday. The deal will add "significant footprint in areas where XPO was previously capacity constrained, the path towards the company's 2027 goals," said Jonathan Chappell, analyst at Evercore ISI. The company has also entered into an $870 million credit agreement which it may use to finance a deal it said would help optimize routes for its less-than-truckload transportation in North America. XPO's successful bid was part of a court-supervised auction that saw nearly two dozen companies, including Estes Express Lines and Knight-Swift Transportation Holdings (KNX.N), win rights to purchase Yellow's assets for $1.88 billion, as per a court filing on Monday. The U.S. Bankruptcy Court in Delaware will hold a hearing on Dec. 12 to approve the bids. Yellow's bankruptcy process was closely watched after its demise potentially saddled U.S. taxpayers with losses stemming from a government rescue. https://www.reuters.com/business/autos-transportation/trucking-firm-xpo-buy-bankrupt-yellows-service-centers-870-mln-2023-12-05/

2023-12-05 14:36

Investors may have over-intepreted Schnabel First rate cut now seen in March FRANKFURT, Dec 5 (Reuters) - The European Central Bank's leading hawk Isabel Schnabel has reconciled her institution with investors who have long bet the ECB is finished raising interest rates, but a new tug of war, on the exact timing of the first cut, is now looming. In an exclusive interview with Reuters, the ECB board member took further rate hikes off the table given a "remarkable" fall in inflation. As policymakers headed into a quiet period before next week's rate-setting meeting, she also declined to repeat recent statements by colleagues that borrowing costs should remain at record highs until the middle of next year. Instead, the German, who has developed a following among traders after correctly predicting two years ago that inflation would prove sticky, said rate-setters will take their cue from incoming data and be wary of declaring victory too soon. Her comments come after weeks of concerted but futile efforts by ECB President Christine Lagarde and some other policymakers to talk markets out of betting on rate cuts as soon as the spring in the face of soft data on prices and credit. "You needed that kind of intervention," Melissa Davies, chief economist at Redburn Atlantic, said. "She's telling markets 'you're on the right line but don't go overboard betting on a rate cut in the spring'." Yet traders seemed to do just that. They brought forward bets on a possible first cut to March from April and now expect 140 basis points' worth of easing by December , increasing the discord between the ECB and the markets about the speed and pace of rate reductions. "I would caution against concluding that she's endorsing current market expectations," said Fabio Balboni, senior European economist at HSBC. "The risk is that some people are over-interpreting what she's saying." Schnabel's comments carry particular weight because she is seen as the most influential voice in the conservative camp of policymakers that drove a string of rate increases - the steepest in the euro's history - in the last 1-1/2 years. She explicitly said, however, that the ECB must be more cautions than markets expect, and that it should err on the side of caution. DECISIONS TO MAKE Economists said there were a number of reasons to believe the ECB would not move until April or later. For starters, policymakers would first want to see wage settlement data that won't be fully available until the spring. Second, the ECB needs to address the future of the 1.7 trillion euros ($1.84 trillion) of bonds it bought under its Pandemic Emergency Purchase Programme, which it has pledged to keep topping up until the end of 2024. It is likely to move that deadline forward, but any stop to reinvestments of maturing debt would need to be gradual, to avoid disrupting bond markets. "They can't really cut rates while reinvestments continue, which puts you into April, already," Dankse Bank's Director for ECB and Fixed Income Research, Piet Haines Christiansen, said. "My call (for the first rate cut) is still June." Lastly, the ECB will be in the middle of deciding how it wants to supply euro zone banks with liquidity in the coming years - by lending to them or buying bonds from them - a complex topic that will take a chunk of policymakers' time and energy. "There's a lot going on in the spring to also have a rate cut," Redburn Atlantic's Davies said. Pictet Wealth Management's head of macroeconomic research, Frederik Ducrozet, was also sticking to his call for a first rate reduction in June but saw some risk of an April move after the Schnabel interview. "The leading hawk is shifting to a more cautious approach - that's an important change," Ducrozet said. ($1 = 0.9244 euros) https://www.reuters.com/markets/europe/schnabel-reconciles-ecb-with-markets-until-next-fight-2023-12-05/

2023-12-05 14:34

NEW YORK, Dec 5 (Reuters) - Wells Fargo (WFC.N) CEO Charlie Scharf told investors on Tuesday he expects to book higher-than-anticipated severance expenses between $750 million to a little less than $1 billion in the fourth quarter. "We are continuing to focus on efficiency with turnover dropping, unfortunately, we're going to have to be more aggressive about our own internal actions," Scharf said, adding that he thinks it would be the right step in the long term. Last month the bank laid off fewer than 50 bankers from its corporate and investment bank, after the San Francisco-based lender had warned earlier its headcount could decline further in an effort to become more efficient. The bank has reduced its workforce since the third quarter of 2020 and it stood at 227,363 at the end of third quarter of this year. It is still operating under an asset cap that prevents it from growing until regulators deem that it has fixed problems from a fake accounts scandal. The bank still has nine open consent orders from banking regulators who require additional oversight of its practices. Scharf, speaking to investors at the Goldman Sachs (GS.N) U.S. Financial Services Conference, said management's top priority included getting the consent orders lifted. "We feel very good about the progress we have made," Scharf added. The fourth-biggest U.S. bank has seen some weakness in its commercial real estate portfolio, particularly the office loans. "We expect to see losses (in the office portfolio) in Q4 which will continue into next year," Scharf said. Wells Fargo set aside $359 million for potential credit losses on office real estate in the third quarter, bringing total allowances to $2.6 billion for the first nine months of 2023. Despite high interest rates and fears of an economic downturn, Scharf said the economy remains strong but he is cautious going into 2024. The consumer is still resilient and credit card growth for the bank may pick up, Scharf added. Wells Fargo has reduced its origination in auto loans and has also been reducing the size of its mortgage servicing portfolio. U.S. consumers are still in strong financial health, according to executives from the biggest U.S. banks. But in recent months, spending has slowed and more Americans are starting to fall behind on their loan payments. https://www.reuters.com/business/wells-fargo-ceo-expects-severance-expenses-exceed-750-million-2023-12-05/