2023-11-30 19:47
Nov 30 (Reuters) - Federal Reserve policymakers signaled on Thursday that the U.S. central bank's interest rate hikes are likely over, but left the door open to further monetary policy tightening should progress on inflation stall, and pushed back on market expectations for a quick pivot to rate cuts. Fresh data shows price pressures are easing and the labor market is gradually cooling, evidence that the slowdown the Fed has tried to engineer with its rate hikes to date is underway. Tighter financial and credit conditions after the Fed raised its policy rate 5.25 percentage points in the last 20 months should help bring inflation down further, New York Fed Bank President John Williams said on Thursday, noting that improvements in supply chains are also easing price pressures. In balancing the risks of too-high inflation and a weaker economy, "and based on what I know now, my assessment is that we are at, or near, the peak level of the target range of the federal funds rate," Williams said. The personal consumption expenditures (PCE) price index rose 3% in October from a year ago, moderating from a three-month string of 3.4% readings though still above the Fed's 2% target, and more Americans applied for unemployment benefits last week, government reports showed on Thursday. Still, the unemployment rate at last read was 3.9%, only a few tenths of a percentage point above where it was when the Fed first began raising rates in March 2022. The government's employment report for the current month will be released next Friday. U.S. Treasury Secretary Janet Yellen said on Thursday she believes the U.S. economy does not need further drastic monetary policy tightening to prevent inflation from becoming ingrained and was on track to achieve a "soft landing" with strong employment. UNCERTAIN PATH Traders have been betting heavily that the Fed will keep its overnight benchmark interest rate steady in the 5.25%-5.50% range for the next several months. But they also expect rate cuts to start in May, with further reductions taking the policy into the 4.00%-4.25% range by the end of 2024 - a view that Williams made plain he does not share. "I'm not losing too much sleep" over the market's view "because there's a lot of uncertainty about the future path of policy," Williams said. Models suggest the stance of Fed policy is the most restrictive it has been in 25 years, and it will probably need to stay restrictive for "quite some time," Williams said. Williams said he expects inflation to end this year at 3%, and ebb to 2.25% in 2024, as economic growth slows to 1.25% and the unemployment rate rises to 4.25%. "If price pressures and imbalances persist more than I expect, additional policy firming may be needed," Williams said. San Francisco Fed President Mary Daly struck a similar tone in remarks to the German newspaper Borsen-Zeitung in an interview published on Thursday, noting her "base case" does not call for any further rate hikes, though it is "too early to know" if the Fed is finished with the rate increases. "I'm not thinking about rate cuts at all right now," Daly said. "I'm thinking about whether we have enough tightening in the system and are sufficiently restrictive to restore price stability." The policymakers spoke before a customary blackout period when they refrain from public comment ahead of a rate-setting meeting. The Fed will hold its next policy meeting on Dec. 12-13. Fed Chair Jerome Powell is expected to get a final word in on Friday, when he is due to speak at Spelman College in Atlanta. Trader bets on Fed rate cuts starting in the first half of 2024 gained steam this week after Fed Governor Christopher Waller, an influential and usually hawkish policymaker, suggested rates cuts by then could be needed to keep policy from becoming overly restrictive in the face of easing inflation. Daly and Williams were more cautious. Data has previously indicated progress that revisions or a change in momentum later erased, and both policymakers on Thursday emphasized the uncertainty of the current outlook. "We still think the Fed will not want to be head-faked again, preferring to see further progress in key policy variables before declaring mission accomplished," TD Securities strategist Oscar Munoz wrote. https://www.reuters.com/markets/us/inflation-cools-fed-officials-signal-rate-hikes-likely-done-2023-11-30/
2023-11-30 19:44
Nov 30 (Reuters) - OPEC+ oil-producing countries failed to produce a joint output reduction target on Thursday but did agree to voluntary curbs on production of more than two million barrels per day (bpd) for the first quarter of 2024. Oil prices fell after rising by more than 1% earlier in the session after OPEC+ announced the voluntary cuts. Here are analysts' views on the outcome of the OPEC+ meeting (in alphabetical order): HELIMA CROFT, RBC: "Without a press conference to parse the deal details, it is a rather opaque ending as we await more details of who is in or out for additional production adjustments. That said, Brazil's entry into the group could prove to be the big deliverable if it does indeed lead to one of the biggest sources of new supply coming under collective management in the coming years." JAMES DAVIS, FGE: "While it would appear that this is the plan from OPEC+, a lack of clarity of what individual country production targets will be for Q1 has left the market disappointed. We are being told what individual countries will cut, but we are not getting a clear message for what the base line for these cuts is, so we don’t know for certain what the actual production level plans are." The cuts might be just enough to keep the market balanced in Q1, he said, "but it will be close." STEWART GLICKMAN, CFRA RESEARCH: "What the market was hoping for was a unified voice on agreed-upon cuts. Instead, what we apparently are getting is a series of individual Saudi-lite voluntary cuts." OLE HANSEN, SAXO BANK: "The fact we are seeing no additional commitment from Saudi Arabia highlights the fragility of this arrangement. "Once the dust settles these initiatives may be enough to sustain the price of Brent in the 80s but with the U.S. economy heading for a semi-hard soft landing and China still struggling, the focus on weakening demand will be stronger than on this attempt by OPEC+." CALLUM MACPHERSON, INVESTEC: "Brazil will be joining OPEC+, but like Mexico, it will not have an output limit and will not take part in cuts, making the inclusion seem rather superfluous. So this does not help. For now the outcome does not live up to the expectation that had raised in recent days." CHRISTYAN MALEK, J.P. MORGAN: "The (oil price) market reaction implies disbelief in the full efficacy of the cuts. However, setting a new framework for each member to deliver on its cut reflects the degree of trust and cohesion among the members; case in point, the fact Brazil is joining is testament to the strength in numbers for OPEC+." GIOVANNI STAUVANO, UBS: "It seems the OPEC+ production cuts are 'voluntary' cuts, not part of an OPEC+ agreement. Hence the concern is that a large fraction of it could be a pledge on paper and effectively less barrels being removed from the market." TAMAS VARGA, PVM: The supply cuts are not bearish, but perhaps not as deep as hoped for, Varga said. He added that the market remains pessimistic about demand next year, highlighting expectations of high interest rates persisting in major economies. A sharp fall in crude prices that followed the first reports of what had been agreed on Thursday were a "head-scratcher", Varga said, adding: "It just goes to show the view on the demand side." The question is how these cuts will play out in practice, as compliance will likely be an issue, he said. https://www.reuters.com/business/energy/view-opec-announces-voluntary-oil-output-cuts-2023-11-30/
2023-11-30 19:38
Nov 30 (Reuters) - U.S. oil refiner Phillips 66 (PSX.N) has retained two top financial and legal advisers for its duel with activist investor Elliott Investment Management, according to a person familiar with the matter. Elliott wants two board seats to be filled by executives with refining experience and faster action on restructuring the fourth-largest U.S. oil refiner to improve its lagging financial performance, the New York activist said on Wednesday. It disclosed a $1 billion stake and took public its calls for change. Phillips 66 is relying on financial and legal advice from Goldman Sachs (GS.N) and Wachtell, Lipton, Rosen & Katz, the person familiar with the matter said. Shares in the Houston refiner rose for a second day as investors cheered the activist's proposal for refining cost cuts and a refreshed board of directors. The stock traded at $127.95 at mid-day Thursday, up 8.4% from its $118 per share close prior to Elliott's going public with its letter. A Phillips 66 spokesman declined to comment on the advisers or whether it has new meetings scheduled with the activist. The company has acknowledged it held and will continue those talks but has not said whether it would accept Elliott's director candidates. "We think some portfolio optimization will be necessary to achieve full valuation, as the conglomerate structure hides the true value of PSX's assets," wrote Tudor Pickering Holt & Co. refining and chemicals analyst Matthew Blair. He rates the shares a "buy" with a $130 target price. The company could divest some non-operated pipeline properties, a European retail fuels unit and its 50% stake in CPChem, a chemicals joint venture with Chevron (CVX.N), Blair wrote. https://www.reuters.com/markets/deals/us-refiner-phillips-66-retains-big-name-advisers-elliott-duel-2023-11-30/
2023-11-30 19:21
BRASILIA/RIO DE JANEIRO, Nov 30 (Reuters) - Brazil hopes to join the OPEC+ group of oil-producing countries in January after a full technical analysis, the country's energy minister said on Thursday, however sources said Brazil is not expected to take part in the group's coordinated output caps. President Luiz Inacio Lula da Silva's office confirmed receiving the invite during his trip to Saudi Arabia, but said he had not formally responded. The president's office and the Mines and Energy Ministry did not say whether Brazil would participate as an OPEC+ observer or as a full participant in the group's shared production quotas. Brazil is not expected to take part in any OPEC+ output caps, said three people familiar with the matter, who requested anonymity to discuss the confidential discussions. OPEC+ nations on Thursday agreed to voluntary output cuts approaching 2 million barrels per day (bpd) for early next year. Mines and Energy Minister Alexandre Silveira told his OPEC+ peers that Brazil was eager to formally enter the group at a future meeting in Vienna, after a technical review of its charter for cooperation. "It's all set. But there is a phase of detailed analysis by our technical team of the document we just received, which is part of the protocol in Brazil," Silveira said in Portuguese during a virtual meeting, where his comments were met with a standing ovation from OPEC+ ministers. In a written statement, OPEC+ said it welcomed Silveira to the meeting, adding that Brazil "will join the OPEC+ Charter of Cooperation starting January 2024." Brazil is the largest oil producer in South America, at 4.6 million barrels per day of oil and gas, of which 3.7 million bpd are crude. State-controlled company Petrobras (PETR4.SA) dominates crude production with 2.35 million per day, mostly processed in Brazil's refineries, followed by Shell (SHEL.L) with 411,000 bpd, TotalEnergies (TTEF.PA) with 146,000 bpd, Petrogal with 110,000 bpd and CNOOC (0883.HK) with 74,000 bpd. https://www.reuters.com/markets/commodities/brazil-confirms-opec-invite-minister-says-eager-join-2023-11-30/
2023-11-30 19:07
NEW YORK, Nov 30 (Reuters) - Crypto lender Celsius Network may have to seek a new creditor vote on its proposed transformation into a bitcoin mining business, a U.S. bankruptcy judge said during a court hearing on Thursday. Celsius said last week that it had reduced its post-bankruptcy business plans to focus only on bitcoin mining, citing the skepticism of the U.S. Securities and Exchange Commission (SEC) about its other planned business lines. U.S. Bankruptcy Judge Martin Glenn of New York, who is overseeing Celsius' Chapter 11 process, expressed frustration on Thursday about the late pivot, saying that he had been a "broken record" about Celsius's need to reach agreement with the SEC. "This is not the deal that the creditors voted on," Glenn said. The revised deal could face "substantial opposition" from creditors, he said. The SEC did not definitively object to Celsius' bankruptcy plan before it was approved, but Celsius said the agency was unwilling to approve crypto lending and staking activity that the agency has opposed in the past. Celsius attorney Chris Koenig argued at Thursday's hearing that Celsius's court-approved bankruptcy plan gave the company flexibility to pivot to a mining-only business. A new vote is not required because the new deal is equally good for creditors, he said. Celsius filed for Chapter 11 protection in July 2022, one of several crypto lenders to go bankrupt following the rapid growth of the industry during the COVID-19 pandemic. Celsius's revised plan frees up $225 million in cryptocurrency assets that would have been managed by a consortium of outside investors, collectively called Fahrenheit, under Celsius's old bankruptcy plan, Koenig said. Celsius creditors can expect a 67% recovery under the new plan, an increase from 61.2% under the Fahrenheit deal, according to court documents filed on Thursday. Under the new proposal, Celsius's post-bankruptcy mining business will be managed by US Bitcoin Corp, which had previously bid as part of the broader consortium that included Arrington Capital. Arrington and other Fahrenheit bidders will not be part of the new company, and Celsius chose US Bitcoin over Blockchain Recovery Investment Consortium (BRIC), which had it had selected as a backup bidder after an auction that concluded in May. An attorney for BRIC said on Thursday that Celsius should have honored its backup bid agreement rather than pursuing a new deal with US Bitcoin. Celsius attorney Koenig called the BRIC deal "stale," and said that US Bitcoin's more recent work on the Fahrenheit bid made it a better choice. Two customers, acting without lawyers, signaled opposition to the deal in court papers filed on Wednesday, arguing that Celsius should be fully liquidated instead. https://www.reuters.com/technology/celsius-network-faces-roadblocks-pivot-bitcoin-mining-2023-11-30/
2023-11-30 19:02
Markets now price hefty ECB, Fed rate cuts in 2024 Nov euro zone inflation eases more than expected Gap with central bank messaging widens further LONDON, Nov 30 (Reuters) - A big disconnect between financial markets and central banks has just got deeper, with traders ramping up their bets on interest rate cuts in the United States and Europe as evidence grows that inflationary pressures are fast abating. Money markets are now pricing in over 100 basis points apiece of rate cuts from the U.S. Federal Reserve and European Central Bank next year, and have this week shifted the expected timing of their first moves firmly forward into the first half of 2024. It's not hard to see why traders are ready to leave behind the most aggressive rate-hiking cycle in decades. Euro zone inflation tumbled far more than expected in November, data on Thursday showed, a challenge to the ECB's narrative of stubborn price growth. In the United States, the Fed's preferred inflation measure, the core PCE price index, eased in October. For much of this year central banks have successfully pushed back against rate cut bets. But this week's price action suggests that task could get harder as investors question whether the mantra of higher rates for longer can hold if inflation keeps easing quickly. "Is the Fed going to pivot from their hawkish statements that they are adamantly focused on inflation and need to kill it?" said Nate Thooft, global CIO for the multi-asset solutions team for Manulife Investment Management. "I believe the Fed will act rationally and begin to cut rates by the end of next year, but we can't rule out the scenario that the Fed is not going to cut rates and just let the ramifications of recession do what they do." SHIFT NEARING Markets now fully price in a 25 basis point U.S. rate cut in May, having seen a 65% chance earlier this week. Just a few weeks ago, a first cut was seen in June. Bets for a March cut have also shot up, with traders pricing in nearly a 50% chance, versus 35% earlier this week. That creates a headache for policymakers, as the speed of the bond and stock rally prompted by those changed expectations loosens the financing conditions they have been trying to tighten by raising rates. U.S. Treasury yields are down more than 50 bps in November, the biggest monthly fall in over a decade. A Goldman Sachs U.S. financial conditions index has eased 90 bps over the last month to its loosest since early September. The bank has in the past shown a 100-bps loosening boosts growth by one percentage point in the coming year. But for many, the fast fall in inflation means central bankers may shift closer to market thinking, as they did in 2021-2022 when investors challenged their "transitory" inflation view as price pressures surged. Comments this week from U.S. Federal Reserve policymaker Christopher Waller, a hawkish and influential Fed voice, that he was increasingly confident inflation would return to its 2% target, has fuelled rate-cut bets. In early November, Bank of England chief economist Huw Pill said mid-2024 might be time for cuts, a view also expressed by Greek central banker Yannis Stournaras. "There are now committee members in all three (banks) willing to talk about rate cuts next year," said Chris Jeffery, head of rates and inflation strategy at LGIM. "Previously we'd had a stone wall of: higher for longer Table Mountain, rates need to stay in restrictive territory." Some analysts, like Deutsche Bank's, are forecasting even swifter cuts than markets. "Central banks will probably pivot quicker than people think, and probably harder, and inflation (trends) basically give them the opportunity to do that," said Dario Perkins, managing director of global macro at TS Lombard. Traders now fully price a 25 bps ECB rate cut in April. In late October, they expected a first cut in July. Thursday's data showed euro zone inflation dropped to 2.4% in November from 2.9% in October, nearing the ECB's 2% target. Simon Harvey, head of FX analysis at Monex Europe, said recent weak data suggested that euro area monetary policy is too tight and has induced a recession. "The ECB should begin to ease policy as soon as April 2024, with risks that a more sinister downturn in growth could warrant a rate cut as soon as March," he said. https://www.reuters.com/markets/rates-bonds/global-markets-rate-cuts-analysis-pix-2023-11-30/
