2023-11-24 14:48

WASHINGTON, Nov 24 (Reuters) - U.S. business activity held steady in November, but employment in the private sector declined for the first time in almost three-and-a-half years, consistent with expectations for an economic slowdown in the fourth quarter. S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, was unchanged at 50.7 this month as a modest rise in services sector activity offset a contraction in manufacturing. A reading above 50 indicates expansion in the private sector. The survey's flash manufacturing PMI dropped to 49.4 this month from 50.0 in October. Its flash services sector PMI edged up to 50.8 from 50.6 in the prior month. Economists expect overall economic activity to moderate considerably this quarter as the lagged effects of higher interest rates from the Federal Reserve start to have a greater impact. Since March 2022, the U.S. central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% band. The economy grew at a 4.9% annualized rate in the third quarter. Growth estimates for the October-December quarter are mostly below a 2% pace. The flash composite new orders index increased to 50.4 in November, ending three straight monthly declines. The modest rise from a reading of 49.0 in October was mostly driven by the services sector, with factory orders stagnant. The lack of strong order growth resulted in businesses shedding workers, with the survey's employment index dropping to 49.7. That was the first contraction since June 2020 and followed a reading of 51.3 in October. S&P Global said businesses commonly cited relatively muted demand conditions and elevated cost pressures as the reasons for layoffs, which were across both manufacturing and services sectors. Companies were also implementing hiring freezes. "Job shedding has spread beyond the manufacturing sector, as services firms signaled a renewed drop in staff in November as cost savings were sought," Sian Jones, principal economist at S&P Global Market Intelligence, said in a statement. The decline in the employment gauge could be flagging a sharp slowdown in the labor market in the months ahead. The labor market has been gradually cooling, with the unemployment rate rising to 3.9% in October, the highest in nearly two years. An easing labor market will aid the Fed's fight against inflation. That battle is likely to get another boost from subsiding prices for energy and other raw materials. The S&P Global survey's measure of prices paid by businesses for inputs fell to 55.7, the lowest level since October 2020, from 57.3 in October. In addition to the lower energy and raw material prices, some firms also reported that a reduction in headcount had eased cost pressures. Though businesses are still raising prices for their products and services, the pace has slowed considerably from last year. https://www.reuters.com/markets/us/us-business-activity-steady-november-sp-global-survey-2023-11-24/

2023-11-24 14:25

BUENOS AIRES, Nov 24 (Reuters) - Argentina's President-elect Javier Milei said on Friday that the closure of the country's central bank, a signature campaign pledge, was a "non-negotiable matter", according to a statement from his office posted on social media platform X. The comments, in response to what he called "false rumors", come as the outsider libertarian economist races to put together his team ahead of taking office on Dec. 10, with some signs that he is picking a more moderate Cabinet that expected. Argentina's social security administration ANSES, a key institution given Milei's pledge to slash state spending and subsidies, will be lead by economist Osvaldo Giordano from the key central Cordoba region, the statement added. That marks a shift from a previous plan that Milei would appoint a close ally to lead the administration. Horacio Marin, a private energy sector executive, was also confirmed as the incoming chief of state oil company YPF. Milei faces major hurdles to implement his more radical reform plans, which include dollarizing the economy, shutting the central bank and privatizing state companies like YPF, which will take time if they can be done at all. His libertarian coalition has a limited number of seats in Congress and no provincial governors. Milei also has to juggle demands from the more mainstream conservative bloc, whose public backing was key to him winning the run-off election last week. https://www.reuters.com/world/americas/argentinas-milei-says-shutting-central-bank-non-negotiable-2023-11-24/

2023-11-24 14:05

LONDON, Nov 24 (Reuters) - Spiralling compliance costs, ongoing legal headaches and a shrinking share of the market: Binance's new chief Richard Teng faces daunting challenges in turning a new leaf for the world's biggest crypto exchange. Teng was quickly appointed CEO this week after Binance's founder Changpeng Zhao pleaded guilty to breaking U.S. anti-money laundering laws, part of a $4.3 billion deal to resolve a years-long U.S. investigation. Now Teng must deal with years of intrusive U.S. financial monitoring, an ongoing U.S. Securities and Exchange Commission (SEC) lawsuit and the potential loss of its dominance of the crypto sector, analysts, investors and former regulators said. Teng faces an especially tough task in transforming the culture of Binance, four of the people said. U.S. Treasury Secretary Janet Yellen said on Tuesday that Binance "turned a blind eye to its legal obligations in the pursuit of profit" as it "allowed money to flow to terrorists, cybercriminals, and child abusers." Teng, who before working for Binance was a financial regulator, said on social media that he would focus on reassuring users of Binance's "financial strength, security and safety" and collaborate with regulators "to uphold high standards globally." "Teng is seen as steady hands," said Carol Alexander, professor of finance at the University of Sussex, who has tracked Binance for years. Still, leading a cultural shift at Binance - a firm shaped by Zhao in his own image - would be "hugely difficult," she said. Investors pulled almost $1 billion from Binance in the 24 hours after Zhao's demise, among its biggest daily outflows of the last year. The reaction is a sign of the challenges ahead for Teng, who previously ran Binance's regional markets. While the U.S. settlement bars Zhao from future involvement in operating or managing Binance, he is still a major shareholder. Yi He, Binance's co-founder and the mother of Zhao's children, remains a top executive at the company. "New page," she posted on Tuesday. Contacted by Reuters with a summary of this article, Binance did not make Teng available for an interview. Binance spokesperson Simon Matthews told Reuters that Binance had lacked "compliance controls adequate for the company that it was quickly becoming" and made "misguided decisions" as it grew quickly. "Richard was hired two years ago to help Binance mature and move past these historical issues," Matthews said, adding that Binance had "worked hard to restructure our organization and personnel and upgrade our systems." The firm has "new leadership" in place with experience in compliance, law enforcement and major corporations, he added. Zhao's lawyers did not respond to a request for comment. MONITORSHIP As part of the resolution, the U.S. authorities will subject Binance to five years of "financial monitorship" overseen by the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN will keep access to Binance's books, records and systems, "oversee remedial undertakings" needed to address Binance's non-compliance with anti-money laundering and sanctions rules, the Treasury said on Tuesday. Such steps are unusual, challenging and costly, even for mainstream financial companies with deep experience of dealing with regulators, said lawyers and former regulators. "It's a real millstone - everything you are doing is subject to scrutiny," said John Reed Stark, a former chief of the SEC's Office of Internet Enforcement. While the exchange has said it has ramped up compliance spending, Zhao for years sought to shield it from regulators, Reuters reported in a series of articles in 2022. Still, Binance should be able to cover both additional compliance costs and the U.S. fines, investors have said. "The fundamentals of our business are VERY strong," Teng posted on social media on Wednesday. "Our capital structure is debt-free, expenses are modest, and, despite the low fees we charge our users, we have robust revenues and profits." HIRED BY ZHAO Hired by Zhao as Binance's Singapore chief in 2021, Teng has been CEO of Abu Dhabi Global Market from 2015 to 2021. His previous roles included chief regulatory officer at Singapore Exchange (SGX). He was promoted to head Binance's regional markets in May and was widely seen as a potential successor to Zhao. His rise to the top job is for Binance "an opportunity to move past mounting enforcement actions and chart a path towards stability and a fresh beginning," said Rajeev Bamra, head of digital assets strategy at Moody's Investors Service. Complicating prospects for a clean slate, however, are outstanding legal headaches. Binance is facing an SEC lawsuit for allegedly operating a "web of deception," including artificially inflating its trading volumes and diverting customer funds. Binance has denied the allegations. It is also under investigation in France for alleged aggravated money-laundering. On the business front, too, Binance is under pressure. For years it dominated the crypto market, but this year has rapidly lost market share. Last month it controlled 32% of crypto spot and 50% of derivatives trading, according to crypto firm CCData, down from 55% and 62% respectively in January. Fuelling the decline has been an end to Binance's zero-fees transaction promotions, as well as its regulatory problems, analysts said. Other exchanges, such as Seychelles-registered OKX, have gained market share this year, according to CCData. OKX is the second-largest exchange after Binance by market share. In the longer term, the exchange may lose further market share because of reduced marketing and business development budgets following the U.S. fines, said Joseph Edwards, head of research at London crypto firm Enigma Securities. "But that's talking quite far down the line - they are a very strong incumbent overall." https://www.reuters.com/technology/binance-ceo-teng-braced-uphill-battle-post-zhao-era-2023-11-24/

2023-11-24 13:06

SAO PAULO, Nov 24 (Reuters) - Brazil's Finance Minister Fernando Haddad said on Friday that the government will introduce measures to help the 17 sectors affected by a presidential veto of a bill aimed at extending a payroll tax exemption. Haddad told reporters the measures would be presented after government officials return from the COP28 climate summit in Dubai. "When Congress becomes aware of what we intend to do, I believe this situation will be resolved," said the minister, without detailing any initiative. President Luiz Inacio Lula da Silva vetoed the bill on Thursday citing concerns that it entailed revenue loss without specifying compensatory measures. The project passed by Congress in October would extend the tax benefits until 2027. The move came as his administration tries to push through measures aimed at achieving an ambitious target of erasing the primary deficit by 2024, with some encountering resistance in Congress. The veto could yet be reversed by lawmakers if absolute majorities in both the lower house and Senate cast votes in favor of the bill's reinstatement. The government had emphasized its commitment to help affected sectors after the approval of a consumption tax reform and a measure designed to generate 35 billion reais ($7 billion) in 2024 by preventing state tax discounts from reducing companies' taxable income for federal revenue purposes, said Haddad. He reiterated the government's goal of achieving fiscal balance and said this would be accomplished through tackling tax distortions. Haddad also attributed a fall in public revenue in the third quarter to the economic downturn spurred by high-interest rates. "High interest and high deficit need to be corrected in the shortest possible time," he said. ($1 = 4.9059 reais) https://www.reuters.com/world/americas/brazil-readies-measures-help-sectors-hit-by-veto-tax-benefits-2023-11-24/

2023-11-24 12:06

LONDON, Nov 24 (Reuters) - The pound rose on Friday nearing its highest in almost three months, lifted in part by a broad-based retreat in the dollar, but also by a rise in UK bond yields after this week's budget update included a forecast of higher government debt issuance. Also bullish for sterling was a reading of consumer confidence on Friday that showed people in Britain turned more optimistic about the outlook for the economy and their personal finances this month, although sentiment is a long off where it was before COVID struck in early 2019. Sterling rose to a high of $1.2575 on Thursday, taking advantage of lower trading volumes because of the U.S. Thanksgiving holiday to make inroads against the dollar. By Friday, the pound traded around $1.257, up 0.28%. Against the euro , sterling was up 0.2% at 86.84 pence. Currency markets are caught up in shifting expectations for the timing of the first central bank rate cuts. Money markets show traders believe the Fed could move as soon as May, while the Bank of England is expected to cut later and by less. This, in theory, should support sterling, but if the concern among investors is over the economic outlook, that complicates the picture, Trade Nation senior market analyst David Morrison said. "It's very difficult for the Bank of England, in particular, because the economic data hasn't been great - a bit like the euro zone - growth is pretty tepid and yet inflation remains way above target," he said. "I just don't see us escaping a recession here. That's in my bones." BUDGET BLUES On Wednesday, Finance Minister Jeremy Hunt unveiled a series of tax boosts to support the UK economy, but estimates of both growth and inflation were more pessimistic than previously forecast. Headline inflation subsided to 4.6% in October. A year ago it was at 11%, but it is still double the BoE's target of 2% and well above consumer inflation rates in either the United States or the euro zone. The Office for Budget Responsibility, the UK's budget watchdog, forecast inflation to reach 2.8% in 2024, compared with a forecast of 0.9% in March. Separately, the Debt Management Office cut its gilt issuance remit for 2023/24 to 237.3 billion pounds ($295.7 billion) from 237.8 billion pounds previously. The 500 million-pound cut was smaller than any primary dealer predicted in a Reuters poll, which has sent 10-year gilt yields up 20 basis points this week to their highest since Nov 14. "If we start seeing some bad GDP numbers and if we do start to see unemployment going up, given everything else, you've then got the Bank of England maybe having to cut rates," Morrison said. Data from market research firm GfK on Friday showed UK consumer confidence index was stronger than anticipated in November, increasing to -24 from October's three-month low of -30. November's reading was above the -28 forecast in a Reuters poll of economists, and follows a sharp fall the month before. "Recent ups and downs in confidence have underlined the nation's topsy-turvy economic mood as encouraging news about falling inflation and wage growth is offset by high personal taxation, alongside costly fuel and energy bills," Joe Staton, GfK's client strategy director, said. https://www.reuters.com/markets/currencies/sterling-nears-three-month-high-uk-consumers-more-upbeat-2023-11-24/

2023-11-24 12:03

NEW YORK/RALEIGH, N.C., Nov 24 (Reuters) - Shoppers took to stores across the world on a Black Friday that appeared subdued compared with prior years, looking for discounted electronics, clothing and household goods in the kickoff to the holiday shopping season crucial to big retailers. Brokerage TD Cowen lowered its U.S. holiday spending estimate to 2% to 3% growth, from 4% to 5%, as it forecast flat Black Friday traffic. Discounts in October and November removed the excitement and urgency of Black Friday. "People have already got what they want," said David Klink, senior analyst at Huntington Private Bank, which owns shares of Walmart and Target. "There are only so many big-screen TVs and Alexa [Amazon voice assistants] you can buy." With many consumers squeezed by persistent inflation and high interest rates, U.S. holiday spending is expected to rise at the slowest pace in five years. Most major retailers slashed their seasonal hiring. Retailers will likely continue to discount throughout the season to avoid inventory gluts at yearend. Caution from shoppers -- coupled with a strong quarterly performance from discount retailers like Target (TGT.N) and Ross Stores (ROST.O) -- show lingering concern over inflation and a higher cost of living even as fears of a recession recede. “People are more value conscious,” said Barbara Kahn, a professor at The Wharton School at University of Pennsylvania. “People are spending, but they’re spending more conservatively.” A record 130.7 million people are expected to shop in stores and online in the U.S. on Black Friday this year, the National Retail Federation estimates. But at 6 a.m. on Friday at a Walmart in New Milford, Connecticut, the parking lot was only half full. "It's a lot quieter this year, a lot quieter," said shopper Theresa Forsberg, who visits the same five stores with her family at dawn every Black Friday. She was at a nearby Kohl's (KSS.N) store at 5 a.m. In Paramus, New Jersey, crowds at the Garden State Plaza mall were thinner than prior years, according to Michael Brown, a partner at consulting firm Kearney, who has checked shopping activity for the past 35 years. "It wasn't the good, old-fashioned kick-the-doors-down-type" shopping event this year, he said. Mall goers "were carrying a bag or two, not the armfuls that you would see in pre-pandemic years. They are not blowing the budget today." U.S. shoppers plan to spend an average $875 on holiday purchases - $42 more than last year - with clothing, gift cards and toys at the top of most shopping lists, according to a survey of 8,424 adults conducted in early November by the National Retail Federation. The Black Friday tradition began in the U.S. but has gone global, as well as moving online. The rise of online shopping has reduced the importance of Black Friday as a single-day event. Shoppers spent an estimated $7.3 billion online through 6:30 p.m. Eastern on Black Friday, a 7.4% increase compared with last year, data from Adobe Analytics showed. On Thanksgiving day, they shelled out $5.6  billion online, Adobe said. "I think people are going to still spend on travel and leisure activities that might be online and not necessarily in stores," said Jimmy Lee, CEO of The Wealth Consulting Group, which holds Amazon shares. "The excitement of waiting in lines on Black Friday - there's not as much of that anymore. A lot of people .... would rather just sit at home and look for deals." DEEPER DISCOUNTS Retailers from Macy's to Amazon (AMZN.O) launched deals as early as October and are likely to offer additional discounts closer to Christmas, Macy's CEO Jeff Gennette told investors this month. Whether those deals will attract inflation-weary consumers is the biggest worry for retailers. Best Buy (BBY.N) is offering between $100 and $1,600 off electronics including laptops, flat-screen TVs and KitchenAid mixers after telling investors this week that shoppers are holding off on big-ticket purchases. A downturn in luxury spending prompted department stores, including Bergdorf Goodman and Nordstrom (JWN.N), to offer steep discounts on items such as Balenciaga shoes and Oscar de la Renta earrings. On Chicago’s Magnificent Mile, shoppers were unimpressed. Carlos Araejo-Ruiz, 17, hoped for a deal on designer belts at Nordstrom. “There was an enthusiastic factor when you’re looking forward to jaw-dropping deals. It’s not the equivalent to years before,” he said. Paul Aheren, 69, who drove from Indianapolis, said he remembered when luxury department stores had markdowns up to 70%. “At Saks,' if you came in from 8 a.m. to 10 a.m., they had a bunch of stuff reduced. You don’t see any of that anymore,” he said. “What they are doing now is clearing the stock they couldn’t sell. I don’t consider that a bargain.” SPORADIC PROTESTS Black Friday came at the start of a four-day Israel-Hamas truce. Protesters held sporadic “shut it down for Palestine” demonstrations across the United States. Demonstrators staged a die-in at a Dallas mall; in Raleigh, protesters briefly shut down the Crabtree Valley Mall, according to online videos; and in Boston, dozens protested outside a Puma shop, a brand that protesters say is the main sponsor of the Israel Football Association. Puma said it does not support any political direction, political parties or governments. ($1 = 0.9168 euros) https://www.reuters.com/business/retail-consumer/us-retailers-hope-draw-picky-black-friday-shoppers-stores-2023-11-24/