2023-11-16 16:32

FRANKFURT, Nov 16 (Reuters) - The European Central Bank's chief supervisor on Thursday supported creating global standards for convertible bonds that were wiped out as part of Credit Suisse's rescue by rival UBS (UBSG.S) earlier this year. Holders of Credit Suisse's Additional Tier 1 bonds with a notional value of 16 billion Swiss francs ($18.1 billion) lost their whole investment while stockholders received some shares in UBS - a differential treatment that triggered lawsuits and sent shockwaves through financial markets. ECB chief supervisor Andrea Enria backed the decision by Swiss authorities, which reflected clauses enshrined in local bonds, but urged global standard-setters on the Basel Committee on Banking Supervision to put some order in this market. "It would be good if the Basel committee could in future think further on some standardization of contracts in these areas," Enria told the annual conference of the European Systemic Risk Board. "Adding some common features, I think, would be beneficial to avoid that there is a sort of contagion between different instruments and that everybody understands how they work in times of stress." Speaking on the same panel, the Basel Committee's chairman Pablo Hernández de Cos said the issue was "on the list". The Basel Committee said in a report last month it would review the features of AT1 bonds, including the "loss-absorbing hierarchy". Shares are generally regarded as junior to bonds, meaning they suffer losses first in a crisis. But Credit Suisse's bonds contained a clause allowing authorities the write down those bonds without winding down the bank. This clause is not a feature in bonds issued by European Union banks and the ECB has made clear that it would impose losses on shareholders first. ($1 = 0.8856 Swiss francs) https://www.reuters.com/markets/rates-bonds/ecb-backs-global-rules-bonds-wiped-out-credit-suisse-rescue-2023-11-16/

2023-11-16 16:22

LONDON, Nov 16 (Reuters) - The Bank of England is likely to need to keep interest rates high for an extended period, Deputy Governor Dave Ramsden said on Thursday, sticking close to the central bank's existing language on the topic. Ramsden voted with the majority on the Monetary Policy Committee (MPC) this month to keep interest rates on hold at a 15-year high of 5.25%. "Monetary policy is likely to need to be restrictive for an extended period of time," Ramsden said in prepared remarks for the European Systemic Risk Board's annual conference. "The MPC have communicated that monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term," he added. Financial markets currently price in the BoE starting to cut rates in May or June next year, with three quarter-point rate cuts priced in by the end of 2024. Ramsden, who is in charge of the BoE's quantitative tightening programme, reiterated that the central bank did not yet know how big its balance sheet would need to be once it had sold a sufficient amount of its stockpile of government bonds. "We continue to work towards assessing what our future steady state reserves supply looks like, both to meet our monetary policy objectives through quantitative tightening, while ensuring our financial stability objective is also supported," he said. The BoE last year became the first major central bank to start actively selling down the stockpile of bonds it had bought since the 2008 global financial crisis. The BoE currently holds 748 billion pounds ($931 billion) of gilts, down from a peak of 875 billion pounds in December 2021, and committed to reduce its stockpile by 100 billion pounds between October 2023 and September 2024. ($1 = 0.8035 pounds) https://www.reuters.com/world/uk/boes-ramsden-uk-interest-rates-stay-restrictive-extended-period-2023-11-16/

2023-11-16 15:43

MEXICO CITY, Nov 16 (Reuters) - Mexico is eyeing broadening tax incentives set out in a recent "nearshoring" decree to companies that relocate operations to the country, Economy Minister Raquel Buenrostro was quoted as saying in a newspaper interview published on Thursday. An expansion of the decree published in October, which benefits 10 sectors, could include new incentives for production that remains in Mexico, the minister said. "We are promoting the strengthening of the national supply chains as an economy, but I think we can be even more ambitious to generate the incentive for new investments and not limit it to exports, but to strengthen national production too," Buenrostro said in the interview with newspaper El Financiero. The United States had concerns the decree could be discriminatory against other countries, but Mexico was willing to modify it in order to avoid conflict, she said. "The modification serves to expand the spectrum that also encourages new investments, and that it is not only for maquila (assembly plants), not only for export industries, but also be for national production," Buenrostro added. Her comments come as President Andres Manuel Lopez Obrador is due to meet with U.S. President Joe Biden on Friday on the sidelines of the APEC Economic Leaders' forum in San Francisco where they are expected to discuss migration and trade. Mexico's government expects nearshoring - the trend of locating manufacturing capacity in Mexico, closer to the U.S. market, rather than in Asia - to add up to 1.2 percentage points to growth, which is expected to reach 3.5% this year. https://www.reuters.com/markets/mexico-eyes-broader-tax-incentives-lure-foreign-investment-minister-2023-11-16/

2023-11-16 13:33

Nov 16 (Reuters) - Europe's largest fund manager, Amundi's investment institute, expects emerging markets (EM) to benefit next year from better economic prospects than developed markets, and as the U.S. Federal Reserve embarks on a rate cutting cycle. The Fed is likely to begin pivoting to rate cuts in mid-2024, which is "positive for EM", said Alessia Berardi, head of emerging macro and strategy at the Amundi Investment Institute. In this scenario, Indian and Japanese equity markets are "relatively" favoured, she told the Reuters Global Markets Forum (GMF). "With the U.S. slowing down significantly, (the) growth premium in favour of EM is increasing," Berardi said, predicting a recessionary outlook for the United States in the first half of 2024. The MSCI emerging markets index (.MSCIEF) has risen 2.8% year-to-date, compared to a 17% rise in the S&P 500 (.SPX). Asia has been resilient despite a slowdown in China this year, Berardi said, adding that the region offered interesting opportunities as the policy mix there is less restrictive than in other regions. In terms of fund allocation, Berardi said she was cautious but gradually adding equities with a "preference for quality and growth in the first phase," focussing on India and Japan. "Later on, adding more beta or valuation styles," she said. Within fixed income, Berardi said her preference was for hard-currency bonds, while adding duration later. The iShares JPM Emerging Markets Bond (EMB.O) exchange traded fund has slipped about 1.6% this year against a backdrop of stubborn inflation and aggressive rate hikes, following 2022's plunge of 22%, one of the worst years on record for emerging markets. Calling emerging currencies "strongly undervalued", Berardi said those with "high carry trade" - the funding of loans and foreign assets by borrowing low-cost currencies - such as the Indian rupee and the Indonesian rupiah were more attractive bets in 2024. (Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://tinyurl.com/yyr3x6pu) https://www.reuters.com/markets/emerging-markets-gain-fed-easing-better-growth-prospects-amundis-berardi-2023-11-16/

2023-11-16 11:43

TOKYO, Nov 16 (Reuters) - Japan's Sumitomo Metal Mining (5713.T) is considering producing cathode battery materials in the United States among other options as it looks to expand output to meet demand from electric vehicles, an executive said on Thursday. Sumitomo Metal, which supplies the nickel-cobalt-aluminium (NCA) cathode materials for the Panasonic (6752.T) lithium-ion batteries used in Tesla (TSLA.O) EVs, is building a plant in Niihama, western Japan, to boost annual cathode production capacity by 24,000 metric tons in 2025 from 60,000 tons now. "Where and when to increase our production capacity next time depends on each country's regulations and laws," Katsuya Tanaka, managing executive officer, told an analyst meeting. "We are examining the impact from any changes to laws and regulations, including the U.S. Inflation Reduction Act (IRA), will have on business, if we were to invest in the United States, especially with the presidential election coming up next year," he said. The IRA includes major provisions to cut carbon emission, boost domestic production and manufacturing. Sumitomo Metal plans to bolster its annual output capacity to 120,000 tons by March 2028 and 180,000 tons by March 2031. The company, which is also a miner and smelter, is also accelerating exploration of a new nickel mine, another executive said. It abandoned a long-running feasibility study on an Indonesian nickel project in Pomalaa. Australia's nickel sulphide explorer Ardea Resources ARL.AX said in July it has signed a non-binding agreement with a Japanese consortium to conduct a feasibility assessment at its Kalgoorlie Nickel Project Goongarrie Hub in Western Australia. The consortium consists of Sumitomo Metal, Mitsubishi (8058.T) and Mitsui (8031.T). "Currently, we are evaluating Ardea's report on the preliminary study while discussing about a more detailed study," said Masaru Takebayashi, managing executive officer. "We are still in the preliminary study stage and whether we will join the project depends on the outcome of the studies," he said, adding the company is also scrutinizing a few other projects. Sumitomo Metal is targeting to boost annual nickel output capacity to 150,000 tons in a long-term from 82,000 tons now. https://www.reuters.com/markets/commodities/sumitomo-metal-mining-looks-boost-battery-materials-output-possibly-us-2023-11-16/

2023-11-16 11:42

SINGAPORE/HOUSTON, Nov 16 (Reuters) - Vitol (VITOLV.UL), world's largest independent oil trader, has provisionally chartered a supertanker to load oil from Venezuela for China, according to two shipbrokers and data from shiptracking firms Kpler and Vortexa. The Very Large Crude Carrier Gustavia S., chartered for $11 million, is scheduled to load its cargo between Nov. 27 and Dec. 2, according to the sources. The company declined to comment on the issue. Vitol is among major European trading houses seeking to resume trade in Venezuelan oil after Washington in mid-October issued a general licence lifting, through April, sanctions on the country's oil production and exports. The U.S. has said it wants to see progress towards a transparent presidential election in Venezuela as well as a release of political prisoners by Nov. 30 or it could reimpose the sanctions. https://www.reuters.com/markets/commodities/vitol-hires-ship-load-venezuela-crude-china-after-us-lifts-sanctions-sources-2023-11-16/