2024-07-19 03:42

TOKYO, July 19 (Reuters) - Japan's government cut this year's growth forecast on Friday as consumption took a hit from rising import costs due to a weak yen, highlighting the fragile nature of the economic recovery. But it projected growth to accelerate next year on robust capital expenditure and consumption, retaining its view the economy will sustain a domestic demand-led recovery. Some members of the government's top economic council, however, voiced concern over recent weakness in consumption and the pain the yen's fall was inflicting on households. "We can't overlook the impact a weak yen and rising prices are having on households' purchasing power," the private-sector members of the council told Friday's meeting that discussed the new growth forecasts. "The government and the Bank of Japan must guide policy with a close eye on recent yen declines," they said. Prime Minister Fumio Kishida told the meeting that the government must be vigilant about the impact rising prices, driven in part by a weak yen, can have on the economy, according to the Kyodo news agency. The government releases its economic growth forecasts in January and then revises them around July. They serve as a basis for compiling the state budget. In the revised estimates, the government cut its economic growth forecast for the current fiscal year ending in March 2025 to 0.9% from 1.3% projected in January. The new forecast is above private-sector forecasts for 0.4% growth, reflecting government hopes that broadening wage hikes, tax cuts and an extension of fuel subsidies will boost consumer spending. The government expects the economy to grow 1.2% in fiscal 2025, the estimates showed. While a weak yen gives exporters a boost, it has become a source of concern for policymakers as it hurts consumption by inflating the cost of fuel and food imports. The government is suspected to have intervened on several occasions this month to slow down the yen's decline, shifting the market's attention to whether the Bank of Japan would raise interest rates at its two-day policy meeting ending on July 31. The BOJ is also likely to trim its growth forecast for this fiscal year at the meeting, reflecting a rare unscheduled downgrade to historical gross domestic product (GDP) figures, sources have told Reuters. It currently projects growth of 0.8% in the current fiscal year. Sign up here. https://www.reuters.com/world/japan/japan-cuts-growth-forecast-panel-member-frets-weak-yen-pain-2024-07-19/

2024-07-19 00:20

SAO PAULO, July 18 (Reuters) - Brazilian planemaker Embraer (EMBR3.SA) , opens new tab said on Thursday it had delivered 47 aircraft in the second quarter of 2024, an 88% increase from the prior year, and reaffirmed its full-year outlook despite ongoing aerospace industry supply chain issues. The world's third-largest planemaker behind Airbus (AIR.PA) , opens new tab and Boeing (BA.N) , opens new tab delivered 19 commercial and 27 executive jets in the April-June period, as well as one defense C-390 Millennium jet. In a securities filing, Embraer said its firm order backlog reached $21.1 billion at the end of June, the highest in seven years. The delivery report comes days ahead of the Farnborough Airshow, when planemakers often announce major orders. Investors have been positive about Embraer's demand prospects, with shares in the planemaker up more than 80% so far this year. Embraer has been experiencing strong demand for its next generation E2 jets as carriers face a shortage of larger single-aisle planes from Airbus and Boeing, and has also managed to convert business jet purchase options into firm orders. The Brazilian firm plans to deliver 72 to 80 commercial aircraft this year, up from 64 last year, as well as 125 to 135 business jets, up from 115 in 2023. Chief Executive Francisco Gomes Neto told Reuters last month the firm was confident in reaching its commercial aircraft target this year and could deliver up to 90 of its E-Jets to airlines next year. Embraer has seen opportunities emerge as it has production slots available from 2026, meaning it can deliver on new jet sales before Boeing and Airbus, the latter having sold out its production of single-aisle jets until the end of the decade. Recent orders include 20 E2 jets from Mexicana de Aviacion and NetJets' converting options for up to 250 Praetor 500 executive jets into firm orders. Sign up here. https://www.reuters.com/business/aerospace-defense/embraer-deliveries-rise-88-second-quarter-order-backlog-7-year-high-2024-07-19/

2024-07-18 23:19

Netflix dips in extended trade after results Domino's Pizza slumps after Q2 same-store sales miss Warner Bros Discovery jumps on report of mulling break-up plan VIX touches multi-month high Indexes down: Dow 1.29%, S&P 0.78%, Nasdaq 0.70% NEW YORK, July 18 (Reuters) - U.S. stocks tumbled on Thursday, reversing early gains as investors continued to rotate away from high-priced megacap growth stocks and second-quarter earnings season gathered steam. All three major U.S. stock indexes suffered losses, and the blue-chip Dow fell the most, halting a series of consecutive record closing highs. The sell-off resumed a day after the Nasdaq posted its biggest one-day drop since December 2022 and the chip sector (.SOX) , opens new tab suffered its largest daily percentage plunge since the pandemic-related shutdown panic of March 2020. But anxiety remained elevated. The CBOE Market Volatility index (.VIX) , opens new tab, often called the "fear index," touched its highest level since early May. "What's different from yesterday is you did see money going into other sectors ... but today it’s a pretty broad selloff," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. The Russell 2000 (.RUT) , opens new tab fell for the second day in a row after an apparent rotation into smallcaps sent the index soaring 11.5% in its most robust five-day gain since April 2020. "Over the last two weeks we've seen a rotation into other sectors including midcaps and smallcaps, which have been huge laggards," Ghriskey added. "But today it’s reversing. The market is flailing around trying to find a direction." "Investors (are) just pulling back and saying 'we're going to cash out now, it's been a great run.' They’re unsure what’s going to happen in terms of politics," Ghriskey said. In economic news, initial jobless claims data landed above analysts' estimates, providing further evidence that the labor market is softening. This is a necessary step toward putting inflation on a sustainable downward path, according to the U.S. Federal Reserve. The Dow Jones Industrial Average (.DJI) , opens new tab fell 533.06 points, or 1.29%, to 40,665.02, the S&P 500 (.SPX) , opens new tab lost 43.68 points, or 0.78%, to 5,544.59 and the Nasdaq Composite (.IXIC) , opens new tab dropped 125.70 points, or 0.7%, to 17,871.22. Of the 11 major sectors in the S&P 500, healthcare stocks (.SPXHC) , opens new tab suffered the largest percentage decline, while energy (.SPNY) , opens new tab stocks were the sole gainers. Domino's Pizza (DPZ.N) , opens new tab tumbled 13.6% after falling short of estimates for quarterly same-store sales. Homebuilder D.R. Horton (DHI.N) , opens new tab beat profit estimates and delivered more new homes than expected, but tightened its annual forecast. Its shares jumped 10.1%. The move also lifted the Philadelphia SE Housing index (.HGX) , opens new tab to a record high. Warner Bros Discovery (WBD.O) , opens new tab jumped 2.4% following a report that the company had discussed a plan to split its digital streaming and studio businesses from its legacy TV networks. Streaming pioneer Netflix (NFLX.O) , opens new tab lost ground in extended trading after posting quarterly results. Declining issues outnumbered advancing ones on the NYSE by a 3.43-to-1 ratio; on Nasdaq, a 3.49-to-1 ratio favored decliners. The S&P 500 posted 76 new 52-week highs and two new lows; the Nasdaq Composite recorded 160 new highs and 56 new lows. Volume on U.S. exchanges was 12.14 billion shares, compared with the 11.8-billion average for the full session over the last 20 trading days. Sign up here. https://www.reuters.com/markets/us/nasdaq-futures-jump-tsmc-results-lift-semiconductor-shares-2024-07-18/

2024-07-18 23:00

LONDON, July 18 (Reuters) - The global lead market has bifurcated since the start of June with Shanghai Futures Exchange (ShFE) prices significantly outperforming the London Metal Exchange (LME). LME three-month lead touched a two-year high of $2,359 per metric ton in May but has since retraced to $2,190 and is now up by just 4.3% on the start of the year. The equivalent Shanghai price has marched higher to six-year highs and is up by 12.4% on the start of January. The divergence is more pronounced on a cash basis with the LME forward curve in contango and the Shanghai curve in backwardation. The contrasting fortunes of the two markets for the battery metal derive from the distribution of inventory. The LME warehouse network is awash with metal, while Shanghai is gripped in a rolling squeeze. FEAST AND FAMINE LME lead stocks more than doubled over the first quarter of 2024, hitting an 11-year high of 275,925 tons on April 2. The headline figure has since slipped to 208,525 tons but there's ongoing churn as stocks financiers seek out cheaper storage options, which is itself a sure sign of an over-supplied market. The bulk of this year's inflow has been Indian metal, which accounted for 46% of warranted stocks at the end of June, up from 24% at the start of the year. It's worth noting that there were another 140,700 tons of off-warrant inventory at the end of May, most of it located at Singapore, the current hub of LME lead stocks activity. LME warehouses in Singapore have seen 63,000 tons of fresh warranting activity over June and July, suggesting a large part of that off-warrant tonnage is still there. ShFE stocks, by contrast, total a relatively modest 59,408 tons, representing a marginal year-to-date increase of 6,524 tons. SHANGHAI SHORT Market open interest on the ShFE lead contract has been running at elevated levels, registering a life-of-contract high of 215,224 contracts in the middle of June. It currently stands at 184,625 contracts, up from 69,000 as recently as March. The lift in trading activity has coincided with a sharp tightening of the Shanghai time-spread structure with backwardations running all the way through to June next year. Short-position holders are evidently struggling to find sufficient units to deliver to exchange warehouses, although more metal is expected to arrive on the July contract expiry. Exchange tightness reflects a shortage of material from both primary and secondary smelters in the domestic market. Spot physical transactions are taking place at a premium even to the elevated ShFE cash price, according to local data provider Shanghai Metal Market (SMM). China's primary lead production fell by 4.7% and its secondary output by 8.5% over the first half of the year, according to SMM, reflecting shortages of both mined concentrates and battery scrap. Imports of concentrates slid by 13% to 418,500 tons in the January-May period with primary smelters topping up with battery scrap at the expense of pure secondary refiners. REVERSE FLOW The imbalance between a well-supplied Western market and a tight Chinese market is the polar opposite of the situation just a couple of years ago. The destructive impact of COVID-19 on supply chains caused LME stocks to shrink to below 50,000 tons in 2021 with physical premiums soaring as buyers struggled to source available metal. ShFE stocks, by contrast, rose above 200,000 tons in September of that year. The east-west imbalance opened an export arbitrage window through which Chinese smelters shipped much-needed supply to western markets. China flipped from being a net importer of refined lead in the 2017-2020 period to a significant net exporter over the following years. Net outbound flows totalled 93,000 tons in 2021 and grew to 115,000 tons in 2022 and to 185,000 tons last year. Exports have slowed appreciably this year with the January-May total falling by 76% year-on-year to just 14,500 tons. The current out-performance of Shanghai relative to London has now opened a profitable import arbitrage with signs that trade flows are about to reverse. This week has brought a spate of LME stocks cancellations with 29,425 tons being prepared for physical load-out. The benchmark cash-to-three-months spread has contracted sharply to a contango of $22 per ton from over $60 last month. It's possible of course that this is just metal on a run-around to cheaper LME storage but it's clearly caught the London market off-guard. It's quite possible that this particular tranche of lead may not reappear in a different LME shed in the near future but may be embarked on a one-way journey to China. The opinions expressed here are those of the author, a columnist for Reuters Sign up here. https://www.reuters.com/markets/commodities/after-three-years-exports-china-is-now-short-lead-2024-07-18/

2024-07-18 22:53

July 18 (Reuters) - Federal Reserve Bank of San Francisco President Mary Daly said on Thursday she is looking for more confidence that inflation is moving back to the Fed's 2% target before calling for an interest rate cut. "We don't have price stability right now," Daly said at a Dallas Fed event. "We've had some really good incoming data, but even with the incoming data on inflation being positive and good data after earlier this year, we're not there yet" on getting inflation sustainably back to the 2% target, she said. Daly said monetary policy is in a balancing act right now. "It's a risk to act too soon to normalize interest rates and then have inflation stuck below or above our target and it's a risk to hold on too long and make the labor market falter," she said. Daly cautioned for patience on the prospect of rate cuts, saying Fed officials have to "balance the costs of acting fast and being wrong," and avoiding a policy mistake is important. The Fed is expected to cut rates in September, but some have said the central bank should act at its July meeting given cooling price pressures. Sign up here. https://www.reuters.com/markets/us/feds-daly-says-not-there-yet-price-stability-2024-07-18/

2024-07-18 22:03

NEW YORK, July 18 (Reuters) - Foreign holdings of U.S. Treasuries hit a record in May, the Treasury Department reported on Thursday, while a decline in Japan's huge stockpile closely coincided with what appeared to be the start of intervention to support its currency. Holdings of U.S. Treasuries rose to $8.129 trillion in May from a revised $8.04 trillion in April. Treasury International Capital System (TICS) data showed that the sum total of all net foreign acquisitions of long-term securities and banking flows was a net inflow of $15.8 billion, comprised of $7.3 billion of private inflows and $8.6 billion of net foreign official inflows. U.S. Treasuries firmed in May, easing yields lower as investors anticipated the Federal Reserve would cut interest rates this year. The expected time frame for easing was pushed back as the Fed said it would wait to pivot until inflation came more in line. The benchmark 10-year Treasury note yield fell to 4.512% from 4.684% during the month, while the yield on the two-year note fell to 4.893% from 5.046%. Japan's stash of Treasuries shrank to $1.128 trillion from $1.15 trillion in April. Japan remains the largest foreign holder of U.S. Treasury securities. China, which is No. 2, saw its holdings fall to $768 billion from $770 billion in April. Market participants have been focused on Japan's Treasury debt holdings as a reserve of dollars due to the threat of intervention from the country's monetary authorities to bolster the yen. Japanese authorities appeared to intervene to sell dollars and buy yen several times since late April. "Foreign holders were largely net buyers and that's consistent with interest rates actually slipping over course of the month," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York. "Japan was the big standout, likely due to the intervention." Sign up here. https://www.reuters.com/markets/us/foreign-us-treasury-holdings-rise-japans-stockpile-shrinks-2024-07-18/