2024-05-17 10:53

BERLIN, May 17 (Reuters) - German arms producers will need help from the government if they are to reduce their dependency on Chinese materials and still be able to compete with U.S. companies, Germany's defence industry association said. Hans Christoph Atzpodien, head of the Bundesverband der Deutschen Sicherheits- und Verteidigungsindustrie (BDSV), said the U.S. defence industry had, under government pressure, widely shed their dependency on Beijing in recent years. German arms producers have not been forced to follow suit, but are bound to come under pressure to do so sooner or later, Atzpodien said. "If we don't follow their (U.S.) example, we will eventually come under pressure (to do so)," he told Reuters in an interview this week. Berlin's awareness of the situation has increased but the domestic defence industry is still waiting for concrete steps to be taken, he said. "One could consider establishing national reserves for resources that are especially crucial," he said, alluding to existing oil and gas reserves. "One could also follow the American example and use public money to reduce dependencies (on China) in the making of defence products, paying a premium for goods that have been manufactured without Chinese raw materials." CHINA STRATEGY U.S. President Joe Biden unveiled steep tariff increases on an array of Chinese imports, and Germany is also concerned by the flood of cheaper imports from China. Berlin outlined the need to reduce strategic dependencies on Chinese goods in its first China strategy announcement last year, citing "unfair practises" and political differences. The U.S. overtook China as Germany's most important trading partner in the first quarter of this year, according to Reuters' calculations based on official data. Anxiety about alleged Chinese spying - dismissed by Beijing - has also grown, with three German nationals arrested last month on suspicion of handing over technology with military applications. Atzpodien warned that German arms producers' business would be at risk if war broke out between China and Taiwan, which China says is part of its territory. He said that such a war could trigger sanctions on Beijing that German companies would have to comply with, or China would cut exports of raw materials used by the defence industry. Under such scenarios, U.S. arms makers would have an advantage as, having reduced their dependency on China, they could offer their products "sanctions-free". The German defence industry depends heavily on Chinese raw materials such as rare earths, with Beijing mining 69% of rare earths globally and processing 86%, according to official figures. China also dominates the mining of other resources crucial for the defence industry, with a share of 74% for graphite and 78% for wolfram, according to the figures. China also accounts for more than 90% of global magnesium processing - essential for the production of aluminium - and more than 80% of germanium. Sign up here. https://www.reuters.com/business/aerospace-defense/german-defence-industry-says-it-will-need-government-help-reduce-dependence-2024-05-17/

2024-05-17 10:46

BENGALURU, May 17 (Reuters) - India's JSW Steel (JSTL.NS) New Tab, opens new tab said on Friday it expected higher sales and spending in the financial year 2025, even as the country's top steelmaker posted a drop in fourth-quarter profit. Consolidated net profit for the three months to March 31 fell nearly 65% year-on-year to 12.99 billion rupees ($155.9 million) on higher costs and softer steel prices. However, its steel sales are expected to rise to 27 million tons (MT) in the current fiscal year, higher than 21.22 MT sales logged in the financial year 2024. It also estimated a capex of 200 billion rupees ($2.40 billion) in the current fiscal year, compared with 167.52 billion spent in FY24. The O.P. Jindal group company reported a sequential fall in profit after logging three straight quarterly gains on the back of strong domestic demand. Domestic steel prices contracted in the quarter amid weak demand in China as the world's top producer and consumer of the metal grappled with concerns in its property sector. India became a net importer of cheap finished steel products in FY24. Imports from China remained a challenge for the domestic steel industry, JSW Steel said in a statement. However, higher costs of key steelmaking raw materials, iron ore and coking coal, led to higher expenses, further pressuring the company's bottomline. Total revenue from operations fell 1.5% to 462.69 billion rupees, while a 2.9% surge in expenses was led by a rise in input costs. The fall in earnings come as India's top steelmakers, including JSW Steel and Tata Steel (TISC.NS) New Tab, opens new tab, are expected to invest billions to ramp up capacity as domestic demand for the metal remains high. The company also named CFO-designate Swayam Saurabh as its chief financial officer, who will take up the role on June 1. ($1 = 83.3129 Indian rupees) Sign up here. https://www.reuters.com/markets/commodities/jsw-steel-posts-fall-fourth-quarter-profit-2024-05-17/

2024-05-17 10:29

NEW YORK, May 16 (Reuters) - With JPMorgan Chase (JPM.N) New Tab, opens new tab coming off a year of record profits, investors are eager to learn about the firm's succession plans, investments in artificial intelligence and opportunities beyond traditional banking. Chief Executive Jamie Dimon and his team will be presenting their growth strategies and financial targets on Monday at JPMorgan's investor day in New York. More than 18 years into Dimon's tenure as CEO of the bank, JPMorgan's shares are trading near record levels. Still, Dimon said the bank needs to grow and stay ahead of a varied group of competitors including rival banks, fintech companies and private creditors. He delivered the message at a gathering of hundreds of the bank's top leaders in Miami in February, reminding them not to get complacent, according to two sources who were present at the event but declined to be identified discussing an internal meeting. A JPMorgan spokesperson confirmed the content of the meeting. Shareholders agree with Dimon's priorities. "We would want to see what the bank is investing in, the growth pockets, the product diversification they are making and the opportunities that they see beyond traditional banking," said David Ellison, a portfolio manager at Hennessy Funds, which manages $4 billion and owns JPMorgan stock. The largest U.S. lender has flourished on surging interest payments and an influx of deposits, including from its purchase of collapsed lender First Republic Bank last year. Its stock has risen about 20% in 2024, outpacing an S&P index of bank shares. Investors will scrutinize the bank's forecast for net interest income (NII), or the difference between what it makes on loans and pays out on deposits. JPMorgan previously estimated its NII would reach $89 billion this year. While the forecast was higher than an earlier $88 billion estimate, it disappointed analysts who expected an even bigger jump. Shareholders are also eager to hear more about JPMorgan's use of artificial intelligence and other advancements from its $15 billion technology budget. "The constant investment made by the bank in people, products and technology, including artificial intelligence...is how the bank has managed to stay ahead of the curve," said Jason Goldberg, a banking analyst at Barclays. SPOTLIGHT ON SUCCESSION The CEO's own plans will also be in the spotlight as he takes the stage. As one of the world's most prominent business leaders, he has been floated as a contender for a senior role in U.S. economic policy. At last year's investor day, Dimon said he could step down in 3.5 years. "It is important to provide investors with confidence on the strength of the bench, and so there will be focus on the emerging leaders," said Mac Sykes, portfolio manager at Gabelli Funds, who did not expect a significant announcement on succession on Monday. JPMorgan's board has identified Jennifer Piepszak and Troy Rohrbaugh, recently appointed co-CEOs of its expanded commercial and investment bank, as candidates for the top job. Marianne Lake, CEO of consumer and community banking, and Mary Erdoes, CEO of asset and wealth management, are also in the running. The executives are expected to discuss their respective businesses on Monday. The event is "an excellent chance for investors to see them in their new roles and look for clues regarding how things might play out over the next few years," Scott Siefers, an analyst at Piper Sander, wrote in a note. Dimon's assessment of the U.S. economy will also be closely watched. Strong employment and healthy consumer finances are propping up an "unbelievable" economic boom, he said last month, despite risks from a rising national debt, inflation and geopolitical conflicts. Despite the bank's strong performance, some investors are frustrated by its restraint on stock buybacks, said Mike Mayo, an analyst at Wells Fargo. "Investors are used to getting two scoops of ice cream from JPMorgan and now that they're only getting one scoop, so they seem upset," he said. Still, Mayo has a buy recommendation on the stock and ranks Dimon as the top-performing CEO among large banks. The consensus analyst estimates for share buybacks is $12.7 billion for this year, according to a report by KBW. Other investors are satisfied with the level of buybacks, as long as earnings stay robust and the bank sets aside money for acquisitions. "We view the extra capital on the balance sheet as dry powder in case some assets come up at a better valuation," said Brian Mulberry, a client portfolio manager at Zacks Investment Management, which manages $8 billion and owns JPMorgan stock. "On top of our agenda is that they show us clearly what future revenues look like, and that they're durable, with strong profit margins," Mulberry said. Sign up here. https://www.reuters.com/business/finance/jpmorgan-investors-weigh-ceo-dimons-strategy-succession-after-record-year-2024-05-16/

2024-05-17 10:11

A look at the day ahead in U.S. and global markets from Mike Dolan After a week of worldwide stock market records, Friday seems set for a breather - with attention switching to the deepening Chinese housing bust and sweeping government plans to stop the rot there. Thursday's saw the blue-chip Dow Jones (.DJI) New Tab, opens new tab briefly top the 40,000 milestone as the S&P500 (.SPX) New Tab, opens new tab, Nasdaq (.IXIC) New Tab, opens new tab and MCSI all-country index (.MIWD00000PUS) New Tab, opens new tab all clocked all-time intraday highs too. Signs of U.S. disinflation resuming and the wider economy cooling all stoked hopes that Federal Reserve interest rate cuts are indeed coming - with annual corporate profit growth and year-to-date stock index gains revving up into double digits. As both a reflection of and spur to the new bullishness, the VIX 'fear index' of equity volatility (.VIX) New Tab, opens new tab subsided to its lowest level of the year on Friday. And futures held steady overnight after a modest tick back in the cash market on Thursday. But as the Sino-U.S. geopolitical rivalry intensified this week with new trade tariffs from Washington and the Russia-China summit in Beijing, market attention switched to the health of the world's second biggest economy and data showing accelerating home price deflation there. Chinese stocks (.CSI300) New Tab, opens new tab jumped on Friday as the government announced a series of measures to cut across a housing slump that's seen new home prices fall in April for tenth consecutive month and at the fastest pace in almost 10 years - with property investment so far in 2024 falling almost 10% from last year. The latest rescue plans allows local governments to buy "some" unsold apartments, relaxes mortgage rules and pledges to deliver unfinished homes. With 4.25 billion square feet of new housing for sale in January-March, up 24% year-on-year, analysts at Tianfeng Securities estimate it will cost around $1 trillion to buy the entire stock. Separately, the People's Bank of China said it would set up a $41.53 billion relending facility for affordable housing and lower mortgage rates and downpayment requirements further. China's CSI 300 Real Estate index (.CSI000952) New Tab, opens new tab jumped nearly 9% on the announcements, with broader CSI300 and Hong Kong's Hang Seng (.HSI) New Tab, opens new tab both up about 1%. The offshore yuan weakened slightly. The extent to which the property sector problems are sapping the economy were revealed in a further slowing of retail sales growth there last month to just 2.3%, the slowest increase since December 2022 and far short of forecasts. The renewed Chinese export push that unnerves western governments and is prompting renewed trade tensions saw industrial production growth beat expectations, however, and accelerate to an annual 6.7% last month. Back on Wall Street, part of the subdued end to Thursday's trading was due to a modest backup in Treasury yields after news of a pickup in U.S. import price inflation that forms an important component of the Fed's favored PCE inflation gauge. Ten-year Treasury yields hovered just under 4.40% on Friday and the dollar (.DXY) New Tab, opens new tab was firmer too. But the wider sweep of U.S. housing, jobless and industry updates released in parallel showed the economy coming off the boil - with U.S. economic surprise indexes plumbing their most negative in 16 months. Fed officials mostly welcomed the tick lower in consumer prices this week, but continued to stress patience before cutting rates. Futures markets are still largely priced for a quarter point cut by September, with a one-in-three chance of a move as soon as July. In corporate results, WalMart (WMT.N) New Tab, opens new tab was a standout and its stock rose 7% after the retail giant raised its fiscal 2025 sales and profit forecast, betting on easing inflation to further boost demand for essentials. Friday's diary is mostly bare - with Fed speakers dominating. AI-bellwether Nvidia's (NVDA.O) New Tab, opens new tab results next week are now in view, while the 'meme stocks' craze of the earlier part of the week seems to have dissipated again. In Europe, June interest rate cut hopes remain high but there was some dampening of easing expectations after that from European Central Bank board member Isabel Schnabel. "The path beyond June is much more uncertain," she said. Key diary items that may provide direction to U.S. markets later on Friday: * US April leading index * Federal Reserve Board Governor Christopher Waller and San Francisco Fed President Mary Daly speak Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-05-17/

2024-05-17 10:09

LONDON, May 17 (Reuters) - Sterling was on track for a weekly gain versus the dollar on Friday, as currency traders look ahead to key data releases next week that could point to how quickly the Bank of England may cut interest rates. The pound edged down 0.1% on the day to $1.2656 , but was on track for a weekly gain of 1%. Against the euro, it gained 0.1% to 85.70 pence . Data this week showed that British wages grew by more than expected in the first three months of the year, but other figures suggested the labour market is losing some of its inflationary heat. Closely-watched consumer price inflation data is due out on Wednesday, while 'flash' PMI data on British business activity will follow the next day. Money markets are pricing in around a 55% chance of a rate cut in June, according to LSEG data. "Our baseline case is still a June rate cut. We do consider however that significant reductions in the pace of private pay and the rate of services inflation could be quite a stretch and that the Monetary Policy Committee (MPC) could delay a move to August," economists at Investec said in a note. On Tuesday, Bank of England chief economist Huw Pill said the central bank might be able to consider cutting interest rates over the summer. Sign up here. https://www.reuters.com/markets/currencies/sterling-track-weekly-gain-ahead-uk-inflation-data-2024-05-17/

2024-05-17 10:05

TORONTO, May 17 (Reuters) - The Bank of Canada would be willing to cut interest rates three times ahead of the Federal Reserve's first move before a declining currency threatens to endanger the inflation outlook, the median estimate of seven analysts in a straw poll showed. A weaker Canadian dollar versus the greenback this year has sparked debate among investors about how much the BoC would be prepared to diverge from its U.S. counterpart. Investors expect the Canadian central bank to begin rate cuts in June or July, with next Tuesday's inflation reading seen as a key input. But the Fed is seen on hold until September, even after cooler-than-expected U.S. inflation data on Wednesday. The BoC's benchmark interest rate, at 5%, already sits 38 basis points below the midpoint of the range set by the Fed for its policy rate. Further widening in the differential could add to pressure on the loonie. Still, analysts say it would take a large move in the currency to drive up import costs enough to put at risk the central bank's efforts to lower inflation to a 2% target. A higher cost of imported goods tends to raise the prices that businesses charge to consumers. "Although there's a theoretical limit to how far the Bank of Canada can set its own policy rate beneath the Fed funds rate, it's likely well below current levels," said Karl Schamotta, chief market strategist at Corpay. "The exchange rate could weaken if interest differentials were to widen further ... but the passthrough to inflation should be relatively modest." The latest data shows inflation at an annual rate of 2.9% in March, down from an 8.1% peak in June 2022. A Reuters poll of analysts predict year-on-year consumer price inflation to be at 2.8% for April. The data will be released by Statistics Canada on May 21. The Canadian dollar has already weakened nearly 2.7% against its U.S. counterpart since the start of the year, to 1.3602 per U.S. dollar, or 73.52 U.S. cents, as the greenback climbed against a basket of major currencies. "As a rule of thumb, a 10% fall in the loonie would boost core goods prices by 2.5%," Olivia Cross, North America economist at Capital Economics, said in a note, adding that core goods make up about 30% of the Canadian CPI basket. There is a limit to how far U.S. and Canadian interest rates can diverge, but "certainly we're not close to that limit," Bank of Canada Governor Tiff Macklem said earlier this month. The Canadian economy has lagged the U.S. economy in recent quarters, weighed by weaker productivity growth as well as higher levels of household debt and a shorter mortgage cycle, a factor some economists argue should see the BoC move ahead of the Fed. The OECD projects Canada's economy will grow 1% this year, much less than the 2.6% rate it forecasts for the United States. The interest rate gap has stayed within 100 basis points since the global financial crisis of 2008-09. Still, that level may not be a binding constraint if the Canadian outlook deteriorates over the second half of 2024, said Robert Both, a senior macro strategist at TD Securities. "A larger-than-expected drag on the household sector from mortgage renewals could give the Bank more license to diverge from the Fed," Both said. Sign up here. https://www.reuters.com/business/finance/weaker-loonie-may-not-deter-bank-canada-diverging-fed-2024-05-17/