Aurelia Butler

BEIJING (Reuters) -China pledged on Thursday to increase the budget deficit, issue more debt and loosen monetary policy to maintain a stable economic growth rate as it gears up for more trade tensions with the United States as Donald Trump returns to the White House.The remarks came in a state media readout of an annual agenda-setting meeting of the country’s top leaders, known as the Central Economic Work Conference (CEWC), which was held on Dec. 11-12.”The adverse impact brought by changes in the external environment has deepened,” national broadcaster CCTV said following the closed-door CEWC.This year’s meeting comes as the world’s second-largest economy is stuttering due to a severe property market crisis, high local government debt and weak domestic demand. Its exports, one of the few bright spots, are facing the threat of higher U.S. tariffs. The CEWC pledges match the tone of one of the Communist Party leaders’ most dovish statements in more than a decade, which was released on Monday after a meeting of the Politburo, a top decision-making body. The Politburo said China would switch to an “appropriately loose” monetary policy stance, “more proactive” fiscal levers, and step up “unconventional counter-cyclical adjustments.”In the same vein, the CEWC summary flagged a higher budget deficit and more debt issuance at a central and local government level. Leaders also vowed to reduce bank reserve requirements and cut interest rates “in a timely manner”.”The direction is clear, but the size of stimulus matters, which we probably will find out only after the U.S. announces the tariffs,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said.This dovish shift in messaging shows China is willing to go even deeper into debt, prioritising, at least in the near term, growth over financial risks, analysts said.At CEWC, Beijing sets targets for economic growth, the budget deficit, debt issuance and other variables for the year ahead. The targets are agreed at the meeting, but won’t be officially released until an annual parliament meeting in March. Reuters reported last month that government advisers recommended that Beijing keep its growth target of around 5% unchanged next year.The CEWC readout said it was “necessary to maintain steady economic growth,” but did not mention a specific number.”Maintaining 5% will be quite challenging in 2025, given that the extra ‘Trump shock’ will hit exports” and capital expenditure, Xu Tianchen, senior economist at the Economist Intelligence Unit, said.”However, a good level of stimulus will prevent a freefall, and I don’t think growth will tank below 4.5%.”TARIFF THREATSTrump’s tariff threats have rattled China’s industrial complex, which sells goods worth more than $400 billion annually to the United States. Many manufacturers have been shifting production abroad to escape tariffs.Exporters say the levies will further shrink profits, hurting jobs, investment and growth in the process. They would also exacerbate China’s industrial overcapacity and deflationary pressures, analysts said.A Reuters poll last month predicted China will grow 4.5% next year, but also suggested that tariffs could impact growth by up to 1 percentage point.If exports take a hit, China needs to look internally for a new growth engine. But consumers feel less wealthy due to falling property prices and minimal social welfare. Low household demand is a key risk to growth.Beijing has issued increasingly forceful statements on boosting consumption throughout the year, but it has offered little in terms of policies apart from a subsidy scheme for purchases of cars, appliances and a few other goods.The CEWC summary said the scheme would be expanded and that efforts would be made to increase household incomes and “vigorously boost consumption.””Markets could be encouraged,” Lynn Song, ING’s chief economist for Greater China, said. “The call to vigorously boost consumption is a good sign.” More

LONDON (Reuters) -Stocks nudged up on Thursday and the euro rose ahead of a European Central Bank monetary policy decision, while investor sentiment was supported by U.S. consumer inflation data that cemented bets for a Federal Reserve interest rate cut next week. In a busy day for central bank decisions, the Swiss franc weakened after the Swiss National Bank cut rates by half a point, its largest reduction in nearly 10 years, which hit the franc. Markets had priced a good chance of a half-point cut in the run-up to Thursday’s meeting.The dollar eased against a range other currencies, as investors took profit on some of the market’s strength ahead of Wednesday’s inflation reading, which showed the consumer price index (CPI) rose exactly in line with expectations in November.Europe’s STOXX 600 edged into positive territory, while Swiss stocks rallied sharply following the SNB’s rate cut. U.S. stock index futures were down 0.1-0.2%Overnight, the tech-focused Nasdaq shot up 1.8% to close above 20,000 for the first time, while the S&P 500 climbed 0.8%. “The U.S. CPI print lit a flame in U.S. equity,” said Chris Weston, head of research at Pepperstone.”The market has essentially seen one of the last remaining obstacles that could derail sentiment out of the way”, he said, “seeing the coast somewhat clearer for the illustrious seasonal chase of returns to play out into year-end.”Traders now place a 97% chance on a quarter-point Fed cut on Dec. 18.Higher U.S. Treasury yields prevented the dollar from straying too far below two-week highs, after data showed an increase in the U.S. budget deficit.Ten-year Treasury yields rose on Thursday by 2 bps to 4.291%, set for a rise of nearly 14 bps this week, their largest weekly increase since late October.CENTRAL BANK FOCUSThe dollar reversed early losses against the Japanese yen to hold steady at 152.46 after Reuters reported that BOJ policy makers were inclined to forgo a hike on Dec. 19 and wait for more data on wages at the start of next year.The Australian dollar surged on unexpectedly strong employment data, rebounding from Wednesday’s weakness following a Reuters report that Beijing is considering allowing the yuan to depreciate further next year. China is Australia’s top trading partner and the Aussie is often used as a liquid proxy for the yuan.The yuan held its ground above a one-week low after the central bank kept the official midpoint for the currency stable, to last trade at 7.268, leaving the dollar down 0.18% in offshore trading.The Swiss franc was last down 0.5% at 0.888 to the dollar, following the SNB decision. Against the euro, the franc was down nearly 0.7% at 0.9339. “Cutting the policy rate by 50 basis points is the right decision, as inflation risks are on the downside and the economy is growing below potential, while Switzerland’s main export are struggling with structural and cyclical problems,” Karsten Junius, chief economist at J Safra Sarasin, said.The euro ticked up 0.2% to $1.0509 after dipping to a one-week trough overnight. The ECB is widely expected to cut euro zone rates by 25 basis points later in the day.Traders will focus on what central bank President Christine Lagarde signals about the outlook for growth and inflation in the months to come, given the political instability in France and Germany right now, as well as the risk of tariffs from the incoming U.S. administration led by Donald Trump.Gold briefly traded at a more than one-month high, driven by the prospect of more rate cuts from the Fed and lower bond yields. It was last steady at $2,717.25 an ounce, having earlier risen to $2,725.79 for the first time since Nov. 6.Crude oil extended its rally this week, lifted by the threat of additional sanctions aimed at stifling Russian oil output.Brent crude futures rose 0.35% to $73.77 a barrel, while U.S. crude futures were up 0.3% at $70.50. More

NEW DELHI (Reuters) -India’s retail inflation eased in November as soaring vegetable prices moderated, boosting expectations of an interest rate cut by the central bank at its next policy review amid concerns around slowing growth. Retail inflation eased in November to 5.48%, lower than 6.21% in the previous month and below a 5.53% forecast by economists in a Reuters poll.Food inflation slowed down to 9.04% from 10.87% a month earlier. Food accounts for nearly half of the consumption basket. Vegetable prices rose 29.33% in November from a year earlier after rising 42.18% in October.The decline in inflation, together with a sharp fall in growth in the July to September quarter to a seven-quarter low, supports expectations of a rate cut in February when the monetary policy committee meets next. The meeting would be the first after the appointment of new central bank governor Sanjay Malhotra. “The deflationary trend in food prices, in particular vegetables, along with the lagged impact of softening demand amid food price deflation should aid headline CPI to fall below 5% in December,” said Garima Kapoor, an economist at Elara Securities.She said she expects a 25-basis-point cut by the Monetary Policy Committee at the meeting in February. The Reserve Bank of India (NS:BOI) (RBI) left interest rates unchanged earlier this month, but reduced the cash reserve ratio that banks are required to hold in order to ease monetary conditions and support growth.Vegetable prices in November moderated due to a bumper summer crop harvest, aided by a favourable monsoon. A good monsoon, adequate reservoir levels and higher minimum support prices are also seen boosting winter crop sowing and production, in turn lowering food inflation in the coming months, according to the government.The inflation rate for cereals in November was 6.88% in November compared to 6.94% a month earlier, while that for pulses was 5.41% against 7.43% in October.”Further falls in food inflation will put downward pressure on the headline rate and softer economic growth should keep a lid on core inflation,” said economist Harry Chambers from Capital Economics.Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was between 3.64% and 3.7%, compared to 3.7% in October, according to two economists. More

(Reuters) -Futures linked to Wall Street’s main indexes took a pause on Thursday after the S&P 500 and Nasdaq ended the previous session on a positive note, while investors awaited some more economic data on the day.The Nasdaq soared past the 20,000 mark for the first time on Wednesday as the technology rally showed no signs of a halt, while the S&P 500 closed at its highest in nearly a week after an in-line inflation reading locked in a 25 basis point cut by the Federal Reserve at its Dec. 17-18 meeting.”The decline in inflation seems to have come to a halt during the autumn. Still, we do not see any acceleration as at the beginning of the year, and inflation is also closer to the inflation target now,” economists at SEB wrote in a note.”We don’t expect the latest inflation outcomes to stop a 25 basis point rate cut by the Fed next week, but a ‘rate pause’ in January seems likely (depending on how much the labor market slows down).” Trader bets on the cut next week now stand at over 98%, according to CME’s FedWatch Tool. They had risen after a jobs report on Friday that showed unemployment rose last month despite a surge in jobs growth.However, bets also indicate expectations of a pause in January after several Fed officials last week urged caution over the pace of monetary policy easing as the economy remained resilient.Data-wise, a November reading of producer prices is due at 8:30 a.m. ET on the day that could further shed light on the state of the economy, alongside a weekly reading of jobless claims.At 7:04 a.m. ET., Dow E-minis were down 74 points, or 0.17%, S&P 500 E-minis were down 12.25 points, or 0.2% and Nasdaq 100 E-minis were down 75.5 points, or 0.35%.Wall Street’s main indexes have set new record highs multiple times this year, thanks to a rally driven by heavyweight tech stocks that have exploited the euphoria around artificial intelligence and the Fed’s interest rate cuts.U.S. equities capped off a remarkable November after Donald Trump’s victory in the presidential election on the prospects of business-friendly policies adding to corporate profits, and have kicked off December on a broadly positive note.However, analysts say that the incoming administration’s potential policies on tariffs could stoke fresh inflationary pressures.Among significant premarket movers, Adobe (NASDAQ:ADBE) slid 11% after the Photoshop maker forecast fiscal 2025 revenue below Wall Street expectations on Wednesday.Chewy (NYSE:CHWY) was off 2.9% after its top stakeholder announced a stock offering to reduce its stake in the pet products retailer. Centene (NYSE:CNC) gained 1.9% after the health insurer forecast a better-than-expected profit for 2025. More

LONDON (Reuters) – The U.S. dollar was broadly steady on Thursday while the euro traded a touch higher before the European Central Bank’s monetary policy decision later in the day, where a quarter-point rate cut is widely expected. The Swiss franc fell after its central bank lowered interest rates by more than expected – 50 basis points – while the Australian dollar surged after domestic employment data beat forecasts.The dollar index, which measures the currency against a basket of six others, was little changed at 106.58, a day after a U.S. inflation reading cemented bets for a rate cut from the Federal Reserve next week. The consumer price index rose 0.3% last month, in line with forecasts, the Labor Department’s Bureau of Labor Statistics said.Markets are now almost fully pricing a 25 basis point cut at the Fed’s Dec. 17-18 meeting, compared with about a 78% chance a week ago, the CME FedWatch tool showed. The ECB is also all but certain to cut interest rates when it announces policy on Thursday and will likely signal further easing ahead as inflation eases back to target and economic growth remains subdued.”Market pricing of the ECB already sees rates being cut into accommodative (sub-2%) territory next summer,” ING strategist Chris Turner said.”Overall we remain bearish on EUR/USD and don’t see the case for the ECB to aggressively push back against current market pricing.”The euro was last up about 0.1% against the dollar at $1.0503.The Swiss franc fell against both the dollar and the euro after the Swiss National Bank opted for a 50 basis point interest rate cut. A majority of economists surveyed by Reuters had expected a smaller 25 basis point move. The dollar was up 0.2% at 0.8867 francs, while the euro rose as high as 0.93455 francs, its strongest level against the Swiss currency since Nov. 25.”There will be some headwinds in the near term,” said Kirstine Kundby-Nielsen, FX research analyst at Danske Bank (CSE:DANSKE), about the Swiss franc after the rate cut. “But more broadly I still think euro-Swiss will go lower, the franc will strengthen, if we look at the next couple of months ahead as I don’t think the picture is very rosy in the euro area.” The dollar was slightly weaker at 152.175 yen, after hitting a two-week high of 152.845 yen the previous day as market players trimmed back bets for a rate hike in Japan next week.Reuters reported on Thursday that the BOJ is leaning toward keeping rates steady, as policymakers prefer to spend more time scrutinising overseas risks and clues on next year’s wage outlook.But with markets now eyeing a rate hike just a month later in January, the shift has not really become a big driver for investors to pile into the dollar against the yen, said Akira Moroga, chief market strategist at Aozora Bank.”There were expectations for December, so dollar/yen has been rising from around 150 yen to about the 200-day average,” he said.The Australian dollar was up 0.6% at $0.6408, pulling further away from the just over one-year low of $0.63370 touched on Wednesday.Australia’s jobless rate posted a shock decline to an eight-month low in November, prompting markets to scale back bets for easing from the Reserve Bank of Australia in February. The kiwi climbed 0.3% to $0.5799, after hitting its lowest since Nov. 2022 at $0.57625 in the previous session.The yuan was last trading around 7.2678 per dollar, up about 0.1% in offshore trading.China pledged on Thursday to increase its budget deficit, issue more debt and loosen monetary policy to maintain stable economic growth. More

The bank now projects real GDP to grow by 2.0% in 2025, down from the previous estimate of 2.7%. This adjustment reflects the anticipated impact of a 30% tariff on Chinese imports and a 5% tariff on all other imports, measures that could dampen economic momentum in the latter half of the year.The report points out that tariffs imposed during President Trump’s previous administration prompted retaliatory actions from trading partners, resulting in reduced exports and suppressed real incomes.The new tariff plans are expected to have a similar effect, with inflationary pressures likely to hit lower-income households hardest, given their reliance on imported goods. Despite current solid income growth, “the inflationary boost from tariffs would likely weigh on consumer spending,” the report says.Businesses are already bracing for the impacts. Wells Fargo highlights contrasting sentiments among manufacturers, with some domestic producers expecting improved demand, and others worrying about rising costs and limited alternatives to Chinese inputs. The services sector is also expressing concerns about potential cost increases, further clouding the outlook for investment and employment.Meanwhile, the US labor market, while resilient, is showing signs of softening. Payroll growth remains concentrated in a few sectors, and the unemployment rate is edging upward.With tariffs potentially exacerbating these trends, Wells Fargo forecasts that the Federal Reserve will prioritize mitigating GDP and employment risks over controlling inflation. The bank expects the Fed to enact additional rate cuts, reducing the federal funds rate to a range of 3.50%-3.75% by late 2025.Also, disinflation continues “at a frustratingly slow pace,” strategists note, with the Fed’s preferred inflation gauge showing little change over the past six months. While goods deflation has slowed, services inflation pressures remain firm. November’s Consumer Price Index exceeded expectations but showed a positive deceleration in services inflation.Looking beyond 2025, economic growth is expected to rebound to 2.2% in 2026, driven by a lighter regulatory environment and potential tax relief measures.“Growth appears likely to pick up in 2026 once the initial impacts of the tariffs fade and the full suite of Republican policy changes go into effect,” Wells Fargo strategists said in a note.“Specifically, the economy would receive a boost from a lighter regulatory touch and the prospect of additional modest tax relief for households beyond the extension of the Tax Cuts and Jobs Act (TCJA) of 2017.” More

This article is an on-site version of our Energy Source newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday and Thursday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersHello from Houston. The news from Texas: ExxonMobil is doubling down on oil — despite concerns that the market faces a looming oversupply crisis. The US supermajor said yesterday that it would crank up output by almost a fifth by the end of the decade, dialling up spending plans even as some of its peers hold back amid growing fears of a supply glut.The 5.4mn barrels of oil equivalent the company plans to pump daily by the end of the decade is more than that of most Opec countries and would turn the west’s biggest producer into a global oil and gas behemoth. Exxon’s argument is that it can produce oil much more cheaply than its rivals, making it best placed to supply what it predicts will be an enduring global thirst for fossil fuels — even if prices slide. Elsewhere, the Biden administration yesterday hit China with a volley of new tariffs on critical mineral imports, a parting gift by the president to Beijing as he looks to shore up the nascent US cleantech manufacturing space before leaving office. My colleague Aime Williams had the scoop. That is also the topic of today’s newsletter. With resource nationalism on the march over the metals and minerals needed to power the economies of the future, our commodities correspondent Camilla Hodgson digs into a new report on what this means for an already-tense geopolitical situation. The verdict? We’ve entered a new era of protectionism. Read on for more. As ever, thanks for reading. Email me at myles.mccormick@ft.com — MylesWestern democracies drive a global rise in resource nationalismBusinesses worldwide face increased risk from a global rise in protectionism as countries scramble to secure access to the minerals critical to battery manufacturing and the energy transition, according to new research. Rising geopolitical tensions have fuelled a rise in state intervention and protectionism “not seen since the first half of the 20th century in western democracies”, global risk intelligence company Verisk Maplecroft said on Thursday. The change has been particularly acute in Europe and North America, with governments in both regions seeking to secure their access to critical minerals such as lithium and copper — the supply chains for which are dominated by China — the researchers said.Increased tensions in the sector have worsened in recent weeks with critical minerals becoming an ever more closely watched geopolitical football. This month, China banned shipments to the US of several crucial minerals and metals in retaliation for new export controls imposed by the Biden administration designed to target Beijing’s development of artificial intelligence. Earlier this year, a coalition of western nations including the US and UK announced financing plans for minerals projects in an effort to diversify away from China.“The fracturing geopolitical landscape and the fallout from major shocks like the pandemic and Russia’s invasion of Ukraine have spurred an acceleration of policies aimed at acquiring the minerals needed to power the tech and defence industries, as well as the green transition to bolster energy security,” said Jimena Blanco, chief analyst at Verisk Maplecroft. “State focus on supply chain security has opened the door for companies to take advantage of attractive incentive schemes, but geopolitical divergence could increasingly limit opportunities to allied or friendly jurisdictions,” she said. According to the researchers’ latest resource nationalism index — a quarterly analysis that measures government control of economic activity in the mining and energy sectors — 72 countries out of the 198 assessed had seen a “significant increase” in interventionist and protectionist policies over the past five years.Venezuela, Russia and Mexico were judged to be the three countries where businesses faced the greatest risks of state intervention and expropriation in the sectors.But the analysts said that the risk scores for Germany, Spain, the UK and Poland had all worsened significantly since 2019, with Germany registering the largest drop of any country during the period. It has come as a consequence of protectionist moves by Berlin such as the seizure of Russian energy assets following the country’s invasion of Ukraine, and the offering of subsidies to boost domestic mineral processing and manufacturing, they said.Some content could not load. Check your internet connection or browser settings.More broadly, the analysts pointed out that European and North American governments had taken steps to shore up their domestic mining and energy industries and restrict foreign investment from rivals with policies including US President Joe Biden’s Chips and Science Act. Forty-one countries that were responsible for 41 per cent of global mineral output were now classified as being either “high” or “very high” risk for protectionist policies, the researchers said. That was an increase from 30 countries five years ago.“The most likely scenario is that western nations will increasingly use a mix of trade and investment policies, along with stricter sustainability standards, to restrict trade with rivals and push for localised supply chains,” said Blanco.Heightened risks across multiple jurisdictions exacerbated the overall challenges faced by companies and investors, given the complex and cross-border nature of many critical mineral supply chains, the group said. For example, a mineral may be mined in one country but processed in another and sold to a manufacturer operating in a third.The analysis considered countries’ protectionist and interventionist policies, state participation in resource extraction and instances of direct and indirect expropriation, such as asset nationalisation or regulatory changes that make doing business in the sectors less profitable. (Camilla Hodgson)Power PointsEnergy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.Recommended newsletters for youMoral Money — Our unmissable newsletter on socially responsible business, sustainable finance and more. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up here More