Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets. Investors in Asia go into Tuesday’s session with a spring in their step following the upswing in global stocks and risk appetite on Monday, but wary that the buoyant U.S. dollar can extinguish that optimism in a flash.Also keeping regional sentiment in check will be unease around China’s economic predicament, even though purchasing managers index data over the last 72 hours showed that factory activity in November expanded at the fastest pace in months.Much of that – the pickup in Chinese manufacturing activity, deepening disquiet about the outlook, and the dollar’s renewed vigor – is tied to U.S. President-elect Donald Trump’s hardline stance on trade and threats of heavy tariffs when he takes office next month.His social media broadside on Saturday to countries contemplating backing away from the “mighty” U.S. dollar appears to have had an initial effect. Excluding Nov. 6, the day after the U.S. election, the dollar’s 0.6% appreciation on Monday was its biggest rise in six months. Europe’s economic and political travails, especially in France, are certainly at play, while the yen is drawing support from bets that the Bank of Japan could raise interest rates later this month.But the dollar’s independent strength cannot be ignored, and bullish sentiment toward emerging markets is rarely sustained for long when the dollar is on the march.Nor can China’s weakness be ignored. Some analysts say the positive PMI surprises are due to a ramp up in production before tariffs from Washington are levied, and China’s underlying economic health remains fragile.China’s bond market would appear to back up that assertion. The 10-year yield on Monday fell below 2% for the first time, while the 30-year yield is now below its Japanese equivalent for the first time in at least 20 years.Still, investors will draw comfort from the S&P 500 and Nasdaq’s rise to fresh peaks on Monday, and U.S. Federal Reserve Governor Christopher Waller saying he is leaning toward a rate cut later this month.Remarkably, after Monday’s spike the S&P 500 has registered more than 50 record highs this year. But will that be enough to lift Asian markets on Tuesday? Asia’s calendar on Tuesday is light, with South Korean inflation the only major economic indicator on tap. It is one of several CPI releases this week following Indonesia’s on Monday and ahead of the latest snapshots from the Philippines, Taiwan and Thailand later in the week.Economists polled by Reuters expect South Korea’s annual rate of headline inflation in November to accelerate to 1.7% from a three and a half year low of 1.30% in October. That would mark the biggest jump since August last year.Here are key developments that could provide more direction to markets on Tuesday:- South Korea consumer inflation (November)- Bank of Thailand governor Sethaput Suthiwartnarueput speaks- Thailand’s finance minister Pichai Chunhavajira speaks More

NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said on Monday the U.S. central bank is likely to lower its interest rate target further over time as inflation pressures continue to cool. “Monetary policy remains in restrictive territory to support the sustainable return of inflation to our 2 percent goal,” Williams said in the text of a speech to be delivered before a gathering of the Queens Chamber of Commerce, held in New York. Looking ahead, “I expect it will be appropriate to continue to move to a more neutral policy setting over time,” Williams said, adding “the path for policy will depend on the data. If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain.” Williams offered no firm guidance about the timing of rate cuts and whether he believes the Fed will lower its interest rate target, now set at between 4.5% and 4.75%, at the Federal Open Market Committee meeting this month. Markets have braced for more rate cuts amid guidance of easier policy from central bank officials, but new uncertainties over President-elect Donald Trump’s policies have clouded that outlook. In a speech Monday, Fed Governor Christopher Waller said “at present I lean toward supporting a cut to the policy rate at our December meeting” depending on how the data come in. In his remarks, Williams said the economy is in a “good place” and the labor market is “strong.” He sees inflation continuing to ebb to the 2% target over time but warned the process could be uneven. The official said the economy should grow by 2.5% this year or maybe more, with the unemployment rate between 4% and 4.25% “over coming months.” Williams said inflation should be 2.25% for the year and said the job market was unlikely to be a source of upward price pressures. More

“[A]t present I lean toward supporting a cut to the policy rate at our December meeting. But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation,” Waller said in prepared remarks at a conference on the Fed’s framework review in Washington sponsored by the American Institute for Economic Research.The Fed governor acknowledged signs of stalling inflation, but said there was “no indication that the pace of price increases for key service categories such as housing and non market services should remain at their current levels or increase.”Still, the decision to back a rate cut at the Dec. 17-18 meeting would “depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation.”Looking ahead to data later this week included the nonfarm payrolls report due Friday, the Fed governor said he expected to see a rebound in job gains for November.Following the hurricane-related hit to job gains in October, Waller said he expects to see a “rebound” in the November employment report.If the incoming data between today and the next meeting, however, “surprisingly suggests our forecast of slowing inflation and a moderating the still solid economy are wrong, then I’ll be supportive of holding the policy [rate],” Waller addded.  More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe Canadian province of Ontario has launched a multimillion-dollar advertising campaign promoting economic and cultural links with the US in an effort to counter president-elect Donald Trump’s threat to impose 25 per cent tariffs on all goods from Canada.With grainy second world war pictures, footage of Niagara Falls and images of numerous bridges between the province and the US, the 60-second ad reminds Americans how Ontario is their third-largest trading partner and the top export destination for 17 states.“For generations, this ally to the north has been by your side: Ontario, Canada, a partner connected by shared history, shared values and a shared vision for what we can achieve together,” the ad states.Although the US has a free trade agreement with Canada, as well as Mexico, Trump accused the two countries of permitting illegal migration and drug trafficking across their borders, saying that he would impose 25 per cent tariffs “on ALL products coming into the United States”. With C$3.6bn (US$2.6bn) in goods and services crossing the border daily — $1bn of this to and from Ontario — a 25 per cent tariff would have devastating consequences for both countries, said Daniel Tisch, chief executive of the Ontario Chamber of Commerce.Show video info“It would disrupt supply chains, drive up manufacturing costs, reduce exports, erode investor confidence and fuel job losses, particularly in Ontario and the border states,” he said.Ontario has a population of about 16mn people and is a hub for manufacturing, agriculture, technology and innovation. The province is also home to Canada’s automotive industry which is deeply integrated with the US market. Its trade with the US was worth C$493bn in 2023.The province’s premier, Doug Ford, has been one of Canada’s most outspoken leaders on relations with the US since Trump won the presidential election.He urged the federal government in Ottawa to negotiate a bilateral trade agreement with the US that cuts out Mexico, which he described as a “backdoor” for China into North America.Ford last week said: “For months, Ontario has been pushing the federal government to show that Canada understands, cares and is responsive to US security and economic concerns, including by urging them to match US tariffs on China.”Prime Minister Justin Trudeau on Friday evening flew to Florida to meet Trump at his Mar a Lago resort in an effort to head off the tariffs.Following the meeting Trump said in a Truth Social post that the leaders discussed the flow of fentanyl and illegal immigrants across the southern US border, as well as energy, the Arctic, “Fair Trade Deals that do not jeopardise American Workers, and the massive Trade Deficit the US has with Canada”.Ford’s spokesperson said the province’s ad is set to air this month on various US online streaming services, including Fox News platforms, and will run into the new year ahead of Trump’s January 20 inauguration. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump says tariff is a “beautiful word”. But he also prides himself on being a dealmaker. So the EU approach to the president-elect’s tariff threats suggested by European Central Bank president Christine Lagarde in an FT interview — “not to retaliate, but to negotiate” — makes sense, at least initially. Any EU offer to buy more US goods to head off a rancorous trade war should, though, be backed up by the understanding that the bloc is ready to retaliate robustly if the returning president does opt for punitive tariffs. Trump would surely seize on anything less as a sign of weakness.The trade threat was amplified when Trump last week pledged day-one tariffs on Canada and Mexico and additional duties on China — highlighting a willingness to blow up supply chains even with America’s biggest trading partners. On Saturday, he threatened tariffs of 100 per cent on Brics countries if they undermined the dollar. But tariffs appear as much a negotiating tool as an ideological goal. Managing trade with the Trump’s US is set to be a central task of the new European Commission, whose term officially began on Sunday — particularly given the EU’s sizeable trade surplus with the US. Brussels has already floated buying more US energy, military and agricultural goods as a concession. Importing more US liquefied natural gas would help the EU finally to ban remaining Russian LNG imports. Europe will need US-made weaponry, too, if it is to shoulder more of the burden of defending Ukraine. This approach neatly targets two Trump priorities at once: the EU can say it is bolstering its energy and military security while helping US producers.But the European Commission is right to keep a stick to hand as well as carrots, with plans to hit back if Trump plumps for tariffs. It is understood to have drawn up retaliatory duties that would particularly hit Republican-led US states. Indeed, EU duties on bourbon whiskey, power boats and motorcycles, imposed in 2018 after Trump introduced tariffs on steel and aluminium imports from the EU and elsewhere, are currently suspended until March. These could provide a bargaining chip — though Trump seems to care relatively little about hits to the US real economy from his arm-twisting on trade. Maintaining EU unity over its response will be vital given the temptation for member states to seek US favours to protect their own interests. To improve the chances of the global trading system weathering the Trump storm, Brussels should also try to ensure any deal with the US — and response to potential “collateral” damage from Chinese imports diverted from the US — does not ride roughshod over trade laws. The 2018 package offered by then commission president Jean-Claude Juncker that fended off US tariffs on EU car exports, which Brussels’ approach today partly echoes, bent some internal EU rules, but was not a terrible abrogation of WTO law.There are already inevitable calls — including from new European Commission vice-president Stéphane Séjourné — for a “Europe first” strategy for key business sectors. Certainly, if Trump does increase US tariffs on Chinese goods, the EU is likely to face tricky talks with Beijing on limiting a flood of Chinese exports, similar to western talks with Japan in the 1980s, or have to restrict them — with likely knock-on effects on its own exports to China.Though the EU punches below its weight geopolitically, on trade it has a credible record of trying to uphold the rules-based order. Onerous trade-offs lie ahead. But even as it seeks to defend Europe’s economic interests, Brussels should do all it can to remain a positive force on trade, rather than being sucked into the vortex of an all-out trade war. More