Aurelia Butler

BANGKOK (Reuters) – Thai Prime Minister Srettha Thavisin said on Monday four consecutive months of negative inflation were a sign of economic weakness and called for fiscal and monetary policy coordination, raising pressure on the central bank to ease monetary policy.Thailand’s headline consumer price index (CPI) fell 1.11% in January from a year earlier, data showed on Monday, versus a forecast drop of 0.82% in a Reuters poll.The decline in January was the fourth in as many months and was driven by government energy subsidies, lower food prices, and last year’s high base, the commerce ministry said.”It’s a sign of economic weakness,” Srettha said, adding fiscal and monetary policy must go together, otherwise “it would be difficult to solve the problem”.It was the ninth straight month that headline inflation was below the central bank’s target range of 1% to 3%.Srettha has urged the central bank to cut the key rate, currently at a more than decade-high of 2.50%, to help Southeast Asia’s second-largest economy he says is in crisis.Earlier on Monday, Deputy Finance Minister Julapun Amornvivat shared a similar view, saying low inflation was worrying while high interest rates were the people’s burden and the central bank should help address the problem.Four consecutive months of negative inflation mean “purchasing power is disappearing,” he said.Despite lower inflation and government pressure on the Bank of Thailand (BOT) to ease policy, it is expected to leave its policy rate unchanged on Wednesday, a Reuters poll showed.BOT Governor Sethaput Suthiwartnarueput recently told Reuters the current policy rate was “broadly neutral” and the economy was not in crisis.The BOT left its key rate steady at its November review, having raised it by 200 basis points since August 2022 to curb inflation.The commerce ministry predicted headline CPI would fall 0.7% year-on-year in the first quarter, with government measures to lower living costs the main factor.”There is still no deflation yet as the core rate remains positive,” Poonpong Naiyanapakorn, head of the ministry’s trade policy and strategy office, told a briefing.The core CPI, which stripe out fresh food and energy prices, rose 0.52% year-on-year in January, versus a forecast rise of 0.57%.For 2024, the ministry maintained its forecast for headline inflation at between -0.30% and 1.7%, after last year’s 1.23%.(This story has been refiled to add a dropped word ‘negative’ in paragraph 1) More

LONDON (Reuters) – Sovereign debt sales from developing nations scaled an all-time record for January at $47 billion led by major and less risky emerging markets but a lack of investor flows into dedicated funds could curtail a nascent recovery for riskier issuers.The start of the year – generally a busy time for debt sales of all sorts – has seen Saudi Arabia, Mexico, Hungary, Romania and a raft of others deliver some big ticket bond issuance. At the same time, flows into dedicated emerging market debt funds remained in the doldrums. Year-to-date, investors pulled about $1.6 billion out of dedicated emerging market hard-currency funds, according to Morgan Stanley data. That follows outflows of around $80 billion in 2022 and around half of that again last year. “Usually at this stage you would have seen money starting to come in”, said Paul Greer, portfolio manager of emerging markets debt and foreign exchange at Fidelity International. “I think there’s still a bit of an allocation towards equity markets. That money will eventually come back into fixed income and emerging markets would benefit. It’s just taking longer than I thought,” Greer added. While the early days of the year were dominated by higher-rated issuers, January also saw a reopening of some corners of the fixed income primary markets that had recently been dormant: Ivory Coast became the first Sub-Saharan nation to tap international capital markets in almost two years. Benin is in the process of following suit. But this might turn out to be an exception. Thys Louw, portfolio manager for emerging markets hard currency debt strategy at Ninety One, said that the main concern of the divergence between issuance and flows into these dedicated funds means that high yield issuers won’t be tapping the markets anytime soon. “There’s some cash on the sidelines… but I am still cautious. You will need to see inflows to say ‘Kenya, you can go, Nigeria you can go,” Louw added.DEPLETED CASH According to JPMorgan calculations, adding coupons to maturities and comparing to gross issuance should have left dedicated emerging markets hard currency funds with a $78 billion cash pile to invest over the past two years. But taking into account outflows, that would have shrunk to just $8 billion, the bank said in a recent note to clients.Demand for recent issuance, especially from higher-rated governments, would have also come from crossover funds, JPMorgan added. Crossover investors do not necessarily invest in emerging markets but are permitted by their mandates to do so. Lower-rated issuers hold less appeal for those asset managers.”If you split the emerging markets into two halves, the higher quality emerging market debt is traded very similar to Europe,” said Dan Farrell, head of International Short Duration, Northern Trust (NASDAQ:NTRS) Asset Management.”But then if you look at the lower end of the emerging markets, they’re in a very different fiscal space and it’s not actually an attractive option for investors.”Analysts at Morgan Stanley estimate almost $165 billion of EM sovereign debt will be issued this year, a roughly 20% increase on 2023. The bank predicts that high-yield issuers Oman, Serbia, Turkey, Bahrain, Uzbekistan and Colombia could all be tapping markets this year. Much will also hinge on when and how fast the U.S. Federal Reserve, the European Central Bank and other G10 central banks will start cutting interest rates. “We have not yet seen a return of stability in rates and macro environment due to still-prevailing uncertainty on the timing of central banks’ policy rates cut for the rest of the year,” said Alexis Taffin de Tilques, head of CEEMEA DCM at BNP Paribas (OTC:BNPQY). “Markets will focus on the higher-grade issuers.” More

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1. Futures edge lowerU.S. stock futures inched down on Monday, as traders geared up for a wave of corporate earnings this week and gauged fresh interest rate commentary from Federal Reserve Chair Jerome Powell.By 05:00 ET (10:00 GMT), the Dow futures contract had shed 131 points or 0.4%, S&P 500 futures had lost 15 points or 0.3%, and Nasdaq 100 futures had dipped by 46 points or 0.3%.The main averages closed in the green on Friday, bolstered by a January labor market report that was far stronger than economists had initially anticipated. While the data pushed back the expected timeline for potential Federal Reserve interest rate cuts this year and subsequently placed upward pressure on U.S. Treasury yields, they were still welcomed by many investors as a sign of resilience in the world’s biggest economy.Also lifting equities in the prior session was a spike in shares in Meta Platforms (NASDAQ:META) and Amazon.com (NASDAQ:AMZN) following bumper earnings from the Facebook-parent and e-commerce giant. Meta’s stock price, in particular, posted its largest-ever one-day jump of 20.3%, sending the social media firm’s market capitalization up to $1.2 trillion, according to Investing.com.2. Earnings wave approachesThe staying power of the stock market rally will likely face another test this week when a stream of big-name U.S. companies unveil their latest quarterly results.On Monday, McDonald’s Corporation (NYSE:MCD) is due to report, with observers keen to find out if the burger chain’s profits benefited from cost-conscious patrons opting for its lower-priced value meals. Caterpillar (NYSE:CAT), the machinery manufacturer that is often viewed as a bellwether for the American industrial sector, is scheduled to announce its fourth-quarter and full-year returns as well.Media firms will also be in focus in the coming days, with results ahead from the industry leaders like Walt Disney (NYSE:DIS), Fox, Warner Music Group, and The New York Times Company.Meanwhile, the spotlight will continue to shine on Big Tech after last week’s market-moving crop of reports from titans like Microsoft (NASDAQ:MSFT) and Google-owner Alphabet (NASDAQ:GOOGL). Chinese e-commerce player Alibaba (NYSE:BABA), ride-sharer Uber (NYSE:UBER), and chip designer Arm Holdings (NASDAQ:ARM) are slated to report this week.Hopes are high that the solid economic signals will be reflected in the corporate numbers. According to LSEG data cited by Reuters, S&P 500 earnings are seen climbing by almost 10% in 2024, accelerating from an increase of 3.6% last year.3. Powell says Fed can be “prudent” on rate cutsThe strong U.S. economy can give U.S. central bankers time to take a “prudent” approach to possible benchmark interest rate reductions, Federal Reserve Chair Jerome Powell said in an interview with CBS news program “60 Minutes” on Sunday.Powell added that he would like to “see the data confirm” that inflation — the major focus of an aggressive series of Fed policy tightening that has pushed borrowing costs up to more than two-decade highs — is cooling back down to the Fed’s stated 2% in a “sustainable way.”His comments underline a cautious sentiment among Fed officials, who are keen to avoid the risk of reigniting price gains by slashing rates too quickly. Last week, the Fed held rates at a target range of 5.25% to 5.50%, and stressed that they will need to see more evidence of easing inflation before they start to roll out cuts.”We have to balance the risk of moving too soon…or too late,” Powell noted.He also refrained from declaring that the Fed was all but certain to achieve a “soft landing,” a scenario in which elevated price growth is defeated without sparking steep job losses and a broader economic downturn. Instead, Powell called the resilience of the U.S. economy “historically unusual.”4. Boeing flags new fuselage issue could delay 737 deliveriesShares in Boeing were lower in premarket U.S. trading on Monday, after the embattled planemaker warned that a fresh issue in some fuselages of its 737 jets could lead to the “near-term” delay of some deliveries.In a memo to employees on Sunday, Boeing Commercial Airplanes President Stan Deal flagged that two holes on these models may not have been drilled exactly to the company’s requirements.Deal said that the problem is “not an immediate flight safety” concern, adding that all 737s can continue to operate safely. However, he conceded that Boeing will have to perform “rework” on about 50 undelivered aircraft.”[T]his is the only course of action given our commitment to deliver perfect airplanes every time,” Deal said. “The days we are setting aside in the 737 program will allow time for our teams to complete the inspections and, if needed, perform the necessary rework.”Scrutiny over the safety of Boeing jets has been rising since a dangerous mid-air door plug breach on one of its 737 Max 9 planes operated by Alaska Airlines last month. In the wake of the incident, Boeing has not offered a forecast for its 2024 financial year, stating that it still has “much to prove” to win back the confidence of regulators and passengers.5. Crude choppyCrude prices were volatile on Monday, with investors eyeing the delayed timing of possible Fed interest rate cuts and ongoing violence in Middle East.By 05:00 ET, the U.S. crude futures traded 0.3% lower at $72.08 a barrel, while the Brent contract dropped 0.2% to $77.21 per barrel. Both of the benchmarks slipped at the end of last week due in part to the blockbuster U.S. jobs report, which pushed out expectations for rate reductions this year. In theory, an extended period of tighter financial conditions could weigh on demand in the world’s biggest oil consumer.Analysts at ING said that hopes for a ceasefire between Israel and Hamas also contributed to some of Friday’s weakness. But they argued that a halt in hostilities “does not appear imminent.”The ING analysts added that, despite further U.S. and U.K. attacks on Yemen-based Houthis over the weekend, oil supply “remains unaffected” and the crude market “is largely balanced” in the first quarter thanks in part to the OPEC producer group sitting on a large amount of spare capacity.”However, this could quickly change if tensions spread to other parts of the Middle East,” they said. More

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SYDNEY (Reuters) – For Australia, China has become the Golden Goose that’s always about to stop laying. For more than three decades now, barely a year has passed where a China crisis was not just around the corner, certain to shut down the rivers of gold flowing into Australia’s trade coffers. The latest scares have come in the form of a collapse in China’s stock markets and a failure of developer China Evergrande (HK:3333) and what it might mean for the property sector, a backbone of China’s economy.That should be bad news for Australia given the sector is a major user of steel and thus iron ore, the country’s single biggest export earner.Yet while China plays an outsized role, David Goodman, Director of the China Studies Centre at the University of Sydney, rejects the idea Australia is dependent on it.”Our two economies, well, they’re fully complementary but the difference is we are really open in the world economy. China is the best place for us to be, don’t get me wrong, (but) if we didn’t have that, we’d be somewhere else. I think everybody accepts that.” EXPORTS IN DEMANDThe threat posed by Evergrande is hardly a surprise either. As far back as 2021, the Reserve Bank of Australia (RBA) was writing about it, and Evergrande has been a feature in its policy outlooks ever since.More than two years later, Australia’s exports to China have rarely been stronger. The latest data for December show goods exports hit A$18.5 billion ($12 billion), up 14.7% on a year earlier. Over the past year, China has bought A$203 billion worth of Australian exports, a cool 37% higher than the same period of 2019 before the pandemic struck.Much of this is iron ore, which has many more buyers than just China and alone generated A$187 billion in earnings in the year to December.Chinese imports of the mineral look to have been near record levels in January, helping keep prices firm around $130 a tonne. That is far above the $60 a tonne the Australian government assumes for its budget and a major windfall for tax receipts.Indeed, that revenue is a major reason the Labor government can afford a sweeping round of cuts to income taxes this year.Other exports have also benefited from a recent thawing in diplomatic relations between Beijing and Canberra, which has seen China lift restrictions on coal and barley and likely soon ease tariffs on wine.INVESTMENT? WHAT INVESTMENT?One area of weakness has been tourism from China, which is less than half of pre-pandemic levels and a drag on casinos and luxury goods retailers. Student numbers from China have also dropped, but the gap has been more than filled from elsewhere, notably India. So great have been inflows that the government is tightening rules for entry.Neither is Australia reliant on inward investment from China, which has always been trivial compared to the huge sums spent by global mining and energy companies.According to data from KPMG and the University of Sydney, the most Chinese investment ever reached was $16 billion in 2008, a drop in the ocean for Australia’s A$2.6 trillion ($1.71 trillion) economy.The constant angst over China has weighed on the Australian dollar, which is now used by investors globally as a liquid proxy for bets against the Asian behemoth.The Aussie currently languishes at $0.6500 when historical measures of fair value suggest it should be around $0.7300, and much of that is the China effect.Yet, again, that has been a boon for mining profits as Australian resources are priced in U.S. dollars, while RBA studies show the impact on domestic inflation has been minor.”So there is not really a clear kind of disruptive force other than what you might see in terms of market sentiment at the moment,” was the conclusion of Elliot Clarke, head of international economics at Westpac. “Are we reliant on Chinese developers here? No, not really. Do foreign investors believe that there’s contagion risk from China to Australia? No, not really.”($1 = 1.5218 Australian dollars) More