Aurelia Butler

ABUJA (Reuters) – Nigeria’s central bank is targeting an inflation decline to 21.4%, Governor Olayemi Cardoso said on Wednesday, adding that bank officials thought the country’s naira currency was undervalued.Cardoso faces pressure to raise interest rates when policymakers at the Central Bank of Nigeria (CBN) hold a rate-setting meeting next month for the first time since he took office in September.Inflation hit its highest level in more than 27 years in December at 28.92%.”Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4%,” Cardoso said in a speech, a copy of which the central bank shared by email.Cardoso added that improved agricultural output and the easing of global supply chain pressures would help boost consumer confidence and purchasing power.The central banker emphasised that the CBN was committed to improving liquidity in the foreign exchange market, reiterating a pledge to clear outstanding FX obligations estimated at $5 billion.”We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” he said in the speech at an event on the economic outlook. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK economic activity increased at the fastest pace for seven months in January despite the crisis in the Red Sea adding to manufacturing price pressures, according to a closely watched survey. The surprisingly strong growth, combined with concerns over sticky inflation, could fuel caution among Bank of England policymakers as they prepare for the next interest rate decision on February 1.The S&P Global flash UK composite output index rose to 52.5 in January from 52.1 in December, marginally higher than the 52.2 forecast by economists polled by Reuters. The figure was the highest reading since June and well above the 50 mark that indicates a majority of businesses reporting rising activity. The latest PMIs add to signs that the economy is recovering from last year’s stagnation, as price pressure eases and markets expect the BoE to cut interest rates from their current 15-year high of 5.25 per cent later this year. Chris Williamson, economist at S&P Global, noted that the strength of growth in January “may deter the Bank of England from cutting interest rates as soon as many are expecting, especially as supply disruptions in the Red Sea are reigniting inflation in the manufacturing sector”.The survey is looked to by policymakers as a near-real-time indicator of the health of the economy ahead of official data for December next month.Yields on rate-sensitive two-year gilts rose 0.03 percentage points to 4.4 per cent after the strong PMI data, reflecting declining prices. The pound strengthened 0.4 per cent against the dollar to $1.274.Williamson said the PMI reading pointed to the economy growing at a quarterly rate of 0.2 per cent at the start of 2024 after a flat fourth quarter, “therefore skirting recession and showing signs of renewed momentum”.Markets are pricing that the central bank will start cutting interest rates in June taking the rate to 4.25 per cent by the end of the year, marking a marginal retreat from what was expected last Friday. More

BEIJING (Reuters) -China’s central bank announced a deep cut to bank reserves on Wednesday, in a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.The central bank’s announcement, coming just as stock markets were closing for the day, led to a bounce in benchmark stock indexes and the yuan, even as analysts said more policy measures were needed.The People’s Bank of China (PBOC) said it was making a 50-basis points (bps) cut, the biggest in two years, in the amount of cash banks must hold as reserves, effective from Feb. 5.More importantly, PBOC Governor Pan Gongsheng said the bank would release policies on improving commercial property loans either on Wednesday or Thursday night, giving hope to investors who have been frustrated by China’s efforts to put a floor under a real estate sector that underpins consumption and household wealth.The first cut in banks’ reserve requirement ratio (RRR) this year comes as the world’s second-largest economy struggles to mount a strong post-COVID recovery amid a housing crisis, local government debt risks and weakening global demand.It also comes just days after China’s benchmark indexes hit 5-year lows as even the last hopeful investors waiting for clarity and an eventual economic rebound appeared to be giving up on the $9 trillion market. “It’s a welcome step, but it’s not going to be a game-changer,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.”There are still questions about the extent to which the ‘National Team’, and various institutions can try to pull together to try to support the market and start up the buying of stocks and draw a line under the sell-off there.”Stock markets in Hong Kong and China had stabilised slightly on Tuesday on reports of a cabinet meeting chaired by Premier Li Qiang to stabilise markets and of state-owned investment vehicles, known as the “national team”, being pressed into action, as they were during the 2015 crash. GOOD START At Wednesday’s surprise press conference in Beijing, Pan said the RRR cut would free up 1 trillion yuan ($139.45 billion) in cash for the economy, exceeding most analysts’ expectations. “The RRR cut is a sign that PBOC will stick to a loose monetary stance throughout this year, despite having missed market expectation of an medium-term lending facility (MLF) rate cut earlier,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.”It’s also a sign that policymakers across the government want to ensure a good start for the economy by frontloading policy support. This is needed to achieve their ambitious growth target in a challenging year.”The cut in reserves follows earlier cuts of 25 bps for all banks in March and September last year. The PBOC would also cut re-lending and re-discount interest rates by 25 bps for the rural sector and small firms from Jan. 25, Pan said.”At present, China’s monetary policy still has enough room,” Pan said. “We will strengthen counter-cyclical and cross-cyclical adjustments, and create a good monetary and financial environment for economic operations.”MARKETS UP, BUT CIRCUMSPECTHong Kong’s Hang Seng Index extended gains after the RRR cut was announced, ending the session up 3.6% to clock its biggest one-day gain in two months. China’s stock market tumbled 13% in 2023 and had extended its slide in the new year amid relentless foreign selling. The blue chip CSI300 Index has risen 3.5% from five-year lows struck last week, but is still down more than 6% this year. China’s onshore yuan hit 7.1601, the strongest level since Jan. 12, after the announcement.Earlier in the day, Reuters reported China’s securities regulators had asked some hedge fund managers to restrict short selling in its stock index futures market.Since China has traditionally injected cash into the economy just before the Lunar New Year holiday week – which this time falls in early February – some analysts were circumspect about policymakers intent to defend markets.”We like to wait to see a full set of policy supports before concluding the impact on overall market,” said Kiyong Seong, lead Asia macro strategist at Societe Generale (OTC:SCGLY).MORE STIMULUS NEEDEDAnalysts say more stimulus is needed this year as the government aims to spur growth to fend off deflationary risks and keep a lid on unemployment as businesses remained wary of adding workers.In December, top Chinese leaders at a key meeting to chart the economic course for 2024 pledged to take more steps to support the recovery. Zhiwei Zhang, chief economist at Pinpoint Asset Management, said China’s fiscal policy should focus more on boosting consumption, which would help ease deflationary pressures.”China needs stronger domestic demand instead of more production capacity,” he said. So far, a slew of policy measures and steps to support the stock market have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus. But the central bank faces a dilemma as more credit is flowing to manufacturing than into consumption, which could add to deflationary pressures and reduce the effectiveness of its monetary policy tools, analysts say. Pressure on the yuan continued to limit the scope of monetary easing as well. The economy grew 5.2% in 2023, meeting the official target, but the recovery has been shakier than investors had expected.Analysts polled by Reuters expect economic growth to slow to 4.6% this year.($1 = 7.1712 Chinese yuan renminbi) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The eurozone economy showed signs of a nascent recovery at the start of the year after a contraction in business activity eased slightly and price pressures intensified, according to a closely watched survey of companies.S&P Global’s flash eurozone composite purchasing managers’ index, a measure of activity at businesses across the bloc, rose to a six-month high of 47.9, up from 47.6 a month earlier, after an improvement in manufacturing offset a deeper decline in services.Economists polled by Reuters had forecast a bigger rise to 48. The eighth consecutive reading below the 50 mark that separates contraction from expansion indicates the eurozone remains stuck in a rut at the start of this year after stagnating for much of 2023.Within the overall figures, a deeper downturn in French and German business activity offset an improvement in the rest of the single currency zone, which returned to modest growth.The euro rose 0.4 per cent against the dollar taking it above $1.09, as investors judged the data reduced the chances of early rate cuts. But Germany’s benchmark 10-year bond yields dipped on signs of economic weakness.Purchasing managers added to hopes of a pick-up in the wider eurozone economy by reporting the smallest fall in new orders since last June, a slight increase in employment levels and a brightening in the overall outlook for the year ahead. Attacks by Houthi rebels on commercial ships in the Red Sea have disrupted global supply chains, causing manufacturers’ delivery times to lengthen for the first time in a year, S&P Global said. But it added: “Manufacturing input costs continued to fall on average.”You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The data is likely to shape discussions at this week’s meeting of the European Central Bank, which is expected to leave monetary policy unchanged and rebuff market expectations of an interest-rate cut at its next meeting in March.Businesses reported the steepest rise in selling prices since last May, mainly because of higher labour costs as wages rise, S&P said. This is likely to worry ECB officials about the risk of persistent inflation that is already making them wary of cutting interest rates too early.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Tomasz Wieladek, an economist at investor T Rowe Price, said increased hiring and falling output in the services sector would lower productivity and raise price pressures. “I therefore expect the ECB to continue to push back on market pricing of so many [rate] cuts later in the year,” he added.Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which sponsors the survey, said it showed “a widespread easing of the downward trajectory witnessed in the past year”. But he added: “Companies have faced higher input prices and were able to pass them through to their customers.” More

NEW YORK (Reuters) – Despite a bullish U.S. stock market and strong economy, workers axed in mass layoffs are struggling to get back on their feet.Recent cuts include 13% of the workforce at online retailer Wayfair (NYSE:W), 20% at toy maker Hasbro (NASDAQ:HAS), 17% at digital music provider Spotify (NYSE:SPOT), and 35% at livestreaming platform Twitch.In the new book “Bounce Back,” money coach Lynnette Khalfani-Cox deals with downsizing and other life-changing issues such as debt, disability, death of a loved one, and unexpected disasters.”I personally have been through almost all of these situations, so telling my story was like a dam breaking,” the bestselling author said.Resilience, a quality critical to success, can grow out of such challenges, whether we are emotionally worn out from the pandemic, lonely and isolated, or scrounging to survive without any savings.Here are a few tips to bounce back better and faster from adversities.THINK BEYOND FINANCESFirst, be kind to yourself, the book’s first two chapters urge, because while money is important, resilience is even more basic.”You are more resilient when you are healthy, eating right, getting sleep and exercising,” said Khalfani-Cox. “That clearer state of mind will help you make better financial choices. If you don’t take care of yourself, nothing else will matter because you are going to make bad choices by default.”STRESS-TEST YOUR OWN LIFEAfter the financial crisis of 2007-2008, the big banks focused more on ‘stress-testing’ their balance sheets: If the worst happened, how would they fare?Individuals should do the same, Khalfani-Cox said. “Be the chief financial officer of your own world. If you or your partner lost your job, how would rent or mortgage get paid? How would childcare be covered? Could you live on one income?Plan now, she advised, noting that few people have a strategy for such scenarios.BUILD OUT YOUR SOCIAL NETWORKGilded Age novelist Horatio Alger wove rags-to-riches stories that have become prototypes for American success based on pulling yourself up by the bootstraps to climb the social ladder. The reality is that we all need others, especially in hard times. Establishing a deep and wide social network helps.”It doesn’t matter if you have been laid off from your job, or displaced from your home because of a flood,” said Khalfani-Cox. “Having people in your life can make all the difference in the world. Your ability to bounce back faster is aided by having the right people in your corner.”WORK ON YOUR NEST EGGEmergency savings are the first line of defense against any life shock. Without that, divorce, disease, damaged credit and other ‘Dreaded Ds’ cited in Khalfani-Cox’s book can cascade into bad financial moves because you have no other choice.”Many Americans don’t even have $400 saved for an emergency, which is why when something goes wrong, they are forced to resort to plastic,” she said. “Then you just dig yourself deeper and deeper. That’s why building up your coffers even just a little can be enormously helpful.”DO NOT DO IT ALONETrying to become a “financial Hercules” on your own is a mistake, Khalfani-Cox said. Therapists, financial planners and debt-management counselors are experts who can save you valuable time and money.Research federal, state and local government programs that can help with education, healthcare or social safety nets. “It’s important to give people that capability to bounce back,” she said, citing such programs. “It’s not just an individual effort alone.” More

The People’s Bank of China (PBOC) would cut the reserve requirement ratio (RRR) for all banks by 50 basis points (bps), thereby freeing up 1 trillion yuan ($139.45 billion) to the market.Chinese blue-chip stocks, which hit five-year lows earlier this week, bounced 1.8% on the day. Hong Kong’s benchmark index soared by 3.6%, having endured its most volatile start to the year since 2020 and after plunging on Monday to 15-month lows.The yuan hit its highest since Jan. 12. On the offshore market, the yuan held mostly steady against the dollar at 7.168.COMMENTS: SAKTIANDI SUPAAT, REGIONAL HEAD OF FX RESEARCH AND STRATEGY, MAYBANK, SINGAPORE:”It’s in some ways, in line with expectations… the aim is actually to increase liquidity so that banks can lend more to customers and take a bit more risk and buy more bonds to support economic growth.Beyond this, I think they need to do a bit more to do ‘animal spirits’, and animal spirits is (one of) probably a robust economy, a feeling of improving wealth effects, the function of equity being more robust… so I think more needs to be done.”REMI OLU-PITAN, HEAD OF MULTI-ASSET GROWTH AND INCOME, SCHRODERS, LONDON:”We think that it’s a step in the right direction, but more is needed.””In our opinion, the incentive to reduce exposure is pretty powerful and so we think this provides a pause, but we’re worried that any recovery will be an opportunity to de-risk.””We need more powerful forces. Two powerful forces are, one, maybe more transparency in terms of the direction of regulation and policy…an additional support actually will come from the U.S. in terms of the Fed – a cutting cycle provides liquidity not just to the U.S. market but externally and typically that comes from a weaker dollar. And with liquidity you get animal spirits.”GARY NG, SENIOR ECONOMIST FOR ASIA PACIFIC, NATIXIS, HONG KONG:”The RRR cut is what the economy needs, and the recent weakened sentiment may have just brought the timing forward. It offers the certainty that the government is willing to stabilise the economy, but it is also unlikely to be a fully lax monetary policy mode. Consumption and real estate data after the Spring Festival will be critical for any anticipation of further easing.”FRANCES CHEUNG, RATES STRATEGIST, OCBC BANK, SINGAPORE:”The cut has been well anticipated, but the market was unsure about the exact timing. The long-term liquidity can facilitate banks to extend loans, or – in an environment where loan demand may be weak, the liquidity released can support bond issuances thereby fiscal stimulus.” “It underlines our medium-term upward bias to yuan rates and CGB (Chinese government bond) yields as markets shall ultimately respond to the better growth outlook resulting from various support measures, and if bond supply is coming through.””We maintain a 10-year CGB yield expectation at 2.70-2.80% by year-end.”SAMY CHAAR, CHIEF ECONOMIST, LOMBARD ODIER, GENEVA: “It’s part of the toolbox where they are taking incremental steps basically to put a floor under economic activity and potentially financial markets.” “We’re still very, far from any kind of decisive policy intervention to really change the economic direction of the country. Rather, it’s a continuation of the small steps we’ve seen.” “It does put a floor under Chinese growth, and certainly allows some form of stability.”KIYONG SEONG, LEAD ASIA MACRO STRATEGIST, SOCIETE GENERALE, HONG KONG:”The scale of 50-bps cut is larger than expected, but the timing of a cut before the Lunar New Year might not be a big surprise to some extent, especially after a stock market rescue plan announcement earlier. Furthermore, another policy announcement for property developers will be out soon, as the PBOC hinted.””We would like to wait to see a full set of policy supports before concluding the impact on the overall market.”KELVIN WONG, SENIOR MARKET ANALYST, OANDA, SINGAPORE:”In the short-term, it will be a positive for Chinese equities, but in the medium-to-long-term, it’s difficult to say if it will have a significant impact on the economy.””The only way to see more positive flows back into the stock market is to have some new stimulus that directly boosts confidence among consumers.”ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE:”It’s worth bearing in mind that this’ll be the third cut in a year. It’ll be more than the previous ones, which were 25 bps each. But it’s just injecting more liquidity in the system and it does seem that there’s a growing lack of demand and consumption. The economic situation is poor so people aren’t in any urgency to borrow money.””I think the more important thing is yesterday’s news about the stock market rescue package, so that might be a reason to keep downside pressure on dollar/renminbi”, (because it would reportedly involve off-shore funds buying Chinese stocks through Hong Kong, likely involving selling dollars for yuan).KEN CHEUNG, CHIEF ASIAN FX STRATEGIST AT MIZUHO BANK”The RRR cut wasn’t too unexpected to me.””I think the purpose of the RRR cut is meant to lift the stock markets before the Lunar New Year holidays. And the PBOC also announced other supportive measures.””The RRR cut could free up some funds that will be needed before the holiday. Its side effect on the yuan won’t be huge.”TIM GRAF, HEAD OF EMEA MACRO STRATEGY AT STATE STREET, LONDON:”My initial thoughts are that this is a little bit overdue as we have expected more easing to support the economy.””Along with some of the stimulus announced yesterday, it does seem like they (the authorities) are paying more attention to stimulus that can support growth and markets.””But the challenges are still there and the banking system is still in trouble.””This is not entirely unexpected and this is not the panacea that will change the narrative too much. More targeted stimulus would be a more powerful lever to push and they seem to reluctant to do that.”KHOON GOH, HEAD OF ASIA RESEARCH, ANZ, SINGAPORE:”It’s probably not surprising. Markets and ourselves have been calling for RRR cuts to happen given that the economic recovery has been pretty weak, and I guess the timing is not unexpected, especially coming after the news yesterday about some kind of rescue plan for the stock market. In terms of market reaction, I think the equity market obviously has taken the news fairly positively, so the rally managed to continue.”CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE:”Markets have been expecting the RRR cut for a while so the announcement is not entirely a surprise. That said, policymakers should ride on the positive momentum by announcing some form of support measures for the economy targeting consumption. This, alongside the 1 trillion liquidity injection (RRR) and potential support for the equity market can help rebuild credibility and shore up investor confidence.”CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON:”It’s one of the usual tricks the authorities resort to when they want to provide some support, whether to the markets or to the economy as a whole. It’s arguably a more effective tool than a rate cut in China, given that we’re in this environment of excess capacity in so many sectors and the ongoing structural and cyclical adjustments.””It’s a welcome step, but it’s not going to be game-changer. There are still questions about the extent to which the National Team, and various institutions can try to pull together to try to support the market and start up the buying of stocks and draw a line under the sell-off there.””But there are obvious question marks as to the extent to which that can turn around the market or not. It’s clear this isn’t any speculative pressure against the market that is causing the rout. It’s a reflection of the trend going forward.” More

Bullard, who has been known for his hawkish stance on inflation, indicated that he expects core inflation to approach the 2% mark by the third quarter of this year. This forecast comes despite ongoing concerns about the tight labor market and persistent inflationary pressures.Following Bullard’s remarks, there was a noticeable dip in Treasury yields. The ten-year note fell to 4.10%, and the two-year notes saw a decline to 4.32%. The personal consumption expenditures price index, a key measure of inflation, dropped to an annualized rate of 2.6% in December last year. The next release is scheduled for January 26. While this decrease suggests a cooling of inflation, some analysts remain wary of the potential risks associated with premature policy easing, particularly in light of the still-tight labor markets.Bullard’s comments have added to the debate over the Fed’s next steps as it navigates between curbing inflation and supporting economic growth. The possibility of a rate cut by March, as posited by Bullard, will be closely watched by markets and policymakers alike in the coming weeks.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

BERLIN (Reuters) – The proportion of German firms exiting the Chinese market or considering doing so has more than doubled to 9% in the past four years, according to a survey by the German Chamber of Commerce in China.The survey highlights the challenges faced by German companies operating in China, including increased competition from local companies, unequal market access, economic headwinds and geopolitical risks, the chamber said.“Last year was a reality check for German companies operating in China,” said Ulf Reinhardt, chairperson of the chamber for southern China.Some 2% of the 566 firms surveyed between Sept. 5 and Oct. 6 said they were selling off business operations in China while 7% said they were considering doing so. That compared to a total of 4% exiting China or considering doing so in 2020.Moreover 44% have taken steps to address risks linked to their business operations in China – including building up China-independent supply chains.The survey comes half a year after the government unveiled a strategy toward de-risking Germany’s economic relationship with China, its biggest trade partner and confirms anecdotal evidence reported by Reuters of German firms reducing their dependence on China.Other countries in the West are also promoting risk mitigation amid concern about China’s increasingly assertive attitude towards Taiwan and in the South China Sea, as well as its tightening grip over its domestic economy.China’s economy is facing a downward trajectory, some 86% of German firms said in Tuesday’s survey, although most deemed it to be temporary and predicted a bounceback within the next 1-3 years.China’s recovery from the pandemic has proven shakier than many expected, with a deepening property crisis, mounting deflationary risks and tepid demand casting a pall over this year’s outlook.Some 54% of surveyed German firms said they nonetheless planned to increase investment to stay competitive. More