Aurelia Butler

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ISTANBUL (Reuters) – The Turkish Central Bank said on Thursday that the impact of food prices on consumer inflation will remain prominent in November, while monthly consumer inflation excluding food displays a more favorable track.In minutes of last week’s policy meeting, where it kept its key rate steady at 50%, the bank said signs of an improvement in services inflation have become more apparent while monthly price increases in the services group lost pace in October. More

Barnier’s government could fall before Christmas, perhaps as soon as next weak, and French borrowing costs soared this week on prospects of political instability over the failure of the 2025 budget.The following looks at the ECB’s options to help France.WHAT COULD THE ECB DO FOR FRANCE?The ECB’s Transmission Protection Instrument (TPI) allows it to buy an unlimited number of bonds from any euro zone country experiencing a disorderly and unwarranted tightening of its financing conditions.The risk premium investors demand to hold French debt rose to a 12-year high of roughly 84 points this week but that level is not far from the 80 basis points hit this summer, when the current bout of political instability started. SO, IS THE ECB GOING TO STEP IN? Probably not. Ultimately it is the Governing Council’s decision. But France fails to meet several key criteria, which makes an ECB intervention legally contentious.First off, the market move is driven by political turmoil and concerns over budget finances, making it difficult to claim it is not warranted.Spreads over German debt, the de facto benchmark for the euro zone, have not risen much further than before the parliamentary election in the summer, so it is difficult to claim it is disorderly. France is also under an EU excessive deficit procedure, failing a key ECB criteria. It is running large budget deficits and its debt level is rising, so it is also hard to argue it has “sound and sustainable macroeconomic policies,” as demanded by the ECB.”We think the ECB would be unlikely to activate the Transmission Protection Instrument and buy French government bonds if the budget is rejected and the government collapses,” Barclays (LON:BARC) said a note.     However, the ECB did leave itself a loophole saying that these criteria are merely an “input” in the decision making and they will be “dynamically adjusted” in light of unfolding risks.Still, to date, no ECB policymaker has even suggested the bank should help France. IS THE RECENT MARKET MOVE EXTREME?When TPI was created in 2022, Italy complained that its spreads were too high. The Bank of Italy governor complained that spreads in excess of 200 basis points were unwarranted and it should be no more than 150 basis points. The ECB, however, did not budge and to date TPI has never been used.Nomura predicts that a French government collapse could push the spread to 100 to 120 basis points. “Fiscal and political uncertainty would surge,” it said. “Nobody, not even the domestic (investors), would be ready to catch the falling knife.”WHAT ABOUT CONTAGION?The ECB has not publicly explored this idea raised by financial market participants. However, the ECB could have the legal power to help other countries in case they suffered from a disorderly and unwarranted rise in borrowing costs because of turmoil in France.Indeed, ECB board member Isabel Schnabel recently argued that bond buys are a powerful tool for stabilising financial markets during periods of stress. “Stabilising financial markets typically requires only short-lived interventions,” she said. “Purchases can be limited in volume and unwound quickly, which also helps limit moral hazard.”    However, Italian spreads have not moved much this week, suggesting no fear of contagion for now.In case of contagion, the ECB could also cut interest rates somewhat quicker than markets now think to compensate for a market driven rise in financing conditions. More

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Last week, the U.S. Chamber of Commerce informed members in an email that the Biden administration was considering adding as many as 200 Chinese chip companies to a trade blacklist, which would prevent most U.S. suppliers from shipping to them.Asked about the report at a regular news conference on Thursday, commerce ministry spokesperson He Yadong said China “strongly opposes” what he said was the U.S. broadening the concept of national security, and the “abuse” of control measures targeting Chinese companies.The U.S. has been tightening controls over semiconductors amid fears that China could use advanced technologies to strengthen its military.”These actions severely disrupt the international economic and trade order, destabilise global industrial security, and harm the cooperative efforts between China and the U.S., as well as the global semiconductor industry,” He said. “If the U.S. insists on escalating control measures, China will take necessary actions to resolutely protect the legitimate rights of Chinese enterprises,” he added. Bloomberg reported on Thursday that the Biden administration was considering additional curbs on the sale of semiconductor equipment and AI memory chips to China.Citing people familiar with the issue, it said the latest proposal would sanction fewer Huawei suppliers than initially planned, notably excluding ChangXin Memory Technologies, which is trying to develop AI memory chip technology.The proposal also targets two chip factories owned by Semiconductor Manufacturing International Corp., Huawei’s partner, and more than 100 Chinese companies making semiconductor manufacturing equipment, rather than the chips themselves, according to the report.Biden is due to leave office in January, and there are concerns that President-elect Donald Trump’s promise to implement additional tariffs on China could trigger a trade war.Trump pledged this week to impose an additional 10% tariff on all imports from China, above any existing tariffs.He accused Beijing of not doing enough to stop the flow of illicit drugs into the U.S. from Mexico.China’s commerce ministry said on Thursday the tariffs would not resolve U.S. internal issues. More

Shares of major global semiconductor equipment companies rose sharply on Thursday following a report that new U.S. sanctions on China’s chip industry may be less severe than expected.ASML (AS:ASML) gained approximately 4% in early European trading, while Tokyo Electron Ltd. (TYO:8035) rose more than 6% in Japan.Bloomberg reported on Wednesday that the U.S. is considering additional restrictions on the sale of semiconductor equipment and AI memory chips to China, but the new rules could stop short of earlier, more stringent proposals.OPEC+ has postponed a meeting on oil production cuts, initially scheduled for Sunday, to December 5, according to reports.The group is set to discuss whether to move forward with plans to increase output by 180,000 barrels per day starting in January. Earlier in the week, reports indicated that discussions are underway to delay the planned increase, possibly for several months.Oil markets are on guard over a potential global supply glut in 2025, spurred chiefly by record-high U.S. production.Oil prices were slightly lower after U.S. inventory data overnight showed that while oil stockpiles fell in the latest week gasoline inventories rose, sparking concerns over cooling demand.A ceasefire between Israel and Lebanon also dented risk premium.Microsoft (NASDAQ:MSFT) shares fell in after-hours trade after the Federal Trade Commission launched a broad-based antitrust investigation, spanning several areas of the software giant’s business, including cloud computing, artificial intelligence and cybersecurity.The probe is looking at whether Microsoft is leveraging its market power in productivity software by imposing restrictive licensing terms that prevent customers from transferring their data from its Azure cloud service to competing platforms.The inquiry was authorized by FTC Chair Lina Khan ahead of her likely departure in January. The outcome of the investigation remains uncertain as the election of Donald Trump has raised expectations he will appoint a fellow Republican with a softer approach toward business.Bitcoin was hovering around $96,000 on Thursday as the world’s largest digital currency moved back towards the $100,000 level, after failing to breach the milestone last week.Bitcoin has hit a series of records since the Nov. 5 presidential election, boosted by expectations the incoming Trump administration will be extremely pro-crypto.Fox News reported Wednesday that the new administration wants to shift the bulk of crypto regulatory oversight to the Commodity Futures Trading Commission from the Securities and Exchange Commission.The CFTC oversees the U.S. derivatives market, and is seen as having less strict regulatory standards than the SEC.But analysts at Compass Point said Wednesday that Trump’s plans for a Bitcoin strategic reserve had limited scope, with the U.S. Treasury unlikely to approve more deficit-driven funding for the government to buy Bitcoin.Black Friday marks the start of the holiday shopping season, which will offer a key indication of how U.S. consumers are coping with higher prices.The season is expected to provide further insights into consumer spending, which drives more than two-thirds of U.S. economic activity. While inflation has eased from the 40-year highs reached two years ago, elevated prices continue to challenge shoppers.Strong spending through the year-end could reinforce recent data suggesting a stronger-than-expected economy.While investors have welcomed these signs of economic resilience, concerns remain over the potential for inflation to pick up again, which could limit the extent of Fed interest rate cuts in the months ahead. More