Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets.Wall Street greeted 2024 with a bout of stock and bond selling suggesting ambivalence is nudging aside year-end optimism about a soft landing and disinflation. Confidence that the Federal Reserve could start it’s pivot away from tightening in March incentivised last month’s S&P 500 run at record highs, and one of the steepest quarterly drops in benchmark yields in almost three years. While such caution in the U.S. could spill over into Japanese shares when Tokyo trading reopens Wednesday, bulls there have their own list of buying justifications, from a 7% fall in the yen to the confidence shown in Japanese shares by Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) in 2023.They could take a cue from South Korea’s benchmark KOSPI which ended the first trading day of the year Tuesday with a 0.55% gain and hit a 19-month high. The Nikkei’s 28% yearly gain was the biggest in a decade and it ended the year less than 1.0% shy of the 33-year high set in November. Still, there is little in the way of major Japanese economic data due this week for motivation. The same is true for indicators from other big Asian markets, where perhaps Thailand’s December CPI reading due Wednesday is the stand out. The yen weakened in overseas markets on Tuesday after its dalliance with five-month highs last week. Dollar/yen rose 0.8% to 141.97. Against China’s yuan the dollar rose 0.36% to 7.1510. The Australian dollar was down 0.72% at US$0.6762. The main driver of the week will likely be Friday’s December U.S. payrolls report which will help market participants guess the timing of any Fed rate cuts. The Fed is widely seen holding rates at its January meeting, traders expect a near 70% chance of a 25-basis point cut in March, according to the CME Group’s (NASDAQ:CME) FedWatch tool.The S&P 500 fell 0.56% on Tuesday and the tech-heavy Nasdaq swooned 1.63%. The Dow squeaked out a 0.07% gain.U.S. Treasury yields popped higher as traders lowered expectations for rate cuts in 2024. But with Japan closed, the largest foreign owner of Treasuries was out of the market. “Things may have gotten a little ahead of themselves, whether it’s equity valuations or expectations of Treasury rate cuts,” said David Albrycht, chief investment officer at Newfleet Asset Management. “People have become really complacent that the Fed is going to execute a soft landing but it’s still not clear.”Here are key developments that could provide more direction to markets on Friday:- Thailand CPI (December)- China Business Surveys, PMI (December)- U.S. FOMC Minutes (December) More

Corcept’s shares fell nearly 38% in trading after the bell.The lawsuit was tied to Korlym, Corcept’s drug to treat Cushing’s syndrome, which creates an excess of the hormone cortisol and causes high blood sugar, among other things.Teva has been looking to sell a generic version of Corcept’s Korlym drug. Its application to do so was approved by the U.S. Food and Drug Administration in 2020, but it has not yet launched its product.Corcept had failed to demonstrate a likelihood of direct infringement of its patent by Teva, a United States district judge ruled.The companies did not immediately respond to Reuters requests for comment. More

WASHINGTON (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva said Americans should “cheer up” about the U.S. economy, as inflation subsides further in 2024 amid a strong job market and moderating interest rates.Georgieva told CNN in an interview that aired on Tuesday that the U.S. economy is “definitely” headed for a “soft landing” with fairly strong growth prospects.”People should be feeling good about the economy because they finally would see relief in terms of prices,” Georgieva said, praising the Federal Reserve’s “decisiveness” in raising interest rates to fight inflation.”While that has been painful, especially for small businesses, it has brought the desired impact without pushing the economy into recession,” Georgieva added.Asked why many polls show Americans pessimistic about the economy, the IMF chief said that consumers had become accustomed to low inflation and very low interest rates for many years, and when both jumped in recent years, it was a shock.”My message to everyone is, you have a job and interest rates are going to moderate this year because inflation is going down. Cheer up. It is a new year, people,” Georgieva said.Georgieva repeated her warnings against fragmentation of the global economy along geopolitical lines due to increasing national security restrictions, with countries gravitating towards separate blocs led by the United States and China. Allowed to continue, she said this could ultimately reduce Global GDP by 7% – roughly equal to the annual out put of France and Germany,” and urged Washington and Beijing to compete on a rational basis, while cooperate on globally important issues.”So we are all better off to find ways to reduce frictions, to concentrate on security concerns that are real and meaningful, and not go willy-nilly in fragmenting the world economy. We would end up with a smaller pie,” Georgieva said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.“Grey gloom” is not the front-page headline many Britons would have wanted to read at the start of the new year. But the phrase sums up the economic mood according to the Financial Times’s annual survey of economists. It is easy to see why. The UK economy shrank in the third quarter of last year, putting it on the cusp of a recession. It is expected to grow by about half a per cent in both 2023 and 2024 as the impact of high interest rates and elevated price levels squeeze households and businesses.Economists are a melancholy bunch. A similarly downbeat outlook this time last year turned out to be overly pessimistic. Inflation fell faster than expected and unemployment did not surge as predicted. Revisions to gross domestic product also showed that Britain’s post-pandemic recovery was in line with G7 peers, and not the worst as previously forecast. Looking ahead, there are a few reasons why the bearish outlook on Britain may weaken.First, Britain begins 2024 with a more stable policy outlook than in the recent past. That may be a low bar, given the political turmoil since 2016, but in the past year the government has overseen an improvement in the business environment. Ties with the EU have improved, and the UK has rejoined the bloc’s Horizon Europe science and research programme. The full expensing of capital investment was also made permanent in the Autumn Statement. The UK’s capital allowances are now among the most generous in the OECD, and businesses are spending again. Investment has finally jumped above levels before the Brexit referendum.The UK is also one of the few major economies where an election will be contested this year between two relatively centrist parties, with no far-right party challenging for power. Prime Minister Rishi Sunak has admittedly put vote-grabbing above economic interests in some areas, including policies to slash legal immigration. But both main parties are engaged in reasonably constructive debates on how to boost long-term growth, which includes reforming byzantine planning laws and rethinking whether UK pension funds could invest more effectively. A significant Labour party victory, as polls indicate, also points to continuity in the medium term.The shift towards calmer waters appeals to investors. The economy could see a decent rebound, particularly if global economic conditions also improve. Just under 50 per cent of executives surveyed by Ernst & Young in June expected the UK’s attractiveness for business to rise in the coming years. Many businesses have now adjusted to costlier EU trading arrangements, and with a lot of negative news priced in, cheap UK stocks could be in for a resurgence in valuation. Real-terms wage growth and steeper than expected cuts to interest rates may also bolster near-term economic activity.Britain has a number of strengths it can build on too. It retains a comparative advantage in financial and professional services and is unique in having so many world-class universities spread throughout the country — which, alongside its finance sector, helps to draw global talent. London remains the largest hub for start-ups in Europe, which means there is significant scope for job creation and innovation. The UK is also building a specialism in life sciences, advanced manufacturing and renewable technologies. It is already a leader in offshore wind.Low growth and high rates paint an undeniably downbeat picture for the year ahead. But continued policy stability for businesses, and sensible measures to develop existing advantages and emergent sectors, could mean the “grey gloom” starts to lift. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Almost one-quarter of UK buy now, pay later users have been charged late repayment fees, with younger consumers hit hardest, according to research that points to how people have turned to the unregulated form of credit to cope with rising living costs.BNPL products allow shoppers to pay for clothes and food delivery shops, for example, in mainly interest-free weekly or monthly instalments.The payment method, where users are charged if they repay loans late, has increased in popularity over the past year, in part because it enables users to avoid shelling out on goods in full and upfront. But regulators and consumer groups have voiced concerns over the risk of indebtedness. Research commissioned by the Centre for Financial Capability, a UK-based financial education charity, found that 22 per cent of BNPL users have missed one or more repayments in the six months to December 2023. Of those people, more than one-quarter took a hit on their credit score as a result or were contacted by a debt collection agency, according to the survey. Young people were most likely to receive late fees, with 34 per cent of users aged 18-34 charged for missing a repayment over the same period.Although the overall number of BNPL users hit by late fees declined slightly year on year in 2023, the number of people aged 55 or over fined for missing a repayment increased from 7 per cent to 10 per cent.CFC trustee Jane Goodland said: “As the ongoing cost of living crisis continues to impact the British public, it is apparent that many users are increasingly reliant on these schemes, without fully understanding the risks involved.“Our polling shows the high usage of BNPL particularly [among] young people, many of whom are facing difficult financial consequences as a result of these schemes,” she added.The charity found that 21 per cent of users were unclear what late repayment fees they would owe the company if they missed a repayment, as well as how this would affect their credit score.Its study found that the use of BNPL was on the rise among people aged 25-65, and most popular with younger users. One-third of UK adults have used the method in the past, compared with 40 per cent of people aged 18-34.Fintech groups including Klarna, Clearpay, Laybuy and PayPal Credit pioneered BNPL but a number of banks including NatWest, Virgin Money, HSBC and Monzo now also provide the product.According to the survey, one-quarter of all people who have used or intend to use BNPL did so or would do so because of inflation and rising living costs. The figure is higher among people 65 or over, with 30 per cent of people in that age group citing the cost of living as their driver.BNPL, which is largely interest free, is unregulated in the UK, meaning providers do not have to run affordability checks on prospective users. Consumer groups have warned that the current set-up can lead people to accrue debt if they build up bills from various late repayment fees on products from different providers.The UK government first said it would regulate interest-free BNPL products in February 2021. The Treasury opened a consultation in early 2023, and set out plans to bring the sector under regulation at the end of last year. In Australia, where BNPL is more mainstream, the government said in May last year that it would bring the products under consumer credit regulation.Goodland said the need to protect consumers from “dangerous financial trends” including BNPL was “urgent” and pressed stakeholders to educate users about the risks.“Financial education is by no means a silver bullet, but . . . coupled with government regulation on BNPL services, [it] can ensure that people are protected,” she said.Video: Why the UK has a problem with maths | FT Film More

NEW YORK (Reuters) – U.S. corporate earnings should improve at a stronger clip in 2024 as inflation and interest rates come down, analysts predict, but worries about slowing economic growth hang over the outlook.S&P 500 earnings are expected to increase 11.1% overall in 2024 after rising a modest 3.1% last year, according to estimates compiled by LSEG. But earnings growth needs to be enough to support lofty valuations in stocks. The S&P 500 index is trading at 19.8 times forward 12-month earnings estimates, well above its long-term average of 15.6 times, based on LSEG Datastream data.Falling rates helped drive a sharp year-end rally, especially after the Federal Reserve in December opened the door to interest rate cuts in 2024 after a rate hike campaign that started in 2022.The Dow Jones industrial average in December hit its first record high close since January 2022, while the S&P 500 is within striking distance of its all-time closing finish. The S&P 500 rose 24.2% for the year. “The market trading where it is at current levels demands earnings to show strong growth next year,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.Among concerns for 2024 is the lingering effect of higher interest rates on the economy and corporate earnings, he said.The U.S. government confirmed in December that economic growth accelerated in the third quarter. Gross domestic product increased at a 4.9% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its final estimate.Profit estimates could weaken further as companies begin to open their books on the fourth quarter and give guidance for the first quarter and the rest of 2024. The release of fourth-quarter results will kick into high gear in mid-January. “We’re definitely seeing those (first quarter) estimates weakening at a faster pace,” said Nick Raich, chief executive of The Earnings Scout. “Look at a name like FedEx (NYSE:FDX), and that’s a good bellwether of the global economy.” FedEx shares tumbled 12.1% Dec. 20, a day after the package delivery company reported earnings for the quarter ended Nov. 30 that fell short of analysts’ targets and cut its full-year revenue forecast.Estimated year-over-year earnings growth for S&P 500 companies for the first quarter of 2024 is now at 7.4%, down from 9.6% on Oct. 1, based on LSEG data. For the fourth quarter of 2023, S&P 500 earnings are forecast to rise 5.2%, down from 11% growth seen on Oct. 1.To be sure, investors point to cooling inflation as a strong positive for companies in 2024.”The consumer still seems to be healthy, inflation is getting better, employment is still strong, interest rates are going down and gas at the pump is going down,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.Moreover, “these companies have streamlined their businesses and margins are decent,” he said.U.S. prices fell in November for the first time in more than 3-1/2 years, pushing the annual increase in inflation further below 3%, a recent Commerce Department report showed.Optimism over growth in artificial intelligence is likely to continue to help companies with results and outlooks tied to AI technology. “While the rebound in TECH+ (earnings per share) began in 2Q23, earnings for the rest of the market are expected to follow in the year ahead,” Jonathan Golub, chief U.S. equity strategist & head of portfolio analytics at UBS Investment Research, wrote in December.The “Magnificent 7″ group of megacap stocks – Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), and Tesla (NASDAQ:TSLA) – accounted for 62.18% of the S&P 500’s total return in 2023, according to S&P Dow Jones Indices senior index analyst Howard Silverblatt. Also, the Fed’s recent dovish pivot has boosted the case for the U.S. dollar to weaken, which would make U.S. exporters’ products more competitive abroad.But whether 2024 earnings forecasts are assuming too many of these positives remains a concern.”The market is assuming a near-perfect landing with inflation cooling without a significant impact to demand and pricing power — not likely in our view,” J.P. Morgan equity strategists wrote in their 2024 outlook. “Current consensus S&P 500 forward EPS growth at 30%ile (+11%)… is in harmony with a Goldilocks outlook for growth and inflation. More