Aurelia Butler

(Reuters) – Argentine President Javier Milei has sent a reform bill to Congress proposing far-reaching changes to the country’s tax system, electoral law and public debt management.The push to reshape South America’s second-largest economy with an omnibus bill requires approval from lawmakers in both chambers of Congress, where Milei’s coalition holds a small minority of seats. WHAT ARE THE MAJOR REFORMS IN THE BILL?The bill has 664 articles that range from allowing the privatization of 41 public companies, eliminating the presidential primary vote and introducing a broad 15% tax on most exports.The government also proposed raising export taxes for soy and its derivatives to 33% from 31%. Argentina is the world’s No. 1 exporter of processed soy.The bill aims to introduce tax amnesties for Argentines, allowing them to register and repatriate some undeclared assets such as stocks, cryptocurrencies and cash.A reform to public debt management would remove limits on sovereign bonds issued overseas and eliminate some conditions on restructuring debt.Changes to Argentina’s proportional representation electoral system would raise the number of lawmakers in each district to one per 161,000 inhabitants, from one per 180,000 inhabitants. This would give more power to the populous province of Buenos Aires in the lower house of Congress, according to a note to clients by consultancy firm 1816. Among the more controversial reforms cited, is a call to cede some legislative power to the presidency until Dec. 31, 2025, with the option to extend these for a further two years. WHAT ABOUT MILEI’S PRESIDENTIAL DECREE?Markets cautiously welcomed a presidential decree from Milei last week to deregulate the economy, which came into effect on Dec.29 and also introduces wide-ranging reforms such as the end to export limits.That decree must go before a legislative commission to weigh its constitutionality. It will remain in force unless both Congress and the Senate vote it down. Unlike the reform bill, the presidential decree does not include changes to the tax and the electoral system, which must be put to congressional debate under Argentina’s constitution. HOW LONG COULD IT TAKE TO PASS THE REFORM BILL?Milei’s government sent the bill to Congress on Wednesday and has called for extraordinary sessions to fast-track its reform agenda.The extraordinary sessions are scheduled through Jan. 31, shortening the usual recess until March. Lawmakers will set up commissions to analyze the proposals, which may include input from experts and government officials. Several of the measures proposed require an absolute majority, such as electoral reform, which analysts warn could slow the process down. There is no set timeline stipulated for the bill to be debated. HOW STRONG IS THE GOVERNMENT’S POSITION IN CONGRESS?Milei’s coalition, La Libertad Avanza, controls only 15% of seats in the lower house, so must rally support to move forward. If eventually approved by the lower house, the bill moves to the Senate, where the government is even weaker, with less than 10% of seats. Given his lack of a strong party or a majority in either chamber, analysts warn that Milei faces an uphill battle to advance his reform agenda. “My doubt is whether Milei is open to accepting changes, or whether he wants the bill to pass without accepting any amendments,” said Ignacio Labaqui senior analyst at Medley Global Advisors in Buenos Aires. “If he goes for the second option, he is literally declaring war on the legislative branch and has a high chance of losing.” Opposition movements have organized demonstrations against Milei’s agenda in several cities since he took office Dec. 10. More

Hapag-Lloyd will continue to divert its vessels around the Suez Canal for security reasons, a spokesperson for the German container shipper said on Friday, adding a further assessment would be made on Jan. 2.Mitsui O.S.K. Lines and Nippon Yusen, Japan’s largest shipping companies, also said their vessels with links to Israel were avoiding the Red Sea area. Both companies said they were monitoring the situation.Shipping giants including Hapag-Lloyd and Denmark’s Maersk earlier this month stopped using Red Sea routes and the Suez Canal after Yemen’s Houthi militant group began targeting vessels, disrupting global trade.Instead, they rerouted ships around Africa via the Cape of Good Hope to avoid attacks, charging customers extra fees and adding days or weeks to the time it takes to transport goods from Asia to Europe and to the east coast of North America.The situation remains uncertain. Maersk is planning to sail almost all container vessels travelling between Asia and Europe through the Suez Canal from now on while diverting only a handful around Africa, a Reuters breakdown of the group’s schedule showed on Thursday.France’s CMA CGM is also increasing the number of vessels it has travelling through the Suez Canal, it said on Tuesday.CMA CGM is among container lines to have introduced surcharges due to the re-routing of vessels, adding to rising costs for sea transport since the Houthis started targeting vessels.Mediterranean Shipping Co’s container ship United VIII was attacked while transiting the Red Sea, it said on Tuesday. The Houthis also on Tuesday claimed to have fired missiles at the vessel, without saying it was struck.The Suez Canal is used by roughly one third of global container ship cargo, and re-directing ships around the southern tip of Africa is expected to cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe. More

The MSCI All-World index surged to 3184.32 on Thursday, its highest since January 13, 2022 amid market optimism over the prospects of rate cuts.According to LSEG data, global equity funds received a net $16.01 billion during the week, logging their most significant weekly net purchase since March 22.Investors poured about $14.57 billion into U.S. equity funds, the biggest amount since June 14. European and Asian funds however, faced outflows of roughly $1 billion and $182 million, respectively.Global bond funds, meanwhile, received $1.07 billion in inflows after two successive weeks of outflows.Investors purchased $2.62 billion worth of global corporate bond funds in contrast to disposals of about $3.9 billion in the prior week. High yield funds also secured inflows, worth about $679 million but government bond funds had outflows of $265 million.Meanwhile, global money market funds attracted $9.12 billion, their first weekly inflow in three weeks.Among the commodities segment, precious metal funds attracted about $111 million as inflows extended into a fourth successive week. Energy funds also attracted about $36 million in net buying.Data covering 29,066 emerging markets funds showed equity funds secured $1.94 billion worth of inflows, breaking a 19-week-long selling streak. EM bond funds however, had $1.33 billion worth of outflows. More

It was the slowest growth in infrastructure output, comprising eight sectors also including coal and electricity, since the 5.2% recorded in May 2023.Diwali, one of India’s main festivals, is usually celebrated in October, but fell later this year, in November. Cement output dropped 3.6% year on year in November while crude oil production fell 0.4%.Electricity generation rose 5.6% in the month, coal production was up 10.9% and the steel sector expanded 9.1% year on year, the data showed. Production of refinery products increased 12.4%. “Given the larger number of factory holidays, we anticipate a modest 2-4% rise in the Index of Industrial Production (IIP) in November 2023,” said Aditi Nayar, an economist at ICRA. In the first eight months of the financial year that started on April 1, infrastructure output, which accounts for nearly 40% of industrial production, rose 8.6% year on year, the data showed. More

SINGAPORE/LONDON (Reuters) -World shares took a breather on the last trading day of the year but were heading for their best annual performance since 2019, while U.S. Treasuries are set to finish the year broadly where they started, camouflaging some wild moves for the benchmark in 2023. Shares around the world have risen sharply in the last two months of the year, as benchmark bond yields fell on the back of expectations of central bank rate cuts early in 2023. The S&P 500 closed on Thursday just 0.3% shy of its record closing high, reached on Jan. 3, 2022. Futures for the index are up 0.1%, leaving traders on edge to see whether the benchmark will reach a new peak before the year-end. The S&P500 is up nearly 25% this year thanks to a massive rally in megacap tech stocks, while Europe’s STOXX 600, currently around a 23-month peak, is heading for a 12% yearly gain, and MSCI’s world share index a 20% gain, its most in four years. All rallied sharply in November and December. “We have eaten a lot of the returns that were expected in 2024. The positive momentum in markets is obviously associated with the fall in yields, and so now the question is how long can this trend continue?” said Samy Chaar, chief economist at Lombard Odier. “It doesn’t necessarily have to stop, future returns are probably more moderate than they were at the beginning of November, but if you think the long end of the U.S. curve can settle around 3.5%- 4%, which is where we are now, there is little danger of a big U-turn, and if companies can continue to generate profits there might still be a few percent of upside.” The benchmark 10-year Treasury yield was 3.885%, up 3 basis points on the day, and remarkably just 5 basis points above its level at the start of the year. That yearly performance masks some major swings, as the note’s yield reached 5.021% in October, its highest since 2007, before retreating and driving the share rally. Behind the move lower in yields has been a sustained decline in inflation around the world that has driven expectations that central banks will be cutting interest rates early next year, even as the U.S. economy has broadly remained strong. Markets are pricing in a 88% chance of the U.S. Federal Reserve starting its rate cuts in March, according to CME FedWatch tool, compared to 35% chance at the end of November. Traders are also pricing in over 150 basis points of easing next year by the Fed, the European Central Bank, and the Bank of England. Spanish inflation was a rare piece of economic data during the quiet period between Christmas and New Year. The country’s European Union-harmonised 12-month inflation was unchanged from November at 3.3%, though below the 3.4% expected by analysts polled by Reuters.CHINESE UNDERPERFORMANCE Chinese markets have been standout underperformers, despite optimism at the start of the year when Beijing ended its zero-COVID policy. Both Hong Kong’s Hang Seng Index and China’s onshore bluechip index lost more than 10% in the year on waning investors confidence in the world’s second largest economy. [.SS] In the currency market, the dollar was rooted on the back foot and headed for a 2% decline this year after two years of strong gains, with declines mirroring the fall in U.S. yields. Against a basket of currencies, the dollar was last at 101.25, edging away from the five month low of 100.61 it touched on Wednesday. [FRX/]In commodities, Chicago wheat and corn futures were set for the biggest annual drop in a decade as easing supply bottlenecks in the Black Sea region and higher production weighed on prices. [GRA/]Oil prices were due to end 2023 down 10% after a year of wild swings driven by geopolitical concerns, production cuts and global measures to rein in inflation.On Friday, U.S. crude rose 0.7% to $72.06 per barrel and Brent was at $77.69, up 0.7%. [O/R]Gold prices rose a touch on Friday and were poised to end their best year since 2020. Spot gold was at $2,064.7 an ounce. [GOL/] More