Aurelia Butler

LONDON (Reuters) -Investors sold stocks at the fastest weekly rate this year in the week to Wednesday, Bank of America Global Research said in a report on Friday.The BofA data captures flows from the run-up to this week’s key central bank meetings from the Federal Reserve and the Bank of England, where both held rates steady. Central banks from some of the world’s biggest economies have served notice that they will keep interest rates as high as needed to tame inflation.Equities recorded a weekly outflow of $16.9 billion, while investors bought $2.5 billion of bonds, which recorded a 26th straight week of inflows, BofA said, citing EPFR data. European equities logged their 28th straight week of outflows, with investors shedding $3.1 billion in this latest week. Energy stocks recorded their largest weekly inflow since March, totalling $600 million, alongside soaring oil prices.Investors also pulled $300 million from gold and $4.3 billion from cash. Year-to-date, however, investors have ploughed $1 trillion into cash. BofA described the mindset as “cautious & “paid to wait”.Meanwhile, they have put $147 billion into U.S. Treasuries so far this year.”…we believe “lower-for-longer” rates & yields caused bubble & boom in 2010s & 2020/21,” the BofA analysts wrote, adding that “higher-for-longer” means a risk of a hard landing and bubble “pops & busts in the first half of 2024. BofA’s bull & bear indicator, a measure of market sentiment, fell to 3.4 from 3.6, remaining at a ‘neutral’ signal. They attributed the drop to outflows from emerging market debt funds, high-yield bonds, and from developed markets long-only investors offsetting record long hedge fund position in 2-year Treasuries. More

LONDON (Reuters) -Citigroup has warned UK-based employees of the likelihood of redundancies as the lender pushes ahead with a sweeping reorganisation, according to a memo seen by Reuters on Friday, a move that could affect hundreds of jobs in the country. The bank, which has about 16,000 employees in the UK, said it was moving into phase two of its plans to rationalise its banking structure and as part of that would set up a consultation process whereby employees can give their feedback. “We anticipate that the reviews may lead to a reduction in roles in some parts of the business, and changes to some other roles. In some cases, colleagues may be placed at risk of redundancy,” James Bardick, UK Citi Country Officer, told employees in the memo seen by Reuters. The bank did not tell Britain and North Ireland-based employees how many jobs would be eliminated. “As we take the necessary next steps to align our organisation model with our strategy, we’re committed to following all legal and regulatory requirements and, importantly, supporting our colleagues through these changes,” a Citi spokesperson said in a statement to Reuters. Bankers have been bracing for change after CEO Jane Fraser said earlier this month that Citigroup (NYSE:C), the third-largest U.S. bank, would strip out a layer of management and cut jobs. The overhaul involves its five divisions reporting directly to the CEO and cutting regional roles outside of North America. “Change isn’t easy, and we recognise the uncertainty that many of our colleagues are experiencing,” Bardick added. “We are moving at pace to provide clarity while following our processes and allowing for needed input from team leaders.”It is not known which areas of the bank’s UK operations will be targeted for layoffs.Under local rules, organisations must consult with employees when there could be more than 20 redundancies. Citigroup said it will be conferring with the London Consultation Forum (LCF) over the coming weeks as part of a collective consultation process. It will also give Belfast-based workers the ability to elect representatives as part of the consultation process.The bank said it would consult with employees at risk of redundancy on an individual basis.  Fraser described the changes as Citi’s biggest reorganisation in almost two decades, in a bid to gain more direct control over its units and boost profit and share price. In recent days in the United States Citi started discussions with employees about potential layoffs, with support staff in compliance and risk management among those areas targeted, Reuters reported. Technology staff working on overlapping functions were also at risk of being laid off, Reuters reported. Kristine Braden, CEO of Citibank Europe, is leaving the company after 25 years as part the organisational change, according to an internal memo seen by Reuters. More

LONDON (Reuters) – Global shares stalled on Friday as U.S. yields climbed multi-year highs and the prospect of recession in Europe increased, compounding growing worries that U.S. interest rates will stay higher for longer.U.S. stock futures were slightly firmer ahead of the opening bell on Wall Street, signalling a pause after sharp losses on Thursday amid uncertainty over interest rates going into 2024.The S&P 500 and Nasdaq are on track for their worst week since mid-March, while the dollar, up 0.17%, was headed for its 10th consecutive weekly increase, lifted by a fall in the euro on grim euro-zone economic data.Benchmark 10-year U.S. Treasury yields hit a 16-year high of 4.508%, later trading at 4.48%, while 30-year yields hit their highest in a dozen years. They were trading at 4.5721%, up slightly on the day.A re-assessment of the Fed’s higher-for-longer policy was driving the rise in yields, creating headwinds for risk assets such as equities, credit and emerging markets, but supporting the dollar, ING bank said.The yen traded at 148.255 to the dollar, after falling sharply earlier in the day following the Bank of Japan’s decision to hold interest rates in negative territory, suggesting it was in no rush to phase out its massive stimulus programme.Firmer oil prices were trading above $90 a barrel, though on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply.The mounting risk of a U.S. government shutdown in just 10 days was also being watched by markets.MSCI’s index of global equities was flat, though still down about 2.6% for the week so far.”The massive week for central banks has really been all about the Fed. That is the focus of the market and that’s what’s driving the dollar right now,” said Eren Osman, managing director of wealth management at Arbuthnot Latham.The Fed revised downwards its unemployment rate forecast for next year, and if the U.S. economic data continued to improve, it would put “upside risk” on interest rates, making the need for a soft landing all the greater, Osman added.In sharp contrast with the U.S. economy, the euro zone economy will likely contract in the third quarter and won’t return to growth anytime soon, HCOB’s flash purchasing managers’ index showed, hitting the euro and yields.The counterpart data for U.S. manufacturing and services data is due shortly after the opening bell on Wall Street.The pan-European STOXX 600 share index was slightly weaker.Speeches from Fed officials Mary Daly, Neel Kashkari, Susan Collins and Lisa Cook are due later.TURNING POINTMSCI’s index of Asia-Pacific shares ex-Japan touched a 10-month low before bouncing to trade up 0.9% on vows in China to support private business. It is down 2.8% this week. The yen eased on news from the BoJ, with traders extra wary of intervention after the BOJ noted it was watching the impact of foreign exchange moves on Japan’s economy.Japan’s Nikkei pared losses of as deep as 1% to trade 0.5% lower.Ten-year Japanese government bond futures rallied though cash yields were little changed and near decade highs at 0.745%.Investors were still digesting a slew of policy decisions from major central banks during the week.Fed members had lifted their median projection for the funds rate in 2024 by 50 basis points (bps) to 5.1% and traders shaved about 15 bps from implied futures pricing, which has rates at 4.7% at the end of next year.Central banks in Sweden and Norway announced 25 bp hikes with the prospect of more to come.Yet the Bank of England, in a split decision, left rates on hold for the first time in nearly two years, sending sterling to a six-month low, while the Swiss franc fell sharply after a surprise hold on rates from the Swiss National Bank.”It’s a lot of mixed messages and stories, and often you get those around turning points,” said Craig Ebert, senior economist at BNZ in Wellington.In emerging markets, Indian bonds and the rupee rallied after JPMorgan said it would add Indian debt to its widely tracked emerging markets index, setting the stage for billions of dollars in foreign inflows.Gold firmed 0.3% to $1,925 an ounce despite pressure from the stronger dollar and bond yields. More

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LONDON (Reuters) – The euro zone economy is likely contract this quarter and won’t return to growth anytime soon, a survey showed, as the dampening effect of central banks’ long campaign of interest rates rises becomes clearer.HCOB’s flash euro zone Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health, rose to 47.1 in September from August’s 33-month low of 46.7.The reading was still below the 50 mark separating growth from contraction, however, and Hamburg Commercial Bank said the bloc’s economy would contract 0.4% this quarter, far worse than the flatlining predicted in a recent Reuters poll.”A recession is becoming increasingly clear in the euro area. Unlike in the winter half-year of 2022/23, the economic weakness is not concentrated in Germany, which has suffered particularly badly from high energy prices,” said Christoph Weil at Commerzbank (ETR:CBKG). “The increase in the ECB key interest rate by 450 basis points in the meantime is slowing down the economy in all euro countries.”Although two years of unprecedented global policy tightening may have reached a peak, major central banks have served notice they will keep interest rates as high as needed to defeat inflation.The impact is now being clearly felt, with shrinking business activity in Germany, Europe’s largest economy, pointing to a contraction there due to a sustained decline in demand for goods and services.Meanwhile France’s dominant services sector contracted at an even sharper pace in September, its PMI showed, as falls in demand and new orders weighed on the euro zone’s second-biggest economy.In Britain, outside the European Union, companies endured a much tougher September than feared, marked by growing unemployment and recession risks.The Bank of England – which had access to the PMI data – halted its long run of interest rate increases on Thursday as Britain’s economy has slowed and inflation fallen, but Governor Andrew Bailey sought to stress the central bank did not think its job was done.Conversely in Spain, gross domestic product grew 0.5% last quarter, confirming a faster and stronger rebound from the COVID-19 pandemic than in many other places.OUT OF ORDERSeptember’s fall in overall activity in the euro zone came despite firms barely increasing their charges. The composite output prices index dropped to its lowest since early 2021.That drop will likely be welcomed by policymakers at the European Central Bank who last week raised their key interest rate to a record high of 4% in their fight against inflation. The services PMI rose to 48.4 from 47.9 but spent its second month below the breakeven mark this year.With higher borrowing costs eating into indebted consumers’ disposable income they cut back on spending. The services new business index fell to 46.4 from 46.7 – its lowest since February 2021.The manufacturing PMI has been sub-50 since mid-2022 and the latest headline index dipped to 43.4 from 43.5, confounding expectations in the Reuters poll for a rise to 44.0.An index measuring output, which feeds into the composite PMI, held steady, albeit still deep in contraction territory.A chunk of that activity was from factories completing existing orders. The backlogs of work index dropped to its lowest reading since the COVID pandemic was cementing its grip on the world in May 2020.”Businesses are still working off old orders at the moment, which is keeping output reasonable right now. Still, that suggests a weaker outlook for the months ahead,” said Bert Colijn at ING. More

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