Aurelia Butler

(Reuters) -The U.S. trucking industry may begin to see an uptick in freight demand in the back half of the year after grappling with another quarter of lower profits due to a slump in package volumes, company executives and analysts said.The expectations have been largely fueled by U.S. retailers’ comments on their improving inventory position and prospects of better inbound container shipments. Companies ranging from Target to Macy’s (NYSE:M) have signaled that they have largely moved past their bloated inventory issues from a year earlier as retailers look to stock up on in-demand products ahead of the crucial holiday season.Meanwhile, a drop in volume of large containers handled by U.S. ports compared to last year is also set to narrow in the coming months, according to the National Retail Federation, indicating retailers are preparing for increased demand during the year-end holiday period.”Most of our retail customers have worked through that inventory…so it does look like the freight markets have troughed from a demand perspective,” said logistics firm XPO’s chief Mario Harik, adding that freight markets could recover into 2024.XPO, which serves companies such as Ulta Beauty (NASDAQ:ULTA), said it saw shipment count and tonnage flip to positive in July, indicating the start of a slightly improved freight demand environment. Old Dominion Freight (NASDAQ:ODFL) Line Chief Financial Officer Adam Satterfield also expressed similar views last month on inventory.”We get the sense that inventory levels are normalizing a bit,” Satterfield said in an earnings call.Freight demand slumped last year after a surge during the pandemic-induced shift to online shopping as customers returned to stores and household budgets were pressured by sticky inflation. This led to retailers moving to stop an inventory pileup, sending a ripple effect on trucks and railroads that move the goods.”I don’t know that we’ve ever seen freight demand fall this far so fast and for so long without an accompanying economic recession,” logistics firm Knight-Swift Transportation chief David Jackson said in a post-earnings call with analysts. As a result, adjusted net income at trucking firms such as JB Hunt (NASDAQ:JBHT), Old Dominion, CH Robinson (NASDAQ:CHRW) and XPO fell between 22% and 69% in the second quarter from a year earlier. The second quarter was the most challenging for trucking firms in recent times, analysts and industry executives said, owing to high wage costs and ultra-low spot rates, or the current market price for a one-time freight shipment. But there is light at the end of the tunnel. “We’re still in the worsening part of the down cycle.. but by the time we get into next year, we’ll be returning to growth,” said Tim Denoyer of market research firm ACT Research. Knight-Swift said a combination of demand recovery as import volumes return to more normal levels and supply reduction should lead to improving freight market conditions in the near future.”There are still some areas where retail inventories are too high, but more and more categories will need restocking as time progresses,” ACT Research’s Denoyer said. Meanwhile, the demise of Yellow (OTC:YELLQ) Corp, the third-biggest U.S. trucking company, may also help prop up rates for rivals such as XPO, FedEx (NYSE:FDX) Freight, and Old Dominion among others, analysts said. More

Here’s a look at the week ahead in markets from Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam, and Nigel Hunt and Dhara Ranasinghe in London. 1/HOT, COLD – OR JUST RIGHT?    With Treasury yields surging and stocks wobbling, major data in coming days will test the U.S. economy’s temperature as investors worry that the Federal Reserve may keep interest rates higher for longer.    The August employment report out on Friday takes centre stage: July non-farm payrolls showed the economy added fewer jobs than expected, but solid wage gains and a declining unemployment rate to 3.5% pointed to continued tightness in labor market conditions.    Other data such as consumer confidence, the state of manufacturing, and inflation, with the latest personal consumption expenditures index is also due.    The readings will come on the heels of Jerome Powell’s warning at the annual Fed confab in Jackson Hole, Wyoming, that the world’s top central bank may need to raise interest rates and 10-year U.S. Treasury yields hitting their highest since 2007. 2/ THE TOUGH PARTFor a year it was a no-brainer that the ECB would be hiking rates to contain high inflation — its key rate rose swiftly to 3.75% from below 0%.Now comes the tough part as the economy sputters. Data showing a slide in business activity has convinced many traders that a pause in September is likely. Yet Thursday’s flash euro area August inflation number, which follows releases from some member states, could be the decider. Euro zone consumer prices rose by 5.3% in July versus 5.5% in June, extending a downtrend that started last autumn. The closely-watched underlying gauge was flat at 5.5% but services inflation rose. Germany’s Bundesbank has warned of a growing risk that consumer price growth gets stuck above 2%. August’s 20% surge in European gas prices suggests disinflation could be slow. It is too soon to rule out a September hike. 3/ PARTING WAYSBond investors are keen to leave behind a painful August that saw a rethink of how long rates will stay higher as a strong U.S. economy put the recession fund managers have long pined for even further out of reach. Longer-dated U.S. Treasury yields soared to a 16-year high and real rates, adjusted for future inflation, jumped above 2% for the first time since 2009, unnerving stock markets. But just as investors were digesting that narrative, a deepening downturn in business activity pointed to more pain ahead for Europe’s stumbling economies, prompting double-digit drops in British and German bond yields in recent days. Now, benchmark 10-year U.S. Treasuries are set for their worst monthly performance since February, with yields up nearly 30 basis points in August. But a gloomier outlook has seen smaller rises in German and British yields. 4/ A GIANT SHIP China is taking ever more steps to revitalize drooping equities, a languishing currency, a teetering property market, and a floundering economy – except the big one investors want: bold fiscal stimulus. Recent days have seen more than 100 A-share companies reportedly announcing buybacks at the request of regulators keen to shore up market confidence. The PBOC has set much stronger-than-expected mid-points for the yuan, building a floor above recent 9 1/2-month lows. Real estate is at the centre of the storm – silent Country Garden development sites show the sector’s sorry state. Some developers don’t have the cash to pay workers – or debt obligations. President Xi Jinping told a BRICS summit that China’s economy is a “giant ship” that will “forge ahead.” PMIs on Thursday and Friday will give the latest evidence of any leaks. 5/ BITTER SWEET El Nino – having emerged for the first time in seven years – is posing a growing threat to global food supplies with the U.S. Climate Prediction Center saying that the weather phenomenon is expected to strengthen through the winter of 2023/24.India’s monsoon rains have suffered, with this month set to be the driest August since records began in 1901. The world’s most populous country is already concerned about the threat to production of several basic commodities, including rice and sugar.India’s export ban of non-basmati white rice last month sent global prices sharply higher and the country is expected to prohibit mills from exporting sugar from October.Agricultural production in other Asian countries, including major palm oil and coffee producer Indonesia, and Thailand – one of the world’s top sugar exporters – is also expected to be hit by dry weather in coming months. More

France’s economic growth was resilient in the second quarter, Martin told France 2 TV, but he added that there were nevertheless indications of slower activity.”But we see things are slowing down, investment is slowing down, consumption is slowing down” he said. “The issue of high interest rates is also weighing on business activity”, he added. Recent business surveys showed that the euro zone’s second-largest economy is being dragged down by a contraction in the country’s dominant services sector while industrial output has been ailing for months. In this context, France is facing additional risks if the government does not manage to keep up with large-scale investment schemes seen in rivalling economies, Martin said, citing the United States and Germany in particular. Data published in July showed that France’s gross domestic product (GDP) grew by 0.5% in the second quarter, beating forecasts. More

ANKARA/LONDON (Reuters) – Turkey’s latest massive interest rate hike has caught the attention of long-sceptical foreign investors who say they could return to Turkish assets if authorities continue to demonstrate that a return to orthodox monetary policy is underway.The lira rallied as much as 7% on Thursday after the central bank shocked the market by lifting its key rate by 750 basis points to 25% – three times the size of the expected move.Turkey’s top officials say that they plan to take two more vital steps to reverse a years-long exodus of foreign investment as well: they will publish a comprehensive economic programme next month that will reduce uncertainties; and they will begin holding meetings with investors abroad.Finance Minister Mehmet Simsek will kick off the investor roadshow on Sept. 19 at Goldman Sachs headquarters in New York, Reuters reported on Friday.Though the tide may be shifting, persuading investors will not be easy: Foreigners had all but abandoned Turkey over the last five years of President Tayyip Erdogan’s unorthodox and often erratic policies, which included slashing interest rates in the face of soaring inflation.Yet five foreign investors told Reuters that this week’s rate hike signalled a new independence among policymakers who are serious about addressing unrelenting pressure on the currency and reining in inflation expectations.”It feels like they are correcting the mistakes they made with their first rate hike decisions,” said Viktor Szabo, portfolio manager at abrdn in London. “And it is a sign that the pressure continued on the currency.”Ola El-Shawarby, deputy portfolio manager for Emerging Markets Equity Strategy at Van Eck, said: “We have some exposure and we are getting more comfortable with the overall picture so we are getting more constructive.”    “The more proof we get of the return to orthodoxy the more likely we are to revisit these investments,” she said. ERDOGAN QUESTIONFaced with badly depleted FX reserves and other economic strains, Erdogan, fresh from winning re-election in May, appointed Simsek and picked as central bank governor former Wall Street banker Hafize Gaye Erkan – the first woman to run the central bank – to turn things around. Vice President Cevdet Yilmaz told bankers that next month’s “medium-term programme” will detail a transition to increased economic and financial predictability and include three-year macro forecasts. The investor roadshow will also accelerate, he added. Simsek has stressed his team has political support for its plan, which should see inflation begin to cool around May of next year.Erdogan, who has fired four central bank chiefs in four years, has said little about the rate hikes. “They will have to raise policy rates further in this cycle to have a lasting effect on international investors,” said Blaise Antin, head of EM sovereign research at asset manager TCW in Los Angeles. “The question is whether they have Erdogan’s green light to keep going.” The central bank said on Thursday it will hike rates more as needed and JPMorgan (NYSE:JPM) predicted they will hit 35% by year-end.TENTATIVE STEPSWith inflation seen rising to near 60% by the end of the year from almost 48% last month, the rate hikes partly narrow the gap.Though Turkey’s international bonds are widely held and form part of key indexes, the country has struggled to lure foreign investors back into its domestic bond markets after a series of lira crises and de facto capital controls.Foreigners hold less than 1% of Turkish bonds, down from 10% in 2019 and 20% in 2015, official data shows. Over the last three months, bonds saw only $110.5 million in cumulative foreign inflows, while stocks saw a rush of $1.7 billion. Turkish stock, Eurobond and CDS markets are more attractive targets this year and next, especially after the rate hike, investors and officials say. New investments from Gulf states have helped to buy time and refresh FX reserves.”Ultimately for investors the end rate matters – but it is more that the central bank is ready to act when needed,” said Kaan Nazli, portfolio manager at asset manager Neuberger Berman in London. “But seeing that change is a positive thing.” Aside from the combined 1,650 basis points in monetary tightening since June, there are other signs of lasting change. Authorities have raised taxes to limit budget deficits, cooled domestic demand, begun rolling back a costly depreciation-protected deposit scheme, and raised FX reserves by $20 billion to head off any possible current account deficit crisis. In an interview with newspaper Yeni Safak, Simsek said Turkey held huge promise for foreign investors as long as “we follow rules-based policies in line with world norms.”After meetings in New York and at the United Nations – which Erdogan is also expected to attend – Simsek listed plans for trips to London and an International Monetary Fund event in Morocco, as well as other meetings in Japan, Singapore and Hong Kong by the end of the year. More

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