Aurelia Butler

Futures on the S&P/TSX index were up 0.2% at 6:53 a.m. ET, tracking their U.S. counterparts. [.N]China this month began dismantling the world’s strictest COVID regime of lockdowns and extensive testing, putting its battered economy on course for a complete re-opening next year, though hospitals and funeral homes were under intense pressure as a surging COVID-19 wave drained resources.On the flip side, concerns remained that rising COVID cases could disrupt its economic recovery, pushing down prices of oil. [O/R]Copper prices hit two-week peak, while gold eased from the six-month high hit in the previous session as the dollar regained strength. [GOL/] [MET/L]The benchmark Canadian index ended up on Friday as energy shares rose, posting its first weekly gain in three weeks.The TSX is set to decline for the first time on a yearly basis since 2018, heading into the last week days of trading left in the year.Canadian equity markets will resume trading for the first time this week, following Christmas and Boxing Day holidays.Among individual stocks, miner First Quantum Minerals (OTC:FQVLF) Ltd said operations at its Cobre Panama mine are continuing as normal as formal talks resumed on Monday with Panama to solve a dispute over the miner’s operations.Northland Capital initiated coverage with “outperform” rating on commercial EV maker Lion Electric. More

Beijing began dismantling its strict COVID curbs this month in an abrupt policy U-turn and on Monday announced it would drop its quarantine rule for inbound travelers from next month. The move initially brought cheer to markets on hopes of a recovery in China’s COVID-hammered economy, but a jump in infections has dampened sentiment.”If the Chinese reopening story is positive for oil and commodity prices, it’s bad news for global inflation,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.”The surge in Chinese demand will certainly boost inflation through higher energy and commodity prices and in response to higher inflation, the central banks will continue hiking rates.” As markets enter the last leg of a grueling year for equities on fears of a recession from the fastest pace of rate hikes by the Federal Reserve since the early 1980s, focus has shifted to 2023 and the outlook for corporate earnings.The benchmark S&P 500 and the Nasdaq are down 19.7% and 33.8%, respectively, so far in 2022 and set for their biggest yearly loss since the financial crisis of 2008.The S&P 500 and Nasdaq ended lower on Tuesday at the beginning of a holiday-shortened week as growth stocks bore the brunt of investor angst over how long the Fed would continue to raise interest rates to tame high prices.Markets are now pricing in 65% odds of a 25-basis point rate hike at the U.S. central bank’s February meeting and see rates peaking at 4.94% in the first half of next year..At 6:14 a.m. ET, Dow e-minis were up 84 points, or 0.25%, S&P 500 e-minis were up 7.25 points, or 0.19%, and Nasdaq 100 e-minis were up 15.75 points, or 0.14%.Shares of Tesla (NASDAQ:TSLA) reversed declines to advance nearly 3% premarket. They hit their lowest level in more than two years in the previous session over demand worries in China.Southwest Airlines (NYSE:LUV) Co slipped 0.7% as the carrier came under fire from the U.S. government on Tuesday after it canceled thousands of flights. More

Vladimir Putin’s invasion of Ukraine this year brought to an end the post-cold war reconciliation between Russia and the west. Rivalries between the US and China have increased, too, as Beijing ramped up its military pressure on Taiwan and Washington tightened controls on technology exports to China. Great power confrontation is back. Even countries that are not sending military aid to Ukraine, or limiting trade with Russia or China, ought to be concerned. If Russia followed through on its hints that it might use nuclear weapons, the entire world would be thrust into a perilous new era. Great power rivalry has also led to a proliferation of economic sanctions, which threaten trade and investment flows and have made countries in the global south ever more wary of the dollar’s dominance of the international financial system. Yet increased competition between a US-led western alliance and a Russia-China axis offers opportunities as well as threats for “middle powers”. As Washington, Brussels, Beijing and Moscow attempt to bend world affairs in their direction, they have to pay more attention to the views of those in between — such as Turkey, Saudi Arabia, Indonesia and South Africa.Recep Tayyip Erdoğan, the authoritarian Turkish president, is under pressure at home. But on the international stage he has played his hand skilfully, and at times ruthlessly. Despite its Nato membership, Turkey has not joined western sanctions on Russia. Erdogan’s government has even blocked applications by Finland and Sweden to join Nato, as it seeks to extract concessions from its allies. Turkey can play geopolitical hardball as the Ukraine war has given Ankara real leverage. The Turks brokered the deal to allow grain to be transported across the Black Sea, easing food price inflation across the world. Turkey may yet play a significant role in future peace negotiations.The rising energy prices associated with the Ukraine war have also increased Saudi leverage. Joe Biden once talked of turning the country into a “pariah”. But he paid a respectful visit to Riyadh over the summer. In recent weeks, the Saudis have hosted Xi Jinping, China’s leader.India, which has realistic aspirations to become one of the world’s superpowers during this century, is also charting a middle path. It has outraged some in the west by importing cheap Russian oil. But India knows it can get away with this as it is also crucial to western efforts to balance Chinese power.Nonetheless, disillusionment with the global south has led to talk in western capitals of the need to put a revitalised western alliance at the centre of global policymaking. Jake Sullivan, Biden’s national security adviser, has spoken of the G7 — which is dominated by the US and Europe — as the “organising committee of the free world”.In elevating the G7, however, the west cannot afford to ignore the middle powers that are represented at the G20. Their growing economic heft means they are crucial to shaping the rules on trade, technology, sanctions and international norms. The G20 statement after November’s summit in Indonesia was also encouragingly tough in its condemnation of Russia — showing it would be a mistake to give up on influencing the middle powers of the global south.Those countries themselves also need to think carefully about their own position. Defending their economic interests and calling out western double standards is fair enough. But unchecked aggression by Russia and China would eventually also threaten the interests of middle powers such as Turkey, Indonesia, India and the Gulf states. That, too, is a lesson that needs to be absorbed. More

The probe follows a complaint by consumer group Codacons, which alleged “a specific collusive will” of airlines to raise prices for domestic flights to and from Sicily during the Christmas holidays, the regulator said in its weekly bulletin.The complaint also targeted state-owned ITA Airways, the successor of former flagship carrier Alitalia, it added.In a statement to Reuters, easyJet denied any wrongdoing. “easyJet strongly refutes these claims, adheres to relevant laws and regulations and will fully cooperate with the authorities to demonstrate it has always acted lawfully and competitively in the best interests of consumers,” it said.The other involved airlines did not respond to requests for comment.The cost of flights is particularly sensitive in Sicily, whose many natives who live and work in northern or central Italy typically wish to travel back to the island to spend Christmas with family and friends.The antitrust authority said its inquiry would come to an end by Dec. 31, 2023. More

The central bank stunned markets this month by raising to 0.50% from 0.25% an implicit cap set for its 10-year bond yield target, a move aimed at ironing out market distortions caused by its yield curve control (YCC) policy.Kuroda said then that the move was not a prelude to an exit from ultra-loose policy, because recent price rises meant Japan’s inflation-adjusted, real interest rate had been declining.”Kuroda is correct on this technical point. But the tweak to the YCC could still be the first step toward monetary-policy normalization,” Ito said in the column posted on the website of news organization Project Syndicate.There was good reason to believe the BOJ’s projection that inflation will slow back below its 2% target next year could prove wrong, said Ito, whom some analysts see as a potential candidate to become BOJ governor when Kuroda’s term ends in April.Japan’s annual consumer inflation rate hit 2.8% in November even when excluding the effect of higher energy and food prices. Ito said that was a sign it could remain above 2% next year even if energy and food prices stopped rising.Next year’s annual pay negotiations were also likely to bring large wage hikes, partly to compensate employees for the rise in inflation, a move that would boost households’ spending power and cause price rises driven by stronger demand, he said.”That would be an ideal initial condition for the BOJ to start hitting its inflation target on a more sustainable basis,” Ito said. “The new year may yet bring a happy ending to Japan’s decade-old ultra-easy monetary policy,” he added.Ito and Kuroda, who have been close since working together at Japan’s finance ministry in 1999-2001, lobbied hard for the BOJ to adopt a 2% inflation target to end deflation. The BOJ did so in early 2013 and deployed a massive stimulus programme when Kuroda became governor months later.Kuroda’s “bazooka” asset-buying programme, however, failed to fire up inflation, forcing the BOJ to adopt YCC in a prolonged effort to achieve its price goal.While rising raw material prices have pushed inflation above 2% in the past few months, Kuroda has ruled out the chance of a near-term rate hike on the view that wages must rise more for Japan to sustainably hit 2% inflation. More

LONDON (Reuters) – It has been a rough 12 months for emerging markets that have seen more governments stumble into default, currencies suffer and double-digit losses in stocks and bonds alike – though many investors are optimistic that 2023 could bring some relief. Below are the events, trends and topics investors expect to shape the outlook for emerging markets next year. 1/ HIGH RATES, LOW GROWTH A slowing pace of interest rate hikes in the United States and other major economies could set the stage for an emerging markets recovery in 2023, with a softer dollar and falling inflation providing much sought relief. Developing economies are expected to cling to their growth differential over developed peers, but recession fears in the United States as well as Europe are casting a pall over global markets generally – especially in the first half of the year. “The economic downturns along with the aggressive monetary tightening and geopolitical and commodity shocks that induce them will be temporarily painful in financial and emerging markets,” said David Folkerts-Landau, group chief economist at Deutsche Bank (ETR:DBKGn). Recovery could be delayed if emerging central banks lack room to lower interest rates for most part of the year. GRAPHIC: Emerging markets interest rates (https://www.reuters.com/graphics/GLOBAL-MARKETS/RATES/akpeqqrzrpr/EM18CEN22121.2.gif ) 2/ CHINA REOPENINGChina’s reopening following its COVID-19 lockdowns will be bumpy, but making up nearly a fifth of global gross domestic product the prospect of a sharp upswing at a time of slow global growth is enticing.Analysts expect a sharp pick-up in consumption and investment in the world’s second-largest economy from mid-2023 onwards. “If you look at the savings rate for China right now, it’s very elevated,” said Erik Zipf, head of emerging market equities at DuPont (NYSE:DD) Capital. “We think that’s going to get spent as soon as people feel comfortable to go out, that’s going to provide a pretty big tailwind from an economic perspective.”3/ WAR IN UKRAINE Russia’s invasion of Ukraine roiled markets and the world economy – and how the war progresses in 2023 could be no less important, whether that would be a continuation, escalation or progress towards finding a resolution. Globally, the war has transformed energy markets and inflation pressures, food security and geopolitical risk perception – factors that are often more keenly felt in emerging economies. Emerging Europe has also felt the immediate humanitarian impact – from refugee movements to Russia’s brain drain. GRAPHIC: FAO food prices hit historic highs (https://fingfx.thomsonreuters.com/gfx/mkt/zgpobbelavd/FAO%20food%20price%20index.PNG) 4/ DEBT REWORKS A growing list of countries are in debt distress in the wake of COVID-19 and the war in Ukraine: Zambia and Ethiopia are trying to overhaul debt burdens under the Group of 20 Common Framework. Sri Lanka and Ghana defaulted in 2022.But a more complex mix of creditors – including the emergence of China as the world’s top bilateral lender – compared to previous episodes of debt distress have made proceedings slow and complex. “To get them all singing the same song in the same key is quite challenging”, said Tim Samples, associate professor of Legal Studies at the Terry College of Business.The number of countries locked out of capital markets among smaller, riskier economies is at historic highs – though there might be a saving grace. “There’s not actually a lot of debt maturing next year,” said Carmen Altenkirch, emerging markets sovereign analyst at Aviva (LON:AV) Investors. “The country that’s probably most at risk is Pakistan.” GRAPHIC: Frontier bonds (https://fingfx.thomsonreuters.com/gfx/mkt/akveqqrynvr/Frontier%20bonds.PNG) 5/ BRAZIL UNDER LULA 2.0President-elect Luiz Inacio Lula da Silva will take office on Jan. 1 with markets already looking for signals of a fiscal anchor to control spending in Latin America’s largest economy. Policymakers have highlighted inflationary risks arising from da Silva’s 168 billion reais ($31.6 billion) spending proposal to meet campaign promises. “Investors want to know if the debt-to-GDP in Brazil is explosive or under upward pressure, whether we’re hitting 100% debt to GDP anytime soon, or we can stabilize it over the next two or three years,” said Gordian Kemen, head of EM Sovereign Strategy (West) at Standard Chartered Bank.6/ TURKEY ELECTIONSPresident Tayyip Erdogan could face the biggest political challenge of his two decades in power as Turks head to the ballot box in the most high-profile vote in emerging markets.The country has grappled with surging living costs and a plunging currency, with the lira falling to a record low against the dollar TRYTOM=D3 in recent days. Years of unorthodox monetary policy have seen many investors cut exposure to the country’s assets. A change in leadership could mark a stellar turnaround.”This is potentially the most interesting story of 2023, one way or another,” said David Hauner, head of EM Cross-Asset Strategy & Economics, EMEA, Bank of America (NYSE:BAC) Global Research. 7/ CASTING A VOTE A number of other emerging market countries face elections. Voters in Africa’s most populous nation Nigeria choose their next president in February, with incumbent Muhammadu Buhari not taking part due to term limits. In Latin America, Argentina will hold presidential elections in October. Two-time president and Vice President Cristina Fernandez de Kirchner said she “would not be a candidate for anything” in the general vote, after an Argentine court sentenced her to six years in jail in a high-profile corruption case.In Poland, an election expected in autumn might see voters ousting the country’s ruling nationalist Law and Justice party (PiS), which could reshape Warsaw’s tense relations with Brussels.($1 = 5.3109 reais) More