Aurelia Butler

BEIJING (Reuters) -China will cut banks’ reserve requirement ratios (RRR) “in a timely way”, state media on Friday quoted Premier Li Keqiang as saying, as the world’s second largest economy faces strengthening headwinds.China will “cut reserve requirement ratios in a timely way to step up support for the real economy, especially small and micro firms, to ensure stable and healthy economic operations,” Li was quoted as saying during a meeting with International Monetary Fund chief Kristalina Georgieva via video link.He said China will implement steady economic polices and make the policies more targeted and effective, while maintaining its prudent monetary policy and keeping liquidity reasonably ample.Since a broad-based cut to reserve ratios – the amount of cash that banks must hold as reserves – in July, the central bank has defied market expectations for further policy easing, and Chinese leaders have ruled out aggressive stimulus.Hu Yifan, regional chief investment officer and chief China economist at UBS Global Wealth Management, said this week she expected the central bank to cut reserves banks are required to hold by Lunar New Year, in early February.But some analysts believe an easing step could come sooner.”A near-term RRR cut is possible,” said Tang Jianwei, senior economist at Bank of Communications in Shanghai.”The downward pressure on the economy is relatively big, dragged by a weakening property market.”The RRR for large banks, after taking into consideration the preferential policy of targeted cuts for inclusive financing, is at 10.5%Advisers to China’s government will recommend authorities set a 2022 economic growth target below the one set for 2021, giving policymakers more room to push structural reforms.China’s multiple headwinds heading into 2022 include the fallout from a property downturn and from strict COVID-19 curbs that have impeded consumption and slowed the impressive rebound from last year’s pandemic slump. More

BENGALURU (Reuters) – The Bank of Canada will raise interest rates by the end of the third quarter next year, according to nearly all economists polled by Reuters, with a growing minority expecting a first hike as early as end-June.Those expectations, based on the view inflation is less transitory than thought, come despite the emergence last month of the Omicron coronavirus variant, which has clouded the economic recovery outlook around the globe.Over 95% of economists, 26 of 27, expected at least one hike by the end of the third quarter of 2022, the Nov. 29-Dec. 3 Reuters poll found.That is much more conclusive than a poll in October when economists were split over the chances of a Q3 hike. Now 19 of 20 common contributors expect at least one rise by end-September compared with 11 in October’s poll.All 29 contributors expected the Bank of Canada to keep rates unchanged at 0.25% at its Dec. 8 meeting. “The Bank of Canada will raise rates in the third quarter of 2022…the elevated rate of inflation is putting pressure on the Bank of Canada and the Fed, but there is a hesitance to raise rates and risk stunting the recovery,” said Brendan LaCerda, senior economist at Moody’s (NYSE:MCO) Analytics.”As such, early 2022 is the critical juncture. If all goes to plan and inflation cools, then the pressure to act dissipates. If not, then we would expect the timeline for rate increases to shift forward significantly.”Canada’s annual inflation, at an 18-year high https://www.reuters.com/world/americas/canadas-annual-inflation-rate-hits-47-oct-highest-since-feb-2003-2021-11-17, has aligned a significant minority of economists with more aggressive pricing in interest rate futures markets. About 45% of respondents, or 13 of 29, expected at least one rate hike by mid-2022, in contrast to no one expecting such a move in the October poll.”The economy is growing strongly and inflation will soon breach 5%,” said James Knightley, chief international economist at ING, who expected a first hike as soon as next quarter and four 25 basis point rate hikes in 2022.”We are reluctant to make any changes to this view right now given the uncertainty over Omicron, but the obvious risk is the BoC ends up delaying the first hike until Q2 should consumer caution kick in on COVID anxiety.”Asked in an additional question when should the BoC raise rates, half of 18 economists said July 2022.”At this point, there’s still a lot of uncertainty on how the new COVID variant might alter the near-term outlook. It could keep inflation elevated by disrupting global supply chains, while also depressing services consumption growth in Canada,” said Avery Shenfeld, CIBC.”A rate hike near mid-2022 might be appropriate, but these fresh clouds on the horizon imply the Bank should avoid being too specific at this point on when they see the first hike coming.” More

The proposed $12,500 electric vehicle tax credit would include $4,500 for EVs built in the United States by union workers, effective after 2027. It is included in the Biden administration’s sweeping climate and social spending legislation now under consideration by Congress.Mexican Economy Minister Tatiana Clouthier said the tax credit was “discriminatory,” and would violate the U.S.-Mexico-Canada Agreement on trade. Mexico is analyzing a range of legal actions in response that may include tariffs, Clouthier said on Thursday.”In the past we have imposed tariffs and we would have to do or propose something very important and strategic for those products, in those places where it hurts them … so that the consequences can be felt,” Clouthier told a news conference.She added that it was “totally contrary to free trade” and has previously rebuked the United States https://www.reuters.com/world/americas/mexican-minister-chides-us-protectionism-ahead-summit-2021-11-17 for pursuing what she described as protectionist policies that were liable to backfire and spur more migration to the U.S. border.U.S. Trade Representative Katherine Tai has said she is aware of trading partners’ objections and was discussing the matter with them.”The Biden-Harris Administration is committed to tackling the threat of climate change by supporting the transition to electric vehicle manufacturing,” USTR spokesman Adam Hodge said in a statement.”We will continue to engage a range of stakeholders, including our close trading partners, as Congress considers legislation to strengthen U.S. leadership in the sector,” he added.In late October, Mexico, along with the European Union, Germany, Canada, Japan, France, South Korea, Italy and other countries wrote U.S. lawmakers https://www.reuters.com/business/autos-transportation/international-opposition-mounts-proposed-us-ev-tax-credit-2021-10-30 saying the proposed electric vehicle tax credit violates international trade rules.The proposal has been backed by U.S. President Joe Biden, the United Auto Workers (UAW) union and many congressional Democrats, but opposed by major international automakers, including Toyota Motor (NYSE:TM) Corp, Volkswagen AG (OTC:VWAGY), Daimler AG (DE:DAIGn), Honda Motor Co, Hyundai Motor Co and BMW AG.The EV tax credit issue was also expected to be raised by Canada’s trade minister, Mary Ng, during meetings this week with Tai in Washington, along with other U.S.-Canadian trade irritants, including on U.S. softwood lumber tariffs. More

The president of the European Central Bank said it was unlikely eurozone interest rates would increase next year, calling the current rise in inflation a passing “hump”, but added that the ECB would act swiftly if needed to staunch the increase in prices.Despite eurozone inflation hitting a record high of 4.9 per cent in November, well above the ECB’s target of 2 per cent, Christine Lagarde said it was likely to have peaked and would decline next year. “I see an inflation profile that looks like a hump . . . and a hump eventually declines,” she said at a Reuters virtual event. Lagarde also repeated her assertion that the ECB was “very unlikely” to raise interest rates next year.Her comments contrast with a recent policy shift at the US Federal Reserve, whose chair Jay Powell this week said it would speed up the withdrawal of its bond purchases to fight soaring inflation, fuelling expectations that it was likely to raise rates next year.Lagarde said it was too early to say what impact the Omicron coronavirus variant would have on Europe’s recent economic recovery and on inflation. “We have to wait for the scientists to tell us [more about the variant],” she said. “But equally, we need to very clearly indicate that we stand ready [to act] in both directions,” she added. Once inflation is on track to stay above 2 per cent for the next few years, fulfilling the conditions set by the ECB for rates to rise, she said the bank “would not hesitate to act”.Some economists have said the new variant could mean inflation stays higher for longer as fresh restrictions disrupt trade and shift demand from services to goods, worsening supply chain bottlenecks that have pushed up prices around the world.However, Lagarde said 55 to 60 per cent of recent inflation came from soaring energy prices and there was “reason to believe that by the end of 2022 it will have declined significantly”.Given the rising uncertainty over the economic impact of the pandemic, Lagarde also said the central bank’s policymakers were unlikely to make any long-term policy pledges when they meet in two weeks. “There are ways to give clarity without making long-term commitments and I would err on the side of not making very long-term commitments because there is too much uncertainty,” Lagarde said.The recent surge in Covid-19 cases and the spread of the Omicron variant have made some ECB policymakers reluctant to commit to maintaining its stimulus for a long period when they meet on December 16, especially after inflation consistently overshot their forecasts this year.Some conservative “hawks” at the ECB have said it could end all asset purchases next year, much earlier than many investors expect. Klaas Knot, head of the Dutch central bank, said on Friday the ECB could raise rates in 2023 if inflation stays higher than expected next year.

Lagarde said new bond purchases under its flagship €1.85tn pandemic emergency purchase programme were still expected to end in March, but she added that the ECB had other tools available to “ensure conditions remain favourable” after that point.She said the ECB could still “act on markets” by reinvesting the proceeds of maturing bonds and by continuing new purchases under its traditional asset purchase programme, which some investors expect to be expanded from its current pace of €20bn a month.Eurozone unemployment, which is close to pre-pandemic levels after dipping to 7.3 per cent in October, was higher than in the US and there were fewer signs of labour shortages or widespread cases of people leaving the workforce in Europe, Lagarde said. More

(Reuters) – U.S. stock index futures edged lower on Friday with investors awaiting November payrolls data at the end of a volatile week marked by fears about the Omicron coronavirus variant slowing an economic recovery.Equity markets flitted between gains and losses all week as investors digested updates on the newly detected variant, which is spreading globally and causing many countries to reimpose travel restrictions.The main three indexes are on course for weekly losses, with Wall Street’s fear gauge, the CBOE Market Volatility index, spiking above 30 for the first in ten months earlier this week. The Labor Department’s closely watched nonfarm payrolls report, due at 8:30 am ET, is expected to show U.S. employers stepped up hiring in November, with the unemployment rate seen falling to a 20-month low of 4.5% and wages increasing further.”Assuming the Omicron news remains less end of the world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself,” said Jeffrey Halley, senior market analyst at Oanda.”That may nip the equity rally in the bud, while the U.S. dollar and U.S. yields could resume rising.”Federal Reserve Chair Jerome Powell said earlier this week that the U.S. central bank will consider at the upcoming meeting a faster wind-down to its bond-buying program, a move widely seen as opening the door to earlier interest rates hikes.November reading on ISM non-manufacturing PMI report is also scheduled after markets open.At 6:42 a.m. ET, Dow e-minis were down 48 points, or 0.14%, S&P 500 e-minis were down 7.75 points, or 0.17%, and Nasdaq 100 e-minis were down 25.5 points, or 0.16%.Meanwhile, the Democratic-controlled U.S. Senate passed a bill to fund the government through mid-February, averting the risk of a shutdown.Delta Air Lines (NYSE:DAL) and Norwegian Cruise Line (NYSE:NCLH) led losses among shares of major airlines and cruiseliners, down 1.0% and 0.7%, respectively, in premarket trading after logging sharp gains on Thursday.Ulta Beauty (NASDAQ:ULTA) jumped 6.3% in low volumes after the beauty retailer raised annual sales and profit forecasts. Nucor Corp (NYSE:NUE) rose 1.6% after the steel products manufacturer increased its quarterly dividend by 23% and announced a $4 billion buyback program. More