Economy

Here’s your look at what matters for markets this week from Kevin Buckland in Tokyo, Ira Iosebashvili in New York, and Naomi Rovnick, Dhara Ranasinghe and Karin Strohecker in London.1/ ELECTRIC DREAMSAs the latest earnings season goes full steam, focus is on Tesla, one of the first of big U.S. tech companies to report. Tesla shares have taken a hit this month, following a long-awaited unveiling of its robotaxis that some investors said was short on practical details. Year-to-date, Tesla’s shares have lost around 11%, compared to the S&P 500’s 22.5% gain.A weaker-than-expected Tesla earnings in late July, along with underwhelming results from Google-parent Alphabet (NASDAQ:GOOGL), sparked a U.S. stocks selloff that was a prelude to the steeper drop in early August. Though investors are more optimistic about the U.S. economy after a blowout jobs report and last month’s 50 bps rate cut from the Federal Reserve, a soft earnings report from Tesla on Oct. 23 could reignite worries about tech stock valuations, which have climbed along with the broader indexes.2/ FAR AWAYFinance officials head to Washington DC for the annual meeting of the International Monetary Fund and World Bank Group from Monday to debate how countries can navigate slowing growth and ever-rising debt.Some 5,000 miles east, in the Russian city of Kazan, President Vladimir Putin hosts a summit of BRICS leaders, seeking support in his standoff with the West. Russia says leaders from Brazil, India, China, South Africa, Egypt, the UAE and Saudi Arabia, which account for a third of global economic output, will be there. Key topics include a push to end U.S. dollar dominance. By then, there will be just days to go to the biggest political risk event of 2024: a U.S. election that is too close to call and one that could mark the start of a new global trade war if Donald Trump wins – a prospect seen as damaging to economies everywhere.3/ THINGS CAN ONLY GET BETTERWhen September business activity data were released a month ago, investors got a shock from news of a sharp euro zone contraction and ramped up ECB rate cut bets.So October PMIs on Thursday will likely be scrutinised for a sense of how rapidly rates have further to fall. PMI data from other economies are published the same day.Note, the final euro zone Sept purchasing managers index, while below the 50 mark that divides contraction from expansion, was not as dire as the initial estimate.And other data suggest tentative reasons for optimism in a bloc that has skirted recession for over a year. Q3 lending demand rose; German sentiment has improved.But tell that to the euro. It will lag as long as investors reckon the ECB will ease policy at a faster pace than the Fed. 4/ PROOFChinese stocks have been a near-perfect barometer of expectations for big bang stimulus from Beijing, and just a glance at a chart of the past two months shows how quickly hopes have been deflated.On Monday, China cut rates– as expected. Since the announcement of the biggest and broadest stimulus since the pandemic in late September, one highly anticipated briefing after another has passed without the details investors are craving – particularly the size of fiscal spending.Just how powerful the fine print can be was shown Friday, when the launch of promised swap and relending schemes sparked a stocks surge. But with further stimulus clarity not expected in any major capacity before a meeting of parliament’s standing committee, probably early next month, that leaves a weeks-long void when stoking the equity rally looks a very big ask. 5/ MONEY, MONEY, MONEYThe UK’s new Labour government presents its first budget on Oct. 30 and with the nation’s finances strained and growth stalling, investors will scrutinise fresh monthly government borrowing data this week. Public sector net debt has hit 100% of economic output and government borrowing in August, at 13.73 billion pounds, 3 billion pounds above economists’ forecasts. September’s borrowing amount will be revealed on Oct. 22. After finance minister Rachel Reeves identified a fiscal “black hole” worth 22 billion pounds, but ruled out raising taxes on working people, stock market investors suspect they are in the firing line from potential hikes to capital gains taxes. Bond market lenders are also, according to BNY, selling gilts at the fastest pace since former Prime Minister Liz Truss’ chaotic 2022 mini-budget, as speculation mounts about the UK increasing debt issuance to fund public investment. More

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The PBOC cut its one-year LPR to 3.10% from 3.35%, slightly more than expectations it would cut the rate to 3.15%. The five-year LPR, which determines mortgage rates, was cut to 3.60% from 3.85%, against expectations for a cut to 3.65%. The PBOC had last cut rates in July. The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending rates in the country.The rate cut was largely telegraphed by Chinese authorities, and is the latest in a line of sweeping stimulus measures aimed at shoring up economic growth. Beijing had over the past month flagged several monetary and fiscal measures aimed at supporting infrastructure development, stemming a property market decline and keeping economic growth on track to meet the government’s 5% annual target. The government had promised interest rate cuts as part of these measures, making Monday’s cut somewhat expected.The past month saw Beijing unveil its most targeted measures yet at supporting growth. But the measures inspired middling investor confidence, given that Beijing did not provide details on the implementation, timing and scale of the planned measures. The PBOC has also consistently cut the LPR over the past two years, to limited effect. Looser monetary conditions have so far done little to offset a persistent deflationary trend in the country, with recent readings for September showing little improvement.  More

Election polls show rising odds of former President Donald Trump winning the Nov. 5 election and are boosting the dollar, since his proposed tariff and tax policies are seen as likely to keep U.S. interest rates high and undermine currencies of trading partners.Currency moves in major markets last week were driven by the European Central Bank’s dovish rate cut and strong U.S. data that pushed out expectations for how fast U.S. rates can fall, particularly if Trump wins the presidency.The yen was down 0.1% at 149.32 per dollar, staying on the stronger side of 150 per dollar, having breached that level briefly last week for the first time since early August.The dollar index measure against major rivals was at 103.45. It fell 0.3% on Friday as risk appetite picked up broadly across markets after China announced more details of its broad stimulus package, but logged 0.55% gains for the week. The euro stood flat at $1.0866 and sterling was also flat around $1.3045.Bitcoin got a lift from Trump’s improving prospects since his administration is seen as taking a softer line on cryptocurrency regulation. It was last up 0.8% at $69,400, and has risen 18% since Oct. 10.With no major economic events due this week, market focus will be on corporate earnings and U.S. election risk, and possibly a rise in costs to hedge dollar and other portfolio risks, Chris Weston, head of research at Australian online broker Pepperstone, said in a note.”With just 15 days to go until the U.S. election, traders need to decide if now is the right time to start placing election trades with greater conviction,” Weston said.The clearest way to express the Trump tariff risk was to be long dollars versus the euro, Swiss franc and Mexican peso, he said.Brad Bechtel, global head of FX at Jefferies, also noted that rising real interest rates were helping the dollar along, particularly against those three currencies.”We expect this trend to continue straight into the election and if Trump wins, likely well after the election as well,” Bechtel wrote.Last week, the yen fell 0.3%, the euro 0.6%, sterling was flat and the dollar index climbed 0.55%. The Mexican peso fell 3%.The euro is down more than 3% in three weeks and has fallen through its 200-day moving average, and is parked near a 2-1/2 month low. More

BRASILIA (Reuters) -Brazilian President Luiz Inacio Lula da Silva on Sunday canceled his trip to Russia for the BRICS summit, following medical advice to temporarily avoid long-haul flights after a head injury at home that caused a minor brain hemorrhage.In a statement, the presidential office said Lula, 78, will now participate in the BRICS meeting via videoconference. He was initially scheduled to depart at 5 p.m. on Sunday.Lula’s doctor, Roberto Kalil, said in an interview with GloboNews TV channel that the president suffered a fall that caused “great” trauma to the back of his head, requiring stitches for the injury and resulting in a “small brain hemorrhage” in the temporal-frontal region.”It’s a condition that will require repeat tests throughout the week. Any brain hemorrhage, theoretically, can worsen in the following days, so observation is important,” he said.Kalil added that Lula is doing well and can engage in normal activities. According to a medical report issued earlier on Sunday by the Sirio Libanes Hospital in Brasilia, Lula suffered a laceration to the “occipital region” in the back of his head on Saturday.The report said Lula “was advised to avoid long-distance air travel but is otherwise able to carry out his regular duties.”The government said in a post on X that Foreign Minister Mauro Vieira has been designated to lead the Brazilian delegation in the BRICS summit, departing later on Sunday. The diplomatic forum founded 15 years ago by major emerging markets Brazil, Russia, India, China has since expanding to include South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates.Congresswoman Gleisi Hoffmann, president of Lula’s Workers Party, posted on social media that she had spoken with the president and that “he is doing very well, just avoiding a long trip.” More

Asking prices rose by just 0.3% in October, well below their average for a 1.3% monthly increase for the month, property website Rightmove (OTC:RTMVY) said. The number of homes available for sale was 12% higher than the same time period last year, and was the highest per real estate agent since 2014.Overall activity in the property market remained strong, with buyer demand rising. Prices were 1.0% higher than a year earlier.Tim Bannister, Rightmove’s director of property science, said some buyers were waiting for a further reduction in borrowing costs by the Bank of England as well as the government’s budget later this month. “Despite a budget-shaped cloud on the horizon, the big picture still looks positive for the market heading into 2025. Market activity remains strong, despite affordability pressures on movers,” Bannister said. “Once we have more certainty about the contents of the budget, hopefully followed by speedy second and third Bank Rate cuts, we could see another surge in market optimism like we had in the summer.”Monday’s figures chimed with other indicators of Britain’s housing sector that have shown momentum picking up. Mortgage lenders Halifax and Nationwide both reported rises in house prices in September.Britain’s finance minister Rachel Reeves will deliver her first budget on Oct. 30. Reeves has warned some taxes will have to increase, although she has said that Prime Minister Keir Starmer’s government would not raise taxes on “working people”. The Times reported last week that Reeves will not extend an increase in the thresholds at which people start paying stamp duty on home purchases beyond its scheduled expiry in March. The BoE is expected to cut its benchmark Bank Rate at its next meeting in November and possibly again in December. Rightmove said a fall in mortgage rates was stalling after dropping quickly when the BoE cut borrowing costs for the first time in more than four years in August.It said average 5-year fixed mortgage rates rose to 4.61% from 4.55% a week earlier, the first weekly increase since May. More

TOKYO (Reuters) – The Bank of Japan holds a two-day policy meeting concluding on Oct. 31, days after a general election where new Prime Minister Shigeru Ishiba faces a key test on his agenda to prop up wages and revitalise the country’s weak regional economies.Here is a guide on what to expect and why the BOJ’s rate review matters:IS BOJ GOING TO RAISE INTEREST RATES?The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signaled readiness to hike again, once the board has enough confidence that Japan will durably hit its 2% inflation target.With inflation stable around 2% and showing few signs of spiking, however, the BOJ is in no rush to pull the trigger.The central bank is widely expected to keep rates steady at the October meeting, as Governor Kazuo Ueda has stressed the need to spend time scrutinising risks such as uncertainty over the U.S. economy and the fallout from volatile markets.Central banks typically avoid changing policy around big political events. The BOJ has plenty of reason to stand pat with a domestic election scheduled on Oct. 27 and the U.S. presidential election looming early next month.WHAT SHOULD MARKETS LOOK OUT FOR?The BOJ has said it will hike rates again if the economy and prices move in line with its forecast. That means its quarterly report, which will include the board’s fresh growth and price forecasts, may offer clues on the next rate hike timing.Sources have told Reuters the BOJ is unlikely to make major changes to its forecast for inflation to hover around its 2% target through March 2027.While such projections would meet the prerequisite for more rate hikes, the BOJ may signal its readiness to go slow by highlighting risks such as slow global growth and the damage volatile markets could inflict on household and corporate mood.If the BOJ escalates warning over such risks or refers to them in the report’s portion on policy guidance, that could further diminish the chance of a year-end rate hike. Increased optimism over sustained wage hikes, by contrast, could be a sign the next rate hike is nearing.WHAT ELSE SHOULD MARKETS LOOK OUT FOR?Governor Ueda’s post-meeting briefing, to be held at 3:30 p.m. Tokyo time (0630GMT) on Oct. 31, may offer clues on the pace and timing of further rate hikes.In a briefing in September, Ueda dropped signs of a pause by saying the BOJ can “afford” to spend time scrutinising risks.His comments on the yen are also key as the currency’s sharp decline, which pushes up inflation via import costs, was among factors that led to the BOJ’s rate hike in July.While still off a three-decade trough near 162 hit in early July, the yen fell to a two-and-a-half-month low below 150 to the dollar on Thursday. Further yen falls could put renewed pressure on Ueda to drop hawkish signals on the rate outlook.WHAT DO ANALYSTS THINK ABOUT NEXT RATE HIKE TIMING?After the October meeting, the BOJ next meets for a policy meeting on Dec. 18-19 followed by a meeting on Jan. 23-24.A slim majority of economist polled by Reuters saw the BOJ forgoing a hike this year, with most expecting the central bank to raise rates again by March next year.WHAT COULD HAMPER FURTHER RATE HIKES?The BOJ has signaled readiness to raise rates to levels deemed neutral to the economy – seen by analysts as somewhere around 1% – by around late next year or early 2026.But the road could be bumpy. The BOJ hopes bumper wage hikes offered by firms this year will underpin consumption, and allow retailers to keep hiking prices. But slowing global demand may discourage manufacturers from offering big pay hikes next year.Political clouds also hang over the BOJ’s rate-hike path. While Ishiba has said he will not interfere in monetary policy, the premier may push back against further rate hikes if his ruling party fares poorly in the Oct. 27 election. More