Economy

SINGAPORE (Reuters) – The dollar held near an 11-week high on Thursday as uncertainty over the upcoming U.S. election looms and as resilience in the U.S. economy added to bets the Federal Reserve will be less aggressive in easing rates versus its peers elsewhere.The highlight of the Asia day will be a press conference in China at 0200 GMT focused on measures to prop up its beleaguered property sector, which will be key in getting the economy back on steadier footing and determining whether the rally in Chinese markets can continue.Ahead of the press conference, the offshore yuan was last 0.04% higher at 7.1328 per dollar.The Australian dollar, often used as a liquid proxy for the Chinese yuan, fell 0.02% to $0.6665, languishing near a one-month low hit in the previous session.The Aussie has been weighed down in part by investors’ disappointment over the lack of further stimulus details from China, which has also capped further upside in Chinese stocks.”Keeping a very close eye on China, waiting for yet another press conference which is probably going to be long in rhetoric and short in detail,” said Rodrigo Catril, a senior currency strategist at National Australia Bank (OTC:NABZY).”Our sense is that there’s not a lot that we can get out of today … it’s very unlikely that we’ll get serious numbers. What we are looking for, though, is a little bit more colour in terms of what this objective of stabilising the housing market means.”In the broader market, the dollar was on the front foot, after having scaled an 11-week top against a basket of peers in the previous session.Sterling was flat at $1.2991, languishing near a two-month low hit on Wednesday due to weaker-than-expected UK inflation data, while the yen struggled near the 150 per dollar level and was last at 149.47.The euro eased 0.02% to $1.0859, ahead of a monetary policy decision from the European Central Bank later on Thursday where it is expected to deliver another rate cut.The dollar has not only drawn support from a run of upbeat data on the U.S. economy which has in turn caused traders to scale back their expectations of Fed rate cuts, but also on the possibility of a victory by Republican presidential candidate Donald Trump at next month’s election.”His core policies on tariffs, immigration, and taxes would produce a more inflationary outlook in the U.S., diminishing prospects for aggressive Fed rate cuts over the cycle,” said Thierry Wizman, global FX and rates strategist at Macquarie.The dollar index was last steady at 103.51, having peaked at 103.60 in the previous session.Elsewhere, the New Zealand dollar ticked up 0.07% to $0.6061, after hitting a two-month low on Wednesday as data showed domestic inflation returned to the Reserve Bank of New Zealand’s target range of 1% to 3% in the third quarter, keeping the door open for the central bank to continue aggressively cutting rates. More

(Reuters) -Global miner BHP beat first-quarter iron ore output estimates on Thursday, spurred by easing of bottlenecks at its Western Australia operations amid efforts by China to revive its grappling property market and faltering economic growth.The world’s largest listed miner over the last year has ramped up the South Flank mine to full production capacity and streamlined its port operations for its Western Australian iron ore business. The ramp-up comes at a time when mining rivals including Vale and Rio Tinto (NYSE:RIO) are moving to expand their supplies. Vale plans to further lift its production, while Rio’s Simandou mine will begin production next year. BHP, which is diversifying into potash, said the $10.5 billion Jansen Stage 1 project was 58% complete. The miner’s upbeat iron ore production update comes as China, the commodity’s largest purchaser, has been announcing a slew of stimulus measures to support its downbeat economic recovery. BHP said iron ore output from Western Australia on a 100% basis was 71.6 million metric tons in the three months to Sept. 30, beating a Visible Alpha consensus estimate of 70.7 Mt, according to a Macquarie note.”Upcoming stimulus (from China) is likely to focus on relieving local debt, stabilising the property market and bolstering business confidence,” said CEO Mike Henry. BHP, which has been aiming to expand its copper operations, recorded a 4% rise in the metal’s output for the quarter, reflecting improved performance at its Escondida mine in Chile. Analysts at Citi said Escondida output rose on higher grades and throughput at the Chilean mine. Earlier this year, BHP made a $49 billion bid for British copper major Anglo American (JO:AGLJ), which did not materialise. But BHP joined hands with Lundin Mining (OTC:LUNMF) to take over Filo Corp, gaining access to more copper assets. Copper, used widely across the globe, is an ideal conductor of electricity and easily malleable, qualities that have made it widely popular for use in wiring, engines, construction equipment, electronics and other devices.BHP’s shares were up 0.3% at A$43.67 in early trade. More

NEW YORK (Reuters) -Rent inflation will continue to put pressure on consumers for some time to come, the Federal Reserve Bank of Cleveland said in a report on Wednesday, in a finding that may point to ongoing challenges for the Fed to get overall inflation back to 2%. “Our baseline forecast implies that [Consumer Price Index]rent inflation will remain above its pre-pandemic norm of about 3.5% until mid-2026,” the Cleveland Fed economists said in their report. One of the key forces keeping rent inflation kicking is the gap that has been seen between new rents and those for existing leases. The analysts say it will take time for what have been outsized gains in new rentals to pass through to existing rents. The statement announcing the report notes this gap is “notably wider” than where it was before the pandemic started, when it stood at just above 1%.”Our estimated rent gap in September 2024 is just under 5.5%, suggesting that there remains a substantial amount of potential rent inflation to be passed through to continuing tenants,” it said.The possibility rent inflation will remain sticky could complicate the effort to get inflation down after its pandemic surge. Fed officials are broadly confident that inflation is retreating back to 2% and because of that they embarked last month on the start of a rate cut campaign that could run for some time, as officials work to normalize monetary policy. Central bankers and economists expect easier times in housing to help that process along. In a note on Oct. 10, Omair Sharif of research firm Inflation Insights said so far this year annualized rent growth through September stood at 4.6% versus 6.8% in 2023. “That is a solid pace of deceleration in rent growth,” he said. “Falling rent inflation should bring down the housing component of the overall price indexes over time,” St. Louis Fed leader Alberto Musalem said on Oct. 7. That led him to say he sees inflation hitting the 2% target as measured by the personal consumption expenditures index “over the next few quarters.”Speaking on Oct. 8, Boston Fed chief Susan Collins said the gain in shelter prices “is the stickiest component and remains above its pre-pandemic average.” But she added “there are good reasons to think that this stickiness in current shelter inflation reflects existing rents still catching up to new market rents,” noting slower new rent price increases point to an eventual slowing in increases for rental lease renewals. She also said slower new rent increases reflects a less frenzied job market. More

Last month, the U.S. central bank cut the overnight rate by half a percentage point, citing greater confidence that inflation will keep receding to its 2% annual target.The overnight rate, which guides how much interest banks pay each other and affects rates for consumers, is now at 4.75%-5.00%.Markets are currently pricing in a 94.1% chance for a cut of 25 bps at the Fed’s next meeting, with only a 5.9% chance the central bank will hold rates steady, according to CME’s Fedwatch Tool.Goldman Sachs also said it expects the European Central Bank to cut interest rates by 25 bps at its monetary policy meeting on Thursday, and noted it sees sequential 25-bps cuts until the policy rate reaches 2% in June 2025. More

The company posted an adjusted profit of $2.13 per share in the July-September quarter, compared with estimates of $2.15, according to data compiled by LSEG.WHY IT’S IMPORTANTU.S. new vehicle sales fell during the third quarter due to fewer selling days, weaker consumer spending and higher interest rates, which impacted demand for automotive coatings.Production at factories in the United States held steady at weaker levels in September, although new orders improved. CONTEXTThe Pittsburgh, Pennsylvania-based firm is a global supplier of paints, coatings and specialty materials. It is the largest coatings company in the world, followed by Sherwin-Williams (NYSE:SHW).At PPG’s automotive OEM coatings unit, which sells paints, coatings and adhesives to the auto industry, organic sales declined by double-digit percentage.However, performance coatings sales during the third-quarter rose compared to last year led by aerospace coatings. BY THE NUMBERSNet sales at PPG’s performance coatings segment rose to $2.92 billion in the third quarter, compared with $2.88 billion a year earlier.Meanwhile, sales at its industrial coatings segment fell 6% to $1.65 billion from the same quarter a year ago.KEY QUOTE”Automotive OEM coatings organic sales decreased more than initially forecasted…due to lower U.S. and European industry build rates, which deteriorated notably late in the quarter, partly offset by PPG growth in China and Mexico,” PPG said. More

The company recorded net interest income of $3.66 billion in the quarter, 10% higher than the year-ago quarter.Credit card firms’ interest incomes have benefited as the Federal Reserve raised its benchmark rates multiple times over the last four years to tame sticky inflation.The U.S. central bank cut its key interest rate last month and is expected to continue with its monetary easing policy.Meanwhile, Discover said it was working with the Securities and Exchange Commission to resolve its accounting approach to a card misclassification issue. In July 2023, Discover said it had overcharged merchants and their banks due to misclassifying some cards. It increased its liability to $1.2 billion to refund affected merchants.A resolution is not expected to impact historical earnings, it said on Wednesday. Meanwhile, the company’s proposed $35 billion acquisition by Capital One announced in February is facing lawsuits from consumers and tough scrutiny by some lawmakers. Riverwoods, Illinois-based Discover’s net income rose to $928 million, or $3.69 per share, from $647 million, or $2.59 per share, a year earlier.Discover’s provision for credit losses fell to $1.47 billion in the three months ended Sept. 30 from about $1.70 billion. More

FRANKFURT (Reuters) – The European Central Bank is likely to lower interest rates again on Thursday, arguing inflation in the euro zone is now increasingly under control and the economy is stagnating.The first back-to-back rate cut in 13 years would mark a shift in focus for the euro zone’s central bank from bringing down inflation to protecting economic growth, which has lagged far behind that of the United States for two years straight. The latest economic data is likely to have tilted the balance within the ECB in favour of a rate cut, with business activity and sentiment surveys as well as the inflation reading for September all coming in slightly lower than expected.In the wake of the releases, a number of ECB speakers including President Christine Lagarde have flagged that a fresh cut in borrowing costs is likely this month, leading investors to fully discount the move. “The trends in the real economy and inflation support the case for lower rates,” Holger Schmieding, an economist at Berenberg, said.A quarter-point cut on Thursday would lower the rate that the ECB pays on banks’ deposits to 3.25% and money markets almost fully price in three further reductions through March 2025.Lagarde and colleagues are unlikely to drop clear hints about future moves on Thursday, repeating their mantra that decisions will be made “meeting by meeting” based on incoming data.But most ECB watchers think the die is cast for cuts at every meeting.”The implicit signal is likely to be that another cut is very likely in December unless the data improve,” Paul Hollingsworth, an economist at BNP-Paribas, said. INFLATION AND GROWTHThe ECB can finally claim it has all but tamed the worst bout of inflation in a generation. Prices grew by just 1.8% last month. While inflation may edge above the ECB’s 2% target by the end of this year, it is expected to hover around that level or even slightly lower for the foreseeable future. Yet the economy has had to pay a high price for that.High interest rates have sapped investment and economic growth, which has struggled for nearly two years. The most recent data, including about industrial output and bank lending, is pointing to more of the same in the coming months. An exceptionally resilient labour market is also now starting to show some cracks, with the vacancy rate – or the proportion of vacant jobs as a share of the total – falling from record highs.This has fuelled calls inside the ECB for easing policy before it is too late.”Now we face a new risk: undershooting target inflation, which could stifle economic growth,” Portuguese central banker Mario Centeno said recently. “Fewer jobs and reduced investment would add to the sacrifice ratio already endured.”The issue is that some of that weakness is due to structural problems, such as the high energy costs and low competitiveness hobbling Europe’s industrial powerhouse, Germany. These cannot be fixed through lower interest rates alone although they can help at the margin by making capital cheaper.”We cannot ignore the headwinds to growth,” ECB board member Isabel Schnabel said. “At the same time, monetary policy cannot resolve structural issues.” More

HONG KONG (Reuters) -Hong Kong’s leader pledged on Wednesday to reform and revive the economy and financial markets including slashing liquor duties, while seeking to improve dire living conditions for the city’s poorest.John Lee, in his third annual policy address, highlighted the need to “deepen our reforms and explore new growth areas,” in line with China’s national priorities and recent calls from Beijing for all sectors to unite to promote development and economic growth. Hong Kong’s small and open economy has felt the ripple effects of a slowdown in the Chinese economy and political tensions including a years-long national security crackdown.It grew by 3.3% in the second quarter from a year earlier, and is forecast to grow 2.5%-3.5% for the year.Although tourism has rebounded since COVID, with 46 million visitors expected this year, consumption and retail spending remain sluggish, while stock listings have dried up and capital flight remains a challenge.Lee told Hong Kong’s legislature that duties on liquor would be slashed to 10% from 100% for drinks with more than 30% alcohol content, in a bid to stimulate the trade in spirits. The lower duties apply only to spirits priced over HK$200 ($26), and for the portion above that amount. The move would “promote liquor trade and boost development of high value added industries including logistics and storage, tourism as well as high end food and beverage consumption,” Lee said.He hoped the move would benefit Hong Kong in the way that it became an Asian wine trading hub after wine duties were abolished in 2008. China’s recent decision to provisionally impose sharp tariffs on French brandy in a tit-for-tat move to European Union tariffs on Chinese electric vehicles, might also benefit the city. Lee said procedures for companies seeking to list in Hong Kong would be streamlined, in a bid to lure more international company listings on its stock exchange. The value of Hong Kong IPOs in 2024 is the lowest in 21 years, according to Dealogic data, not taking into account China Resources Beverage and Horizon Robotics which this week launched deals to raise up to $1.34 billion. China’s Midea raised $4 billion in a secondary listing in the city in September.The government said it would try to develop Hong Kong into a gold trading hub with “world-class” gold storage facilities, create a commodity trading ecosystem and fuel bunkering centre, and try to tap opportunities in green shipping, aviation and tourism. “Amidst the increasingly complicated geopolitics, our city’s security and stability gives us a clear edge as an attractive place for physical gold storage … and potentially propelling Hong Kong into a gold trading centre,” he said.PIVOT TO ECONOMY FROM SECURITYLee’s speech was less focused on national security than the year before, though he also stressed a need to “stay vigilant” towards potential national security threats.There were also signs of further integration between Hong Kong and China with the launch of a new civil servant “exchange programme” with a number of Chinese cities. A “Northern Metropolis” project on the border with China would also see 60,000 housing units in a cluster of public housing estates be completed in the next five years.In a bid to revive the city’s ailing property sector, Lee said the ratio of mortgages would be eased to 70% of the value of a property for all buyers.Hong Kong’s benchmark stock index was up 0.3%, while the property sub-index rose more than 2%. On the livelihood front, the government proposed new laws to regulate the leasing of so-called “sub-divided flats”, tiny cubicles sometimes called “cage homes” which have been criticised as below acceptable living standards.The new system would ensure basic safety standards for the 110,000 households currently living in such units. ($1 = 7.7684 Hong Kong dollars) More