Economy

(Reuters) -Morgan Stanley’s profit surpassed estimates on a bumper third quarter for investment banking that had also buoyed rivals, sending its shares up more than 3.5% before the market open. A revival in corporate debt issuance, initial public offerings (IPOs) and mergers has bolstered profits for Wall Street banks this year. As markets hover near record highs and the U.S. Federal Reserve begins its policy-easing cycle, bankers expressed optimism that mergers and acquisitions will continue to recover after a two-year drought. Morgan Stanley benefited from a “constructive environment”, CEO Ted Pick said in a statement. “Institutional securities saw momentum in the markets and underwriting businesses on solid client engagement.” Its investment banking revenue jumped 56% in the third quarter. Competitors Goldman Sachs had posted a 20% surge in fees, while JPMorgan Chase (NYSE:JPM) saw a 31% gain. Morgan Stanley’s profit jumped to $1.88 per share, exceeding analyst views of $1.58, according to estimates compiled by LSEG. Across the industry, global investment banking revenue rose 21% in the first nine months of the year, led by a 31% surge in North America, according to data from Dealogic. Morgan Stanley earned the fourth highest fees globally over the same period, the data showed. It was a lead underwriter on big initial public offerings in the quarter, including by cold storage giant Lineage and airplane engine maintenance services provider StandardAero.”We are seeing a rise in equity capital markets activity led by financial sponsors, not only for IPOs in the U.S. but also in Europe”, Morgan Stanley CFO Sharon Yeshaya said in a phone interview. The institutional securities business, which houses investment banking and trading, generated revenue of $6.82 billion, compared with $5.67 billion a year ago. Equity trading revenue was another bright spot, jumping 21% as stocks rallied. Fixed-income revenue rose 3%. The investment bank’s profit climbed to $3.19 billion from $2.41 billion a year earlier. “The company is executing very well across all the segments… Ted Pick has quickly built a leadership presence and confidence from investors,” said Macrae Sykes, portfolio manager at Gabelli Funds.WEALTH BOOST Under former CEO James Gorman, who will serve as executive chairman until year-end, Morgan Stanley expanded into wealth management to generate stable revenue and even out volatility from trading and investment banking. “The company has been a leader in wealth technology implementation, which should lead to better advisor productivity and share gains in asset gathering,” said Sykes said.Wealth management revenue – a key area of focus – increased to $7.27 billion, compared with $6.40 billion, a year ago.The business added $64 billion in net new assets and total client assets reached $6 trillion. Considering the investment management division assets of $1.6 trillion, Morgan Stanley is closer to its goal of managing $10 trillion in client assets. “Total client assets have surpassed $7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows,” Pick said.Investment management revenue climbed to $1.5 billion compared with $1.3 billion a year ago, helped by higher asset management and related fees. More

Import prices slipped 0.4% last month, the biggest drop since December 2023, after a revised 0.2% decrease in August, the Labor Department’s Bureau of Labor Statistics said on Wednesday.Economists polled by Reuters had forecast import prices, which exclude tariffs, would fall 0.4% after a previously reported 0.3% decrease. In the 12 months through September, import prices dipped 0.1% after increasing 0.8% in August. Government data last week showed slightly firmer consumer prices in September. While producer prices were unchanged last month, some components showed strength, which was expected to translate into a higher monthly readings in the key inflation measures tracked by the Federal Reserve for its 2% target.The U.S. central bank is expected to cut interest rates again next month, but by a smaller 25 basis points against the backdrop of a resilient economy. The Fed launched its easing cycle with an unusually large half-percentage-point reduction in its policy rate to the 4.75%-5.00% range in September amid growing concerns about the labor market. It hiked rates by 525 basis points in 2022 and 2023 to combat a surge in inflation. More

NEW DELHI (Reuters) – Rising prices of edible oils and vegetables like onions and tomatoes have driven up grocery spending for Indian households ahead of the festival season, prompting some consumers to limit more expensive purchases like electronic items, retailers said.India’s annual festival season, which runs from late September to early November, sees households scramble to buy food and other goods, encouraged by discounts offered by both online and brick-and-mortar retailers.But the start to the festive season this year has been slow.Sales of electronics and home appliances so far in October have risen just 5-7% from last year, against estimates for an 8-10% climb, said Nilesh Gupta, director at Vijay Sales, a retail chain with 143 stores. “We remain optimistic that sales will pick up,” he said.India’s economy is projected to grow by 7.2% in 2024-25, driven by increased rural demand, according to the central bank’s estimates.But high-frequency indicators such as auto sales and manufacturing purchasing managers index (PMI) have suggested weakness in the economy.Retail inflation, particularly for food, has remained high, eroding disposable income. In September, retail inflation was 5.49% and food inflation at 9.24%. Vegetable prices were 36% higher than a year ago.”The surge in onion prices, along with other food items, is having a ripple effect on the purchasing behaviour of small customers,” said B.C. Bhartia, national president of the Confederation of All India Traders (CAIT), representing 2 million retailers.Sanjay Kumar, 37, an office assistant who earns 22,000 rupees ($262) monthly, said: “I have cut my vegetable purchases by more than half to stay within my family budget, and I’m postponing the purchase of a microwave for Diwali.” CAIT had expected festival sales worth 4.25 trillion rupees, 13% higher than last year, driven by rural demand. A final tally of festival sales will only be available after the Hindu festival of Diwali in November, when purchases hit a peak.Online sales, which account for 15% of retail sales during the festive season, are also off to a slow start.Mobile phones, a key category that sells online, have seen weakness in sales of entry level models, indicating “continued income stress on low income groups,” though premium handsets were selling better, said Pushan Sharma, director of research at Crisil Market Intelligence and Analytics.Bangalore-based consultancy Redseer was more optimistic, estimating online festival sales of 1-1.2 trillion rupees, up 20% on the year, against 13% growth last year.Major retailers like Reliance Retail, Amazon (NASDAQ:AMZN), and Walmart (NYSE:WMT) owned Flipkart are offering discounts and easy credit deals to attract customers. Fashion, a key sales category during the festive season, saw weak demand in July-September, Dinesh Taluja, senior executive at Reliance Retail, told analysts this week.”But sales have picked up,” he said.$1 = 84.0040 Indian rupees) More

The document, sent to the European Commission for approval, estimates higher revenues amounting to 0.168% of GDP as a contribution to consolidating public finances.Economy Minister Giancarlo Giorgetti told reporters on Wednesday that banks and insurers would contribute to the state finances with “more than 3.5 billion euros” next year.”I think the affair has been interiorized by the markets, so it goes as it should. The fishermen and workers will be happy after this budget, a little less so the banks,” Giorgetti said.His deputy Maurizio Leo said the budget would be frozen for the next two years deductions related to banks’ tax credits stemming from past losses, known as deferred tax assets, in a move that would temporarily hike taxation on profits.The Treasury expects to collect 1 billion euros from insurers by changing the payment terms of stamp duties due for some insurance policies.Rome also changed taxation of stock options for managers. “We defer the deduction to the time when there is actual allocation of the shares,” Leo said. The DBP said revenues from banks, insurance products and gaming would fall by 0.073% of GDP in 2026 and by 0.096% the following year.Italy last year shocked markets by imposing a 40% tax on banks’ windfall profits, only to backtrack by limiting the scope of the levy and giving lenders an opt-out clause which meant that in the end it raised zero for state coffers.($1 = 0.9190 euros) More

BANGKOK (Reuters) -Thailand’s central bank unexpectedly cut its key interest rate on Wednesday, saying the move brought rates a “neutral” level consistent with the economy’s growth potential and downplaying the impact of government calls for policy easing on its decision.The 25-basis-point reduction was the first rate cut since May 2020, following five consecutive meetings where it held rates steady and months of pressure from the government, looking to the central bank for help with reviving sluggish growth.The benchmark stock index rose 1.6% with the baht dropping 0.36% after the decision that only four of 28 economists polled by Reuters had anticipated.”The lower policy rate would not impede debt deleveraging given the expected slowdown in loan growth and would remain neutral and consistent with economic potential,” the Bank of Thailand (BOT) said in a statement.The BOT’s monetary policy committee voted 5 to 2 to bring the one-day repurchase rate to 2.25% from a decade-high of 2.50%, where it has been since September 2023, when the bank hiked its benchmark by 25 basis points.”It’s not an easing cycle… just recalibrating the policy interest rate,” assistant governor Sakkapop Panyanukul told reporters. “It was not from political pressure,” he said.Deputy Finance Minister Paopoom Rojanasakul told reporters on Wednesday the rate cut would help boost growth and showed that fiscal and monetary policies were being coordinated.At their previous meeting in August only one policymaker backed a rate cut while the rest voted to keep the rates steady.”The mounting headwinds swayed the other four members,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.Floods in parts of the country, competition with cheap Chinese imports and factory closures were all weighing on the economy, he said.”The case for cuts arguably only grew even more over the past few months, in view of the rapid appreciation of the baht,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomic, who predicts another cut at the next rate meeting on Dec. 18.Capital Economics also expects a rate cut in December and sees the policy rate at 1.5% at the end of next year.On Wednesday, the Philippines also cut rates, while Indonesia kept rates unchanged.The central bank on Wednesday raised its 2024 economic growth forecast to 2.7% from 2.6% earlier, and predicted 2.9% growth in 2025, down from the 3% previously projected.Southeast Asia’s second-largest economy has lagged its regional peers, saddled by high household debt and borrowing costs, and weak exports.The BOT also cut its forecast for 2024 headline inflation to 0.5% from 0.6%, which is below the target range of 1% to 3%.The central bank and Finance Ministry will meet again at the end of October to discuss the inflation target. ($1 = 33.34 baht) More

(Reuters) – Asian bond markets attracted overseas investments for the fifth consecutive month in September, though the pace of inflows slowed due to diminished expectations for further rate cuts by the U.S. Federal Reserve and caution ahead of U.S. elections.Cross-border investors bought local bonds in Indonesia, India, Malaysia, South Korea and Thailand, totalling a net $4.99 billion, which was less than $14.09 billion worth of net purchases the prior month, data from regulatory authorities and bond market associations showed.Analysts anticipate a further decline in flows into Asian bonds due to the recent strengthening of the U.S. dollar and the increase in U.S. bond yields this month.The U.S. dollar index hit a two-month high of 103.397, this week, while the yield on U.S. 10-year notes reached a two-and-a-half-month high of 4.12% after strong jobs data and higher-than-expected September inflation reduced expectations for large Fed rate cuts.Saktiandi Supaat, an analyst at Maybank, noted that near-term risks for emerging market currencies persist, with a potential win by Republican presidential candidate Donald Trump possibly triggering de-risking due to his tariff proposals, while a victory by Democrat Kamala Harris might support a global soft landing and gradual Fed rate easing.In September, foreigners purchased a net $2.76 billion worth of South Korean bonds, less than half the amount received in the previous month, while Indonesian bonds attracted about $1.4 billion in overseas capital.Additionally, foreigners pumped about $427 million, $253 million and $156 million respectively into Thai, Malaysian and Indian bonds last month.However, analysts are optimistic about the inclusion of Asian bonds in global bond indexes, which should bolster inflows.Indian government securities were added to JPMorgan’s Government Bond Index-Emerging Markets in June 2024 and will join Bloomberg Index Services’ Emerging Market Local Currency Index in January 2025.Additionally, FTSE Russell will include South Korean government bonds in the World Government Bond Index and Indian bonds in the Emerging Markets Government Bond Index starting in November 2025 and September 2025, respectively.”Hopefully, the KTB yields’ upward march could be somewhat offset by the capital inflow amid its inclusion into the WGBI Index. The changing rate cut expectations will particularly weigh on higher yielders like IDR rates,” said Samuel Tse, an analyst at DBS Bank. More

(Reuters) -British inflation slowed sharply last month and key price gauges watched by the Bank of England also fell, bolstering bets on a November interest rate cut and helping finance minister Rachel Reeves before her first budget.Annual consumer price inflation eased to 1.7% in September from 2.2% in August, the lowest reading since April 2021 and driven down by lower airfares and petrol prices, the Office for National Statistics said.A Reuters poll of economists had pointed to a reading of 1.9%.Sterling fell by four-fifths of a cent against the U.S. dollar and fell sharply against the euro too.Interest rate futures showed investors were putting a 90% chance on two BoE quarter-point rate cuts by the end of this year, up from a roughly 80% chance on Tuesday.”Today’s release removes another potential obstacle to the Monetary Policy Committee voting for a 25bps rate cut at its November meeting,” said Martin Swannell, chief economist adviser to the EY ITEM Club consultancy. “The key question now is whether the MPC will step up the pace of rate cuts at subsequent meetings, and this scenario would likely require further good news on pay growth and inflation.”Data on Tuesday showed British pay grew at its slowest pace in more than two years in the three months to August and vacancies fell again.Britain’s finance ministry welcomed the fall in inflation, which offers a helpful backdrop for Reeves as she readies her first budget, due on Oct. 30.A less inflationary outlook would slightly improve the economic and fiscal outlook for the budget as Reeves struggles to find the extra money to invest in public services and new infrastructure without spooking investors.Her spending plans will be watched closely by the BoE.CORE INFLATION COOLS “Though the stars are aligning  for a November rate cut, the upcoming Budget is the final hurdle as rate setters will want to assess the inflationary impact of any measures announced before loosening policy again,” said Suren Thiru, economics director at ICAEW, an accountancy body.September’s inflation reading is also used as a base month for many social benefits. Wednesday’s weaker-than-expected reading may disappoint recipients, although it could offer Reeves a little extra leeway for her budget plans.Core inflation, which excludes energy, food, alcohol and tobacco, slowed to 3.2% from 3.6% in August.Services inflation – which the BoE views as the most important gauge of domestically-generated price pressure – sank to its lowest since May 2022 at 4.9% in September, down from 5.6% in August. However, the drop reflected a plunge in air fares, which are a volatile component of the inflation basket – something the BoE will take into account next month.The BoE had not expected services inflation to fall below 5% this year in forecasts it published in August, and the reading was below all expectations in the Reuters poll. There were also signs of weaker inflation pressure ahead. Prices charged by factories for their goods fell by 0.7% in the year to September, the biggest fall since October 2020, during the COVID pandemic. More

This article is an on-site version of our Moral Money newsletter. Premium subscribers can sign up here to get the newsletter delivered three times a week. Standard subscribers can upgrade to Premium here, or explore all FT newsletters.Visit our Moral Money hub for all the latest ESG news, opinion and analysis from around the FT Welcome back. At a breakfast hosted by Morningstar Sustainalytics yesterday in London, analysts cautioned against inflated expectations for next week’s COP16 UN biodiversity conference in Colombia.“This is probably the third year in a row where we’ve been expecting a big breakout moment for biodiversity investing,” Lindsey Stewart, director of stewardship research, told attendees. However, he predicted, “we’re not going to be quite at that big breakout moment yet”.Morningstar has identified just 34 equity funds or ETFs focused on biodiversity — all of them in Europe — that represent just $3.7bn in assets, said sustainability research head Hortense Bioy. That’s compared with $530bn in climate funds and ETFs Morningstar tracks globally. There was one biodiversity fund in the US, Bioy said, but it closed.Meanwhile, with Moral Money Americas under way today in New York City, I have a story that bucks a persistent narrative that developing countries are energy transition laggards. — Lee Harrisrenewable energy In poorer nations, renewable power is getting its moment in the sun For years, the buildout of solar and wind power in the developing world has lagged behind richer nations. Renewables’ high upfront capital costs have held back investment, even though many countries in the global south are sunny, energy-hungry, and less burdened with legacy fossil fuel infrastructure.But renewables in many emerging markets are now achieving lift-off. Solar and wind power, measured both by energy generated and as a share of total electricity generation, is growing faster in the global south than in the global north, according to a new study by energy consultancy RMI.Over the past five years, renewable energy generation has grown at a compound annual rate of 23 per cent in the global south, versus 11 per cent in the world’s richest economies. RMI defines the global south as Africa, Latin America, south and south-east Asia, and excludes China and the major fossil fuel exporters in Eurasia and the Middle East.Seventeen per cent of energy demand in the global south comes from countries where the solar and wind share of electricity generation is higher than that in the world’s richest economies. These countries include Mexico, Brazil and Morocco.Importantly, these findings compare rates of growth, not total generation capacity installed. (This makes sense, since many developing countries started their energy transitions more recently, and are therefore starting from a lower base.) While the global south is not yet adding more renewable power than rich economies in absolute terms, RMI expects that trend to flip by the end of this decade, largely due to the drastic cost decline in renewable technology.“Even with the lack of commitment from the global north, in terms of their funding for the global south, this technology is very much in the money,” RMI report co-author Vikram Singh told me. “It’s boom time in the global south” for green energy, he said.The bullish projections are due, first and foremost, to Chinese investment in renewables, which has created economies of scale that are making these technologies more affordable globally. The cost of solar and battery technologies halved in 2023, RMI said, making them cost-competitive in middle-income markets such as Brazil and India.But disparities in the cost of capital haven’t evaporated. Investors continue to ascribe higher risk to the global south. In 2022, the weighted average cost of capital for a 100-megawatt solar project in South Africa, Vietnam, Brazil or Mexico was about 11 per cent, while in advanced economies it was about 5 per cent, according to the International Energy Agency.Where the global south’s solar boom has arrived, it is despite development banks’ failed promise to deliver trillions more in blended public and private-sector finance for sustainable development.Despite those persistent challenges, Singh said, “I don’t think that the narrative is any longer that the global south is begging for global north dollars and intervention.”In Vietnam, solar energy will hit “capex parity” in 2024 with coal, RMI found using BloombergNEF data, meaning that the upfront cost of solar buildout will be equal to that of coal.Some regions have even outpaced China’s rate of renewables penetration. Latin America hit the same share of electricity generation from solar and wind as China — and grew more quickly after securing an initial foothold where it provided 0.5 per cent of generation.Some content could not load. Check your internet connection or browser settings.It’s not only falling costs that are driving deployment. The global south could actually achieve a faster energy transition than richer economies, RMI argues, for a few reasons:Richer countries went first: By installing solar and batteries when they were more expensive, more developed countries ate some costs and ironed out the kinks in deployment.More sun: Many developing countries are closer to the equator, meaning more intense sunlight.Less steel in the ground: Many emerging markets have less legacy fossil fuel infrastructure to deal with — and less of an entrenched fossil fuel lobby.Finally, RMI thinks the global south has a geopolitical edge in the transition: developing countries are more open to sourcing the cheapest renewable technologies, which overwhelmingly come from China. By contrast, trade tensions could drive up the cost of the transition in the west.EU member states agreed earlier this month to impose tariffs of up to 45 per cent on imports of Chinese electric vehicles, and the US has said it plans to raise its own tariff to 100 per cent.Efforts to block Chinese technologies such as EVs are “unfortunate”, Singh said, since they “take away from competition and further growth of the sector”. Plus, he said, they made it more likely that China would supply the next generation of energy technologies to the global south.Further challenges await. In addition to commitments to deploy new clean energy at the UN’s COP conference in Dubai last year, countries also pledged to double energy-saving efforts by 2030. Without focusing on efficient use of energy, Singh said, we are pouring more energy supply into “a leaking bathtub”.Smart readGlobal insurers are almost universally opting to include a low-carbon transition goal in their investment plans, Brooke Masters reports.Recommended newsletters for youFT Asset Management — The inside story on the movers and shakers behind a multitrillion-dollar industry. Sign up hereEnergy Source — Essential energy news, analysis and insider intelligence. Sign up here More