Economy

SINGAPORE (Reuters) – The dollar flirted with the psychological threshold of 150 yen on Tuesday and held broadly steady ahead of a key reading on U.S. inflation due later in the day, while bitcoin hovered around the $50,000 mark for a second day running.Trading was largely subdued early in Asia with markets in China and Hong Kong still closed for the Lunar New Year holidays and as traders stayed on guard ahead of Tuesday’s release of consumer prices data in the world’s largest economy.The greenback last bought 149.39 yen, edging higher toward the closely-watched 150 level that analysts said would likely trigger further jawboning from Japanese officials in an attempt to support the currency.The yen, which has already tumbled more than 5% against the dollar year-to-date, is under persistent pressure as investors pare back their expectations of the scale and pace of the Federal Reserve’s easing cycle. The yen bears are also being emboldened on signs the Bank of Japan will resist aggressively hiking rates even if it exits negative interest rates this year as markets are wagering.”It is a bit of a yield story. Yields in the U.S. are around their highs for 2024, so that’s certainly helped dollar/yen,” said Tony Sycamore, a market analyst at IG.”It’s also being supported by carry. With volatility so low and… for 2024, the markets have been pretty happy to add risk to their portfolios, and the carry trade is certainly part of that, which supports dollar/yen because of the yield differential.”Elsewhere, the euro edged 0.03% lower to $1.0768, while sterling fell 0.07% to $1.2620.The Australian dollar likewise dipped 0.08% to $0.6526.All eyes were on January’s inflation report for the United States due later in the day, which will likely provide further clarity on how soon, and by how much, the Fed could cut rates this year.A batch of resilient U.S. economic data, particularly a blowout jobs report out earlier this month, have heightened expectations that U.S. rates are likely to stay higher for longer.Markets are now pricing in just about 110 basis points of rate cuts from the Fed this year beginning in May, down from about 160 bps at the end of last year.Ahead of Tuesday’s data, the Federal Reserve Bank of New York said in its January Survey of Consumer Expectations on Monday that inflation a year and five years from now were unchanged at readings of 3% and 2.5%, respectively.The projected rise in inflation three years from now dropped to 2.4%, the lowest since March 2020, from December’s 2.6%.”Obviously, the U.S. dollar has really benefitted from the resilient data we’ve seen recently, and we’ve sort of seen that the U.S. economic outperformance story is really what’s driving currency markets overall,” said Kyle Rodda, senior financial market analyst at Capital.com.”You’re not really seeing that same level of strength in Europe and anywhere in Asia… and that’s definitely showing the appeal for the greenback.”Against a basket of currencies, the dollar inched up 0.02% at 104.16. The New Zealand dollar eased 0.11% to $0.6121.In cryptocurrencies, bitcoin firmed 0.64% to $50,155, having risen above the $50,000 level for the first time in more than two years on Monday.The world’s largest cryptocurrency has risen nearly 18% this year, helped by last month’s regulatory nod for U.S.-listed exchange traded funds (ETFs) designed to track its price.Analysts said the latest boost to bitcoin comes ahead of its halving event, which will cut the reward for successfully mining a bitcoin block in half.”It’s a really interesting move. The expectation of rate cuts certainly helps, but it doesn’t explain what’s really set fire to bitcoin over the past four, five sessions,” said IG’s Sycamore.”In that respect, I think it’s more a focus on the halving… and some ETFs inflows.” More

MEXICO CITY (Reuters) -Mexican tycoon Carlos Slim is interested in increasing his investments in the oil sector, including in U.S.-based Talos Energy (NYSE:TALO)’s projects, after the billionaire businessman bought a stake last year in a major offshore project discovered by Talos.Speaking at a press conference, Mexico’s richest person signaled he would like to grow his company’s presence in the oil and gas industry beyond providing oilfield services, including possible petrochemical projects.Slim said that increasing his stake in Talos’ Mexican subsidiary would depend on other unspecified factors. He said he is especially interested in potential investments in Houston-based Talos’ overall portfolio.”It depends on the conditions,” he said, referring to possibly growing the stake of his holding company Grupo Carso in Talos’ local unit. “But definitely. Investing in the parent company … interests us.”We’re interested in being partners with someone with experience,” added Slim, whose business empire extends from telecommunications to mining to retail.Talos discovered the Zama oil deposit in Mexico’s territorial waters in the Gulf of Mexico in 2017, but later lost rights to operate the potentially lucrative find to state oil company Pemex, which holds the rights to an adjacent area where Zama likely extends. The Zama oil field, believed to hold around 735 million barrels of oil, is essentially Talos Mexico’s only project.Last September, Talos completed a $125 million transaction with Grupo Carso that involved the sale of 49.9% of its subsidiary Talos Mexico.At the time, Talos CEO Tim Duncan stressed that 2024 would be “an important year for that asset,” citing progress on engineering designs.Over more than a decade, Slim’s oil and gas business has mostly focused on providing services, like renting out drilling rigs and deep water platforms.”We’re involved in not just helping with drilling (services), rather we’re getting involved in oil,” he said, suggesting an ambition to possibly move into producing and marketing crude.Slim said he currently holds about 22% of Talos overall. Zama’s operator and largest shareholder is Pemex, with a 50.4% stake, while Talos and Carso hold 17.4%. Germany’s Wintershall Dea has another 19.8%, and Britain’s Harbour Energy the remaining 12.4%.Last week, Mexico’s oil regulator approved a Pemex request to modify Zama’s development plan. Pemex had sought to cut the budget from more than $1.24 billion to just under $70 million and delay some related infrastructure projects.Zama is expected to eventually pump up to 190,000 barrels per day of medium crude and associated gas. More

The survey from National Australia Bank (OTC:NABZY) (NAB) showed its index of business conditions slipped 2 points to +6 in January, just below its long-run average of +7.Its measure of business confidence added 1 point to +1, following a 7-point rebound in December.”Confidence remains weak as it has for some time, consistent with ongoing pressures across the economy with growth clearly slowing in the back half of 2023, and cost growth still high,” said NAB’s chief economist Alan Oster.The survey’s measure of business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilisation picked up to 83.6%, from 82.8%.Quarterly growth in purchase costs edged up to 1.8% in January, while growth in retail prices rebounded to +0.9% from +0.5% in December. “Price pressures remain solid despite the ongoing easing in activity measures,” Oster said. “However, they typically lag activity in the economy and we expect an ongoing easing in price pressures across the economy in early 2024.” The Reserve Bank of Australia (RBA) has lifted interest rates to a 12-year peak of 4.35% in an effort to restrain inflation and continues to warn that another hike might be needed even as the economy slows. More

The Westpac-Melbourne Institute index of consumer sentiment jumped 6.2% in February, from January when it fell 1.3%. The index reading of 86.0 showed pessimists still outnumbered optimists, much as it has for the past year or more.Political partisanship was a notable feature of the survey as the confidence index among supporters of the Liberal National opposition slipped to 77.6, while that for supporters of the ruling Labor Party surged to 103.8.”While sentiment is still firmly pessimistic there finally looks to be some light at the end of the tunnel for Australian consumers,” said Matthew Hassan, a senior economist at Westpac.”Moderating inflation and shifting expectations for interest rates appear to be the main factors behind the lift.”Consumer price inflation slowed sharply to a two-year low of 4.1% in the December quarter, while the Reserve Bank of Australia (RBA) held rates at 4.35% at a policy meeting last week.The central bank did leave the door open to another hike if needed, but markets are wagering the next move will be down, albeit not until later in the year.The survey found the proportion of consumers expecting mortgage rates to rise in the next 12 months dropped to 42%, from 52% in January and 61% in December.This had a big impact on the index measuring whether it was a good time to buy major household items which climbed 11.3% in February.The survey’s measure of family finances compared to a year earlier rose 4.9%, while the outlook for finances over the next 12 months gained 2.4%.The outlook for the economy for the year ahead jumped 8.8% and the outlook for the next five years firmed 4.4%.Consumers remained bullish on house prices with that index rising 2.1% to a new cycle high of 161.4. More

Speaking at an economics conference, the head of the Reserve Bank of Australia’s (RBA) economics unit Marion Kohler said inflation was not expected to return to the 2-3% band until late 2025 and not reach the midpoint of 2.5% until 2026.Consumer price inflation had slowed a little faster than expected to 4.1% in the December quarter, while core inflation dropped to 4.2%. “I’d like to stress that there is substantial uncertainty around forecasts that far out,” noted Kohler.”Our forecast reflects our expectation that subdued economic growth will balance demand and supply of goods and services in the economy and labour market conditions will ease to be around levels consistent with sustained full employment.”The central bank held interest rates steady at a 12-year high of 4.35% last week, having last hiked by a quarter point in November. It also left the door open to another hike if necessary, though financial markets are wagering the next move will be down.Kohler noted rising mortgage rates had combined with high inflation and historically high levels of tax payments to depress household incomes, and this was bringing demand in the economy back into better balance with supply.This meant economic growth was likely to be subdued for the next year or two. Unemployment was seen rising from the current 3.9%, but peak at an historically low 4.4% in 2025.The expected slowdown in inflation would require a recovery in productivity, which had been very subdued in the last few years. Kohler was optimistic productivity would improve once temporary factors related to the COVID-19 pandemic played out.”Risks remain though and as you’d expect we will continue to monitor incoming data closely,” Kohler added. More

Investors are closely watching China, whose stock market gyrations, deflation problem and property woes are casting a shadow over global growth outlook.
According to the IMF, demand for new housing in China is set to drop by around 50% over the next decade.
“Every big industrial transition has had a major depression associated with it, or global financial crisis,” Bill Winters told CNBC.

DUBAI, United Arab Emirates — China is facing a confidence deficit as its economy undergoes massive transition and concern grows over its ongoing property crisis, a top banking CEO said while onstage at Dubai’s World Governments Summit.
“China’s biggest problem to me is a lack of confidence. External investors lack confidence in China and domestic savers lack confidence,” Bill Winters, CEO of emerging markets-focused bank Standard Chartered, told CNBC’s Dan Murphy Monday during a panel discussion.

“But I think China is going through a major transition from old economy to new economy,” Winters added. “If you visit the new economy, which many of you have — I have — it’s booming, absolutely booming, well into double-digit growth rates and in everything EV-related, the whole supply chain, everything sustainable finance and sustainability related, etc.”
Investors are closely watching China, whose stock market gyrations, deflation problem and property woes are casting a shadow over the global growth outlook. According to an International Monetary Fund report completed in late December 2023, demand for new housing in China is set to drop by around 50% over the next decade.
Decreased demand for new housing will make it harder to absorb excess inventory, “prolonging the adjustment into the medium term and weighing on growth,” the report said. Property and related industries account for about 25% of China’s gross domestic product.

IMF Managing Director Kristalina Georgieva, speaking to CNBC in Dubai on Sunday, stressed what she saw as the need for reforms from Beijing in order to stem its economic challenges.
The international lender has discussed with China “longer-term structural issues that the country needs to address,” Georgieva said. “Our analysis shows that without deep structural reforms, growth in China can fall below 4%. And that will be very difficult for the country.”

“We want to see the economy genuinely moving more towards domestic consumption, and less reliance on exports … but for that, [they need] confidence of the consumer,” she said, echoing Winters’ sentiments on domestic confidence. “And that means fix the real estate, get the pension system in place, as well as these longer-term improvements in the fundamentals of the Chinese economy, would be necessary.”
Standard Charters’ Winters, meanwhile, is ultimately optimistic about the world’s second-largest economy, pointing out that every society that’s undergone major economic transition inevitably experiences some level of tumult and growing pains.
“They’re trying to manage this transition without disrupting the financial system, which in the West, we’ve never managed to do,” the CEO said. “Every big industrial transition has had a major depression associated with it, or global financial crisis. They’re trying to avoid that which means it gets dragged out. I think they’ll get through the back end just fine.”
— CNBC’s Evelyn Cheng contributed to this report. More

(Reuters) – A look at the day ahead in Asian markets.Most of Asia is open on Tuesday although activity and trading volumes will be lighter than usual due to the Lunar New Year holiday and China being closed this week, which may continue to limit the upside across the region’s stock markets.For the most part, the global ‘risk-on’ party rolls on – the S&P 500 is further above 5000 points, the Nasdaq and MSCI World index are homing in on new record highs, and Bitcoin is above $50,000. But Japan aside, Asia is not fully joining in.The MSCI Asia ex-Japan index has fallen three days in a row, albeit the losses on Friday and Monday were only around 0.1%. Wall Street may be swatting to one side the relative buoyancy of the dollar and U.S. bond yields, but emerging and Asian stocks are finding it more difficult.The economic calendar in Asia is light on Tuesday – Australian consumer sentiment and Japanese wholesale price inflation are the main releases – while Philippine central bank governor Eli Remolona will speak to mark the release of 2023 Financial Stability Report.Japan’s wholesale inflation figures could move the yen, which is within sight of 150 per dollar for the first time since mid-November, as debate surrounding the Bank of Japan’s exit from ultra-loose policy intensifies.Annual wholesale price inflation in December was flat, slowing for a 12th consecutive month and indicating that consumer price inflation pressure will soon dissipate. All else equal, this takes pressure off the BOJ to ‘normalize’ policy and phase out its massive monetary stimulus soon. But as the International Monetary Fund noted on Friday, current inflation is broad-based across goods and services for the first time in three decades. As Japan’s economy continues to recover, domestic demand is replacing rising costs as the main driver of inflation with the output gap closing and labor shortages intensifying, the IMF said.In an interview with Reuters on Friday, IMF First Deputy Managing Director Gita Gopinath said the BOJ should consider ending its yield curve control and massive asset purchases now, then gradually raise interest rates.For their part, money markets are pricing in a one-in-three chance that the BOJ raises rates by 10 basis points next month, thereby bringing its negative interest rate policy to an end. But Japan is in something of a sweet spot right now – growth is humming along nicely and the weak yen is fueling a stock market boom that has lifted markets to 34-year highs. And if cooling wholesale inflation does bring down consumer inflation, will the BOJ want to rock the boat so soon?Here are key developments that could provide more direction to markets on Tuesday: – Japan wholesale inflation (January)- Australia consumer confidence (February)- Philippine central bank chief Remolona speaks (By Jamie McGeever, editing by Deepa Babington) More

LONDON (Reuters) – Rating agency Fitch fired a warning shot across Britain’s bows on Monday, urging the country’s government to keep a tight rein on spending at its upcoming budget or risk another downgrade. Fitch has an AA- grade and a negative outlook – effectively a downgrade warning – on its UK rating and is awaiting the budget next month where the struggling Conservative government is flagging possible tax cuts ahead of an approaching election. “We estimate that the UK general government deficit rose to 6% of GDP in 2023 from 4.7% of GDP in 2022 and above the 2.7% ‘AA’ category median,” Fitch said, adding that government debt of just over 100% of GDP now was “almost double” the median.Focus for the budget will be on whether the government’s new policy measures – which will come against a backdrop of easing of inflation, financing costs and potentially net borrowing – help reduce Britain’s debt level.”Policy choices are key to reducing UK fiscal uncertainty,” Fitch said, highlighting that its next planned review of its UK rating was a couple of weeks after the March 6 budget on March 22.”Implementing the fiscal consolidation projected after the election would entail real cuts in unprotected spending that could be politically challenging,” Fitch said. More