Economy

The GDL union announced on Monday that a fourth round of strikes in the ongoing wage dispute would begin at 2 a.m. local time (0100 GMT) on Wednesday until 6 pm (1700 GMT) on the following Monday, which would be the longest strike in Deutsche Bahn’s history. Cargo train drivers were called to begin their strike a day earlier, on Tuesday at 6 pm.The longest strike at Deutsche Bahn to date lasted five days in 2015.The latest strike could quickly add up to a billion euros in damage, taking into consideration that other transport routes have also been disrupted by the situation in the Red Sea, Michael Groemling, from the IW Cologne economic institute, said.”Something is brewing,” said Groemling. The German economy is already in recession. “This is now threatening to worsen,” he said.Commerzbank (ETR:CBKG) chief economist Joerg Kraemer said the strike could cost the transport sector 30 million euros ($32.66 million) a day but significantly more damage would be done if factories have to stop production due to supply problems.In addition, the strike was adding to the already tarnished image of Germany as a business location, he said. Deutsche Bahn had submitted a new wage offer to the GDL on Friday which also responded to the union’s core demand of a reduction in working hours with full wage compensation.However, the GDL rejected it.”With the third and supposedly improved offer, Deutsche Bahn AG has once again shown that it is pursuing its previous course of refusal and confrontation undeterred – with no trace of any intention to reach an agreement,” GDL boss Claus Weselsky said in a statement.A Deutsche Bahn spokesperson criticized the GDL for exacerbating the conflict instead of seeking compromise. “Anyone who does not even come to the negotiating table with a new offer of up to 13% (wage increase) and the possibility of a 37-hour week with the same salary is acting absolutely irresponsibly,” said the spokesperson.Deutsche Bahn and the GDL have been in dispute over a collective wage agreement since the beginning of November, with the union seeking a reduced working week for its shift workers, from 38 to 35 hours, on current wages.($1 = 0.9184 euros) More

BUENOS AIRES (Reuters) – Brazil’s economy is set to cool this year, a Reuters survey found, amid an intensifying tug of war between the government and some lawmakers over which sector should pick up the tab for adjustments needed to meet ambitious budget goals.Gross domestic product (GDP) increased more than expected in 2023 partly due to improved investor optimism over Finance Minister Fernando Haddad’s efforts to rectify deep imbalances. But the picture on that front is now more mixed.The country’s fiscal side “remains the weakest link among its macroeconomic fundamentals,” Rabobank analysts wrote in a report, warning of a possible rise in market risks if the government eventually admits a grimmer budget reality.Growth in Latin America’s No.1 economy is set to decelerate to 1.6% in 2024 vs. 3.0% in 2023, according to the median forecast of 50 economists polled Jan. 8-18. Estimates for this year ranged between 0.4% and 2.5%.On the one hand, public spending could give the economy an extra boost from decisions to pay accumulated federal debt that had been in limbo and to implement smaller cuts in a special federal investment scheme known as “PAC.””There are positive surprises with respect to recently approved fiscal measures, the settlement of accumulated court-ordered payments and spillover effects from the PAC program,” said Joao Leme, an analyst at Tendencias consultancy.However, overall fiscal trends are starting to cause concern, as outlays to fund President Luiz Inacio Lula da Silva’s social plans continue to rise faster than federal revenues, despite different tax initiatives from Haddad.Between January and November of 2023, the primary deficit reached 114.6 billion reais ($23 billion), reversing a 49.7 billion reais surplus for the year-ago period, with November’s result undershooting expectations again.Further weighing on the budget, lawmakers overturned last month a presidential veto on a bill approved by Congress that handed fiscal waivers to companies and municipalities totalling around 27 billion reais.In response, the government unveiled tax adjustments to limit benefits across various sectors through an executive order effective for four months, but still requires Congress approval to go beyond that period.Also, the economic team began discussing the possibility of re-imposing unpopular taxes on imports worth up to $50, a measure likely to face complaints from retailers and consumers.As disagreement mounts, Lula’s administration is increasingly expected to miss its goal of reducing the primary deficit to zero. Median calls from eight banks compiled by Reuters showed it only falling to -0.8% of GDP from -2.2% in 2023.”We do not expect the government to be able to close the deficit in 2024,” said Flavio Serrano, chief economist at Banco BMG. “The government’s biggest challenge will be to obtain revenue in an environment of real growth in mandatory spending.”Financial markets have mostly kept calm, with the local currency oscillating around 5.0 per U.S. dollar. The real should continue near that level for at least one month more as activity winds down for Carnival (NYSE:CCL) in February.A first bimonthly report on revenue and expenditures due in March “will be critical in determining the size of the total budget freeze that would be necessary to ensure compliance with the zero target,” said Roberto Secemski, a Barclays economist.”Alternatively, it may reopen the discussion about possible changes to the target, which would hurt fiscal credibility.”Elsewhere in the region, the Mexican economy is expected to grow 2.2% this year, while Argentina’s GDP is seen contracting 2.3%. (For other stories from the Reuters global economic poll:)($1 = 4.9279 reais) More

Major economies have proven surprisingly resilient to sharp interest rate increases from central banks over the last two years.
Wieting told CNBC’s “Squawk Box Europe” on Monday that he is optimistic the global economy does not need an “economic collapse” to rein in inflation.
Investors will be closely watching Friday’s personal consumption expenditure (PCE) inflation figure, the Fed’s preferred metric, for further clues as to when the central bank will begin cutting rates.

Jim Dyson | Getty Images News | Getty Images

The global economy does not need a “collapse” in order to bring inflation back to target and return to sustainable growth, according to Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth.
Major economies have proven surprisingly resilient to sharp interest rate increases from central banks over the last two years. This has been particularly evident in the U.S., with recession thus far avoided and the labor market remaining robust.

Talk has now turned to rate cuts as inflation remains on a downward trajectory toward central banks’ targets, while growth has slowed.
Wieting told CNBC’s “Squawk Box Europe” on Monday that he is optimistic the global economy does not need an “economic collapse” to rein in inflation.
“We had one massive shock — one pandemic, one collapse. We didn’t need two recessions to ultimately cure our inflation problem,” he said.
“It’s holding down parts of our economy now — manufacturing and trade declines are happening around the world — but these are likely to bottom within the year.”

U.S. headline inflation came in at an annual 3.4% year-on-year in December, remaining above the Federal Reserve’s 2% target but down considerably from a peak of 9.1% in June 2022.

Investors will be closely watching Friday’s personal consumption expenditure (PCE) inflation figure, the Fed’s preferred metric, for further clues as to when the central bank will begin cutting rates.
Meanwhile, a preliminary estimate of fourth-quarter GDP is scheduled for Thursday, with the economy expected to have grown by 1.7%, its lowest rate since the 0.6% decline in the second quarter of 2022.
“This period of slower global growth and slowing employment growth in the United States we think can pass and lead to a healthier growth period if we take a look particularly at the next year and beyond, and that’s this year’s business for investors,” Wieting said.
He highlighted that while there is excess that needs to be worked out of the economy, this was not the result of a “true overheating” or prolonged “boom,” but instead of excess government fiscal stimulus related to the pandemic recovery that wasn’t going to be repeated.
“If you take a look at money supply in the United States, it declined 4% over the past year. Take a look at the 1970s, it was almost 10% growth for the entire decade, important prices surging 14% every single year — that’s … sustained inflation,” Wieting said.
“This story with just all of this government spending coming and going — upheaval in supply and demand, consumer spending going up or down 30% between goods and services, during the pandemic period — that’s not the environment we’re in any longer.” More

WASHINGTON (Reuters) – U.S. Federal Reserve officials suspected the fight to lower inflation would be difficult and have been reluctant to declare success even as price increases have slowed.The data from December showed why.Overall consumer price inflation jumped, while a measure of underlying inflation fell. Producer prices, the costs that figure into what consumers eventually pay, dropped, and an indicator of the margins added by retailers fell sharply – a possible sign of developing price competition.But shelter costs keep rising, as do prices charged for an array of services like auto insurance. An Atlanta Fed wage tracker recently showed bigger pay raises for people remaining in their jobs, a finding that runs counter to the notion that the labor market was settling down after a period marked by high wage gains.Add it up and Fed policymakers say they still need more evidence to convince them that inflation will return to the U.S. central bank’s 2% target and stay at that level before they commit to interest rate cuts that financial markets expect to begin perhaps as early as March. STRIKING DISTANCE?While some inflation factors have turned decisively in the Fed’s favor, others remain unresolved.The central bank’s next policy meeting is scheduled for Jan. 30-31. Officials are expected at the end of that meeting to keep the Fed’s benchmark overnight interest rate steady, as they have since July, in the 5.25%-5.50% range. Comments last week by Fed Governor Christopher Waller show the two overarching ideas that will frame the debate as policymakers consider when to start reducing borrowing costs that rose at a record pace over 2022 and 2023 to cool the worst inflation outbreak since the 1980s.Inflation, Waller said, is now “within striking distance” of the Fed’s goal, with the personal consumption expenditures (PCE) price index the Fed uses as its benchmark running right at the 2% target on a six-month basis through November. Data for December will be released on Friday. On a year-over-year basis, PCE inflation is down to 2.6% from a high of 7.1% in June of 2022 and is expected to keep edging lower.Yet even if the risk of a resurgence has diminished, “the worst thing we could have is it all reverses, and we’ve already started to cut,” Waller said. “We really want to see evidence that this progress, this trend … continues. I believe it will. We have to see that before we can start making decisions.” BEYOND BASE EFFECTSWhat will create that conviction?For the next few months, basic arithmetic should help as high inflation readings from early 2023 fall out of the calculations. But Fed policymakers will try to look beyond that to see how different inflation components are behaving over shorter periods to get a sense of whether businesses really are becoming less aggressive in setting prices.It is already happening for many goods, where prices in general fell about 1% from September through December. When volatile food and energy items are excluded, goods prices have been falling for seven months. Inventories are flush after a pandemic-era rebuild, and inventory-to-sales ratios are roughly where they were before the health crisis.For the Fed it is a welcome return to a familiar world. Falling goods prices were a byproduct of trade liberalization in the 2000s and helped anchor low inflation through 2019, until the COVID-19 pandemic threw global supply chains into disarray, consumer goods demand jumped because of the health crisis, and prices soared. At their peak in February 2022, goods prices excluding food and energy products were rising 12.3% annually. But policymakers also don’t want to rely on that too much, and recent developments, like the strikes by Iran-aligned Yemeni militants that have discouraged shipping through the Suez Canal and trade frictions between the U.S. and China, have raised worries about renewed price pressures. HOUSING HELP TO COME?The pandemic led to soaring home prices in parts of the U.S. and falling rents in others, but overall shelter costs rose only a tepid 1.4% over the 12 months ending February 2021, less than half the typical rate preceding the COVID-19 outbreak.But shelter inflation then accelerated, hitting 8.2% by March of 2023. That reading has been slowing, and Fed officials remain confident shelter cost “disinflation” will continue. Yet the process has been so slow that some policymakers consider housing costs still too sticky to rely on.”I think in the categories of where are the dangers, this issue of housing inflation is the critical piece in the near term,” Chicago Fed President Austan Goolsbee said in an interview with Reuters earlier this month.Real-time measures of new apartment leases show slower price increases in the pipeline, and that should eventually lower headline inflation. But some of the improvement has leveled out, and the complicated interplay between apartment and house construction, home sales, mortgage rates, and ongoing job creation and wage growth has divided top economists over how far or how fast housing inflation will slow from here.Shelter costs account for about a third of the spending basket used for the consumer price index (CPI). While the weighting is roughly half that in the Fed’s preferred PCE price index, policymakers may remain skittish about cutting interest rates if housing inflation does not fall as anticipated. SERVICE-SECTOR BLUESIf the last chapter of the Fed’s inflation fight comes down to one thing, it is whether the massive service sector, which accounts for about two-thirds of the economy, behaves more like airline fares or auto insurance.When the CPI peaked above 9% in June 2022, auto insurance premium increases were responsible for about 0.15 percentage points of that change, while airfares accounted for a comparable 0.18 percentage points. But airline prices have been falling for nine months now, while auto premiums continue their upward trajectory – having risen 20% over the last year as of December and accounting for a full half of a percentage point of that month’s 3.4% inflation rate.Services inflation outside of housing has been slowing but remains elevated, and some policymakers are concerned it may persist.Richmond Fed President Thomas Barkin told reporters earlier this month that he sees forces pulling in both directions – competition, for example, that led a gym owner in his district to see a drop in new enrollments after a price increase, but plenty of markets where businesses still have pricing power and intend to use it.The push and pull across industries, from small businesses to national chains, from health care to haircuts, may well set the pace for the Fed’s own decision making.”You increase prices until you kind of get the signal from your customers and competitors … that you can’t,” Barkin said. “The COVID period was so confusing to purchasers, both individuals and institutions, it’s hard for people to get prices back into some sense of what’s normal … We’ll see how it all plays through.” More

1. Futures inch higherU.S. stock futures edged into the green on Monday, pointing to a continuation in an artificial intelligence-powered rally that pushed the benchmark S&P 500 up to its first record high close in two years in the prior session.By 05:17 ET (10:17 GMT), the S&P 500 futures contract had added 14 points or 0.3%, Nasdaq 100 futures had gained 95 points or 0.6%, and Dow futures had climbed by 53 points or 0.1%.The main averages on Wall Street all ended Friday more than 1% higher, fueled by an upgraded second-quarter profit forecast from server maker Super Micro Computer (NASDAQ:SMCI). The bullish outlook drove a steep jump in AI chipmakers Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), as a well as a surge in the Philadelphia SE Semiconductor Index to a fresh all-time high.Enthusiasm around AI had been bolstered earlier in the week by top contract chipmaker TSMC, which forecast a 20% increase in revenue this year thanks to soaring demand for the potential applications of the nascent technology.Following a day of heavy volume on U.S. exchanges, the S&P 500 rose by 1.23%, the tech-heavy Nasdaq Composite added 1.7%, and the 30-stock Dow Jones Industrial Average gained 1.05%.2. FAA recommends further Boeing checksThe U.S. aviation authority has recommended that airlines carry out inspections of door plugs on Boeing 737-900ER aircraft, saying that they have an identical design to a jet involved in a dangerous mid-air breach earlier this month.In a statement released late on Sunday, the Federal Aviation Administration said that operators of the 737-900ER are “encouraged to conduct a visual inspection” to ensure that the door plug is “restrained from any movements.” The FAA said the move is designed to create “an added layer of safety.”The FAA added that some operators have “noted findings” with bolts on the 737-900ER in previous maintenance inspections of mid-exit door plugs. While it is not a part of Boeing’s Max fleet, the 737-900ER has the same optional door plug seen in the U.S. planemaker’s newer family of jets.Boeing, which has already come under intense scrutiny in recent years over safety concerns, has faced further pressure since a non-fatal blowout on its 737-9 Max model operated by Alaska Airlines on Jan. 5. The FAA grounded 171 of the 737-9 Max planes after the incident.3. Earnings season ramps upInvestors will be looking ahead to a slate of key earnings later this week, with big-name companies like Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA) and 3M (NYSE:MMM) all set to unveil their latest results.Analysts have predicted that the quarterly figures will help determine the staying power of the S&P 500’s recent rally.”If […] we find out that the market has either gotten ahead of itself […] or we get guidance from some of these companies that doesn’t match the bullish sentiment that’s being priced into them, that can be a real risk,” Steve Sosnick, Chief Strategist at Interactive Brokers (NASDAQ:IBKR) told Reuters.Outside of the U.S., some of Europe’s most high-profile tech firms are due to report, including chipmaker ASML (AS:ASML), computer accessories maker Logitech (NASDAQ:LOGI), software developer SAP (ETR:SAPG), and fashion behemoth LVMH (EPA:LVMH).4. Sony ends Zee merger talksSony has terminated merger discussions between its Indian unit and Zee Entertainment, putting an end to a long-running series of negotiations over a deal that would have created a $10 billion giant in one of the world’s fastest-growing economies.The Japanese group said in a statement that it had been unable to extend talks surrounding the agreement beyond a Jan. 21 closing date. First announced in 2021, the tie-up would have brought together two media powerhouses in India during a time of rising competition in the country.But Sony told Reuters that unspecified closing conditions of the merger were “not satisfied,” adding that it was “extremely disappointed” but committed to growing its presence in India.Zee, meanwhile, revealed in a securities filing that Sony was seeking a termination fee of $90 million and “emergency interim reliefs.” It refuted Sony’s claims and vowed to take “all necessary steps to safeguard the long-term interests of its stakeholders,” including by taking legal action.Reports suggested that the two companies were at odds over the leadership of the combined group, with Sony in particular refusing to allow Zee Chief Executive Punit Goenka take the helm of the business. However, Zee said on Monday that Goenka was “agreeable to step down in the interest of the merger.”5. Oil edges upOil prices moved higher on Monday, as worries about global crude demand were offset by ongoing geopolitical fears.By 05:23 ET, the U.S. crude futures had risen 0.2% to $73.38 a barrel, while the Brent contract had climbed 0.2% to $78.68 per barrel.The demand outlook remains muted. The U.S. Energy Information Administration, the Internal Energy Agency and the Organization of the Petroleum Exporting Countries all expect demand for crude to slow this year. Analysts have also flagged that growth in the U.S. — the world’s top oil consumer — is expected to have decelerated in the fourth quarter.Counterbalancing these downward pressures on prices was continued violence in the Middle East over the weekend, with the U.S. striking another anti-ship missile being prepared to launch by Yemen-based Houthi militants into the Gulf of Aden. Attacks in the region, a crucial artery for shipping between Europe and Asia, have recently threatened to disrupt global trade by causing many firms to divert vessels away from the area.Elsewhere, Ukraine allegedly carried out a drone attack on a Russian fuel export terminal over the weekend. Russian energy company Novatek said it had been forced to suspend some operations at the site due to a fire, Reuters reported. More

The number of foreclosed homes up for auction stood at 389,000 units last year, said China Index Academy, a major independent real estate research firm. A total of 99,000 units worth a combined 150 billion yuan ($20.84 billion) were successfully sold at auctions, the firm said. Total foreclosures, including commercial, residential and industrial properties, land, garages and parking spaces, totalled 796,000 units, a record high. The number was up 36.7% from 2022, showed the survey.Last year, the troubled property market saw the worst decline in new home prices in nearly nine years, dragging on the broader recovery.China’s economy grew 5.2% last year, as credit has been diverted from the property sector towards manufacturers and as investment into infrastructure held up.The southwestern second-tier cities of Chongqing and Chengdu were the most affected by home foreclosures, logging in the most auctions last year, China Index Academy said. The number of foreclosures has been gradually rising since 2020, the firm said, and the number has continued to rise in the early days of 2024.E-commerce company JD (NASDAQ:JD).com’s said earlier this month its online auction platform has sold 11 homes worth more than 10 million yuan each in the first ten days of January. JD.com said it planned more auctions of luxury homes in top-tier cities including Beijing and Shanghai during the Lunar New Year holidays. ($1 = 7.1968 Chinese yuan renminbi) More

Leaders of the six Western Balkan countries — Albania, Bosnia, Kosovo, Montenegro, North Macedonia and Serbia — met on Monday in Skopje to discuss reforms needed to access the EU growth plan presented last October. “Today the leaders will be discussing the common regional market and the integration of the region progressively in our internal market, which is a huge driver for growth,” said Gert Jan Koopman, the European Commission’s Director-General for Neighbourhood and Enlargement Negotiations. “The growth plan is a potential a game changer and could double the size of your economies in the next decade,” he said at the start of the meeting.Having been promised EU membership years ago, the accession process across the region has slowed to a crawl, mainly due to reluctance among the bloc’s 27 members and a lack of reform throughout the region.Serbia and Montenegro were the first in the region to launch EU membership talks, and Albania and North Macedonia began talks with Brussels in 2022. Bosnia and Kosovo lag far behind their neighbours in the process.”The growth plan means 6 billion euros for the whole region and the amount of the money we will get depends on the good works that we do,” Kosovo Prime Minister Albin Kurti said ahead of the meeting. The EU growth plan for the region would include the opening of its common market to the Western Balkan countries in areas such as free movement of goods and services, transport and energy. But in return, the countries need to implement reforms and resolve all outstanding issues with their neighbours. The EU’s aim is to give greater stability to a region that emerged from the bloody 1990s break-up of Yugoslavia but is still racked by tensions.The six leaders will present a joint declaration at a press conference in North Macedonia’s capital Skopje later on Monday. More

Earnings season and a snapshot of how business activity is holding up in January as turmoil in the Red Sea wreaks havoc on supply chains are also due. Here’s a look at the week ahead in world markets from Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam, Lewis Krauskopf in New York, Amanda Cooper in London and Ezgi Erkoyun in Istanbul. 1/ ECB VS MARKETSThe ECB meets on Thursday and for all the pushback against rate-cut speculation, traders have merely delayed bets on a first move by a month to April. Markets still expect five cuts this year.Policymakers are in no hurry to signal cuts and even some doves say it’s too early to discuss them. Expect more pushback from ECB boss Christine Lagarde, who warned traders pricing too many cuts would not help the ECB fight inflation.Euro zone inflation rose in December and wage growth is still too high for its liking. While it’s too early for a pivot, the ECB has halted rate hikes and clarified how it will wind down its pandemic-era bond-buying scheme. And Lagarde could be pushed on the impact of supply chain disruptions in the Red Sea on inflation. 2/ BATTERED YEN BULLS     Just how much the frenzy for an imminent end to Bank of Japan stimulus has quickly become a frustration is playing out in currency markets.The yen has tumbled as much as 5.6% this month alone to beyond 148 per dollar. That move has happened more quickly than December’s yen bounce to five-month peaks near 140 from a more than one-year trough near 152 in mid-November.A New Year’s Day earthquake on Japan’s west coast cleared any vestigial bets for an exit from negative rates at the BOJ’s two-day meeting starting on Monday.    Those wagers had already been tempered by dovish BOJ commentary, while recent data suggests a cooling of inflation without any central bank assistance.    Dollar/yen’s approach to 150 could trigger some jawboning from Tokyo. A weak yen is unpopular with voters, who already take a poor view of Prime Minister Fumio Kishida’s administration.3/ PUSH AND PULLAs some Federal Reserve policymakers push back on market rate-cut bets, a key U.S. inflation gauge on Thursday should shed some light on the timing of such a move. December’s personal consumption expenditures (PCE) reading comes after the price index increased 2.6% in the 12 months to November and monthly prices fell for the first time in more than 3-1/2 years. Money markets price a 61% chance of a 25 bps March cut versus a 77% chance a week ago.Higher-than-expected December retail sales numbers have also raised doubts over whether the Fed will be able to cut as early as March, as the central bank continues to wrestle inflation down from the 40-year highs hit in 2022. U.S. corporate earnings are also on the must-watch list, including Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX), 3M and Intel (NASDAQ:INTC). 4/ FLASH IN THE PANInvestors are betting heavily on the global economy coasting gently to a recession-free soft landing, along with rate cuts this year. The Jan. 24 flash Purchasing Managers’ Index (PMI) readings will give a sense of how business activity, in contraction territory across much of the world, has held up.New orders and hiring intentions will come under scrutiny as they are two of the more forward-looking components. New orders have trends lower everywhere, often a sign of firms preparing for tough times ahead – at odds with the rosy outlook in financial markets. On earnings, it’s a big week for European tech, with ASML (AS:ASML), Logitech (NASDAQ:LOGI) and SAP reporting, as well as luxury powerhouse LVMH. 5/ ONE LAST PUSH Turkey watchers are keen to see what size rate hike the central bank will deliver on Thursday, with a bigger-than-expected rise in the minimum wage, pre-election spending and a sliding lira keeping risks to the projected disinflation path well and truly alive.As part of an economic policy U-turn, Turkey’s central bank has jacked up rates to 42.5% from 8.5% since June to contain inflation. In December, the central bank said it was set to complete the tightening cycle as soon as possible, though Governor Hafize Gaye Erkan has pledged to maintain tight policy as long as necessary.Policymakers already downshifted tightening prospects last month, saying rates were close to a level that would keep disinflation on track. Economists expect inflation to hit over 70% by mid-year and decline to around 40% by year-end.South Africa’s central bank also meets on Thursday and is expected to keep rates unchanged. Governor Lesetja Kganyago says disinflation has begun. (Graphics by Prinz Magtulis, Pasit Kongkunakornkul, Kripa Jayaram and Sumanta Sen; Compiled by Dhara Ranasinghe; Editing by Karin Strohecker and Alex Richardson) More