Economy

WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits dropped to an eight-month low last week, pointing to low layoffs at the end of 2024 and consistent with a healthy labor market.The report from the Labor Department on Thursday added to a recent raft of upbeat economic data, including consumer spending, in reinforcing the Federal Reserve’s projections for fewer interest rate cuts this year. Labor market resilience is keeping the economic expansion on track.”A stable job market will squelch the Fed’s appetite for cutting rates aggressively amid nagging services inflation,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:LPLA).Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 211,000 for the week ended Dec. 28, the lowest level since April. Economists polled by Reuters had forecast 222,000 claims for the latest week. There were sharp declines in unadjusted claims in California and Texas. Large increases in filings were recorded in Michigan, New Jersey, Pennsylvania, Ohio, Massachusetts and Connecticut.Claims tend to be volatile around the end of the year. Through the volatility, however, they have remained compatible with a labor market that is steadily slowing at a pace that does not signal a deterioration in economic conditions.The four-week moving average of claims, which strips out seasonal fluctuations from the data, fell 3,500 to 223,250. The dollar rose to a two-year high against a basket of currencies, while stocks on Wall Street were slightly stronger. Yields on longer-dated U.S. Treasuries edged higher.CONSTRUCTION SPENDING UNCHANGED     The U.S. central bank last month delivered a third consecutive interest rate cut, lowering its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range. It, however, projected only two reductions in borrowing costs this year compared to the four it had forecast in September, acknowledging the resilience of the jobs market and economy. The Fed’s policy rate was hiked by 5.25 percentage points in 2022 and 2023 to quell inflation.The labor market is being underpinned by very low levels of layoffs, but employers are hesitant to add more workers after a hiring spree during the recovery from the COVID-19 pandemic. As a result, some workers who have lost their jobs are experiencing long bouts of joblessness, with the median duration of unemployment approaching a three-year high in November. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 52,000 to a seasonally adjusted 1.844 million during the week ending Dec. 21, the claims report showed. The so-called continuing claims continued to rise in Washington state, long after a strike by factory workers at Boeing (NYSE:BA) ended. They remained elevated in North Carolina in the aftermath of the devastation caused by Hurricane Helene, and in Michigan and Ohio, which have suffered job losses in manufacturing.Economists have also attributed some of the continued elevation in the so-called continuing claims to difficulties stripping out seasonal fluctuations from the data. They expect the unemployment rate to have held steady at 4.2% in December.The government is scheduled to publish its closely watched employment report for December next Friday.”Businesses hired fewer employees in 2024 than they did in 2023 and 2022, leading to the persistent increase in continuing claims in 2024,” said Stuart Hoffman, senior economic advisor at PNC Financial (NYSE:PNC). “But the economy is still creating roughly enough jobs to keep up with labor force growth.” A separate report from the Commerce Department’s Census Bureau showed construction spending was unchanged in November as a moderate rise in single-family homebuilding was offset by a sharp decline in outlays on multi-family housing projects. That followed an upwardly revised 0.5% rise in October. Economists had forecast construction spending would gain 0.3% in November after a previously reported 0.4% rise in October. It increased 3.0% on a year-on-year basis in November.Spending on private construction projects edged up 0.1% after increasing 0.6% in October. Investment in residential construction nudged up 0.1%, with outlays on new single-family projects rising 0.3%.  New construction could be hampered by higher mortgage rates, President-elect Donald Trump’s threat to impose tariffs on imports, and the labor shortages that could result from his incoming administration’s broad promise to deport immigrants. Trump’s policy pledges, including tax cuts, have contributed to the elevation in mortgage rates even as the Fed has been lowering borrowing costs. Outlays on multi-family housing units fell 1.3% in November. Spending on home renovations continued to increase.Investment in private non-residential structures like offices and factories was unchanged in November. Spending on public construction projects dipped 0.1% in November after easing by the same margin in October. State and local government spending slipped 0.1%, while outlays on federal government projects dropped 0.5%. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe German conservative leader Friedrich Merz, who is in pole position to become the country’s next chancellor, has said the EU should make a fresh attempt at a sweeping free trade deal with the US once Donald Trump becomes president.“We need a positive agenda with the US, which would benefit both American and European consumers,” the Christian Democrat leader said in an interview with DPA news agency. “A new European-American joint free trade initiative could avert a dangerous tariff spiral.”It is unclear what kind of reaction Merz will get in Washington. Trump halted negotiations on the Transatlantic Trade and Investment Partnership (TTIP), a planned trade agreement between the EU and US, shortly after becoming president in 2017 and went on to impose tariffs on European imports.Merz was speaking less than two months before snap elections in Germany prompted by the collapse of Chancellor Olaf Scholz’s fragile three-party coalition in November. Polls suggest Merz’s centre-right CDU/CSU bloc is on course for victory.Ahead of Trump’s re-entry into the White House on January 20, Germans are becoming increasingly apprehensive about the potential negative impact of his so-called Maga (“make America great again”) policies on the Eurozone’s largest economy.In his first term Trump aggressively pursued an “America First” approach aimed at closing the US trade deficit and boosting homegrown production, which often entailed trade conflicts with some of the US’s closest allies. In a sign of turbulence to come, he warned last month that the US would impose tariffs on EU goods such as cars and machinery unless the bloc stepped up its purchases of US oil and gas. A study last year by the German Economic Institute in Cologne (IW) predicted the German economy would incur losses of up to €180bn over a second four-year Trump term as a result of a trade war between the US and Europe.It said German carmakers and machine-building companies would be particularly hard hit by Trump’s plans to raise import tariffs to 10 per cent or even 20 per cent. The US was Germany’s biggest trading partner in the first half of 2024.Speaking to DPA, Merz said he expected tougher conditions for European business when Trump becomes president. “It will be challenging,” he said. The EU should, Merz added, expect the US to focus on safeguarding its own interests, including by imposing high import tariffs. “But our response to that shouldn’t be to start with our own tariffs,” he said.Instead, the EU should concentrate on restoring its declining competitiveness, and then tell the Americans: “Yes, we are prepared to face this competition with you, too.” He added: “The right response is to react with innovation and good products.” Merz has pledged to improve the competitiveness of the German economy, which is stuck in its first two-year slump since the early 2000s, if he becomes chancellor.In its manifesto the CDU/CSU says it will reduce corporate taxation to 25 per cent from about 30 per cent currently, cut social security contributions, halve electricity network charges for industrial customers and slash bureaucracy.Other parties, such as Scholz’s Social Democrats, and some economists have warned that many of Merz’s proposals are unfunded.Merz said Germany must reduce corporate tax rates and become a more attractive place to do business in order to better compete with the US, where tax credits provided under President Joe Biden’s Inflation Reduction Act have prompted many German companies to consider moving production to the US.He said Germany’s non-wage labour costs such as social security payments were also too high. “You can’t resolve that on a European level, you have to do it on a national basis.” Indeed, the country’s non-wage labour costs are now at their highest level ever, according to figures released on Thursday, thanks to an increase in contributions to medical insurance, which came into effect at the start of the year. Some 42.3 per cent of gross wages go towards medical, social and unemployment insurance, according to calculations by the Augsburger Allgemeine newspaper. More

LONDON/SINGAPORE (Reuters) -World shares struggled for traction on Thursday after a jittery close to 2024, while the dollar weakened as investor sentiment dithered ahead of Donald Trump’s return to the White House.The start of the New Year was shaping up to be a less favourable one for European and Asian equities, as uncertainty over the policies of incoming U.S. President Trump and a more hawkish Federal Reserve outlook looked set to dominate market rhetoric for now.Global shares, which had closed out 2024 with a strong annual gain of nearly 16%, clocked a monthly loss of more than 2% in December and ticked 0.1% lower ahead of the Wall Street open. European stocks eased during their first trading session of 2025 but the STOXX 600 index last recovered earlier declines and steadied by midday. U.S. stock futures pointed higher, however, as S&P 500 and Nasdaq futures climbed roughly 1%. Other major bourses hovered either side of the unchanged mark with notable underperformance seen in France where the CAC 40 shed around 0.7%.European oil & gas stocks were buoyed by higher crude futures, as Russian gas firm Gazprom (MCX:GAZP) halted gas exports via pipelines running through Ukraine after Kyiv refused to renew a transit agreement.Autos and luxury goods underperformed. An index tracking the region’s banks fell as much as 2.35%. China stocks ended sharply lower, logging their weakest New Year start since 2016, as factory data disappointed investors who were also waiting for more policy support. China’s blue-chip CSI 300 Index closed down 2.9%, while the Shanghai Composite Index tumbled 2.7% and Hong Kong’s benchmark Hang Seng fell 2.2%.Global markets are kicking off 2025 with a sharp focus on key economic and inflation indicators, said Bruno Schneller, managing director at Erlen Capital Management in Zurich. “The latest PMI release from China, falling short of expectations, underscores challenges in the manufacturing sector. However, President Xi’s announcement of more proactive policies to boost growth signals potential shifts in economic strategy for the region,” added Schneller. China’s Xi Jinping said on Tuesday in his New Year’s address that the country would implement more proactive policies to promote growth in 2025. Investors are closely monitoring China’s recovery with Trump’s talk of tariffs in excess of 60% on imports of Chinese goods potentially posing a significant headwind.”With Donald Trump’s return to the White House amplifying external risks and an already fragile domestic economy, a debt-deflation trap leading to a generational downturn could be perilously close if upcoming stimulus measures are delayed or misdirected,” said Yingrui Wang, China emerging market economist at AXA Investment Managers.LEVYING TARIFFSTrump will be sworn in as U.S. president on Jan. 20 for his second term in office. Friday will see the new session of Congress begin, with a Republican majority in both the House of Representatives and the Senate. “A big question will be how the new administration moves on new tariffs, and which countries they’re focused on,” Deutsche Bank (ETR:DBKGn) analysts said in a note.The dollar erased downward pressure against other major currencies, up 0.2% by 1221 GMT. The euro ticked 0.2% lower to $1.0328 but strayed not too far from a more than one-month trough.Markets now price in about 42 basis points worth of rate cuts from the Federal Reserve this year, compared with more than 100 bps from the European Central Bank and 60 bps from the Bank of England.In London trade, U.S. 10-year Treasury yields were down around 4 bps at 4.22%.Oil prices rose, with Brent crude futures up $1.03 to $75.67 a barrel. U.S. West Texas Intermediate crude gained $1.01 to $72.74. [O/R]Spot gold traded 0.7% higher at $2,641 an ounce. The yellow metal had a banner year in 2024, surging more than 27% in its largest annual gain since 2010. [GOL/]Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt on New Year’s Day, marking the end of decades of Moscow’s dominance over Europe’s energy markets.The gas had kept flowing despite nearly three years of war, but Russia’s Gazprom said it had stopped at 0500 GMT on January 1, after Ukraine refused to renew a transit agreement.The benchmark front-month contract at the Dutch TTF hub hit a 14-month high in earlier trading but then settled back a bit, up 2.29% at 50.01 euros per megawatt hour (MWh) by 1225 GMT, according to LSEG data. More

LONDON/SINGAPORE (Reuters) -The dollar hit new multi-month highs against the euro and the pound on Thursday, the first day of 2025 trading, as it built on last year’s strong gains on expectations U.S. interest rates will remain high relative to peers. The euro fell to as low as $1.0314, its lowest since November 2022, down around 0.3% on the day. It is now down nearly 8% since its late September highs above $1.12, one major victim of the dollar’s recent surge. Traders anticipate deep interest rate cuts from the European Central Bank in 2025, with markets pricing in at least four 25 basis point cuts, while not being certain of even two such moves from the U.S. Federal Reserve. The dollar was hitting milestones across the board and the pound was last down 0.65% at $1.2443, its lowest since April, with its fall accelerating after it broke through resistance around $1.2475. “It’s more of the same at the start of the new calendar year with the dollar continuing to extend its advances in anticipation of Trump putting in place friendly policies at the start of his term,” said Lee Hardman, senior currency analyst at MUFG.U.S. President-elect Donald Trump’s policies are widely expected to not only boost growth but also add to upward price pressure. That will lead to a Fed cautious about cutting rates too much further, in turn underpinning U.S. Treasury yields and boost dollar demand.A weaker growth outlook outside the U.S., conflict in the Middle East and the Russia-Ukraine war have also added to demand for the dollar. The dollar also reversed an early loss on Thursday to climb against the Japanese yen, and was last up 0.17% at 157.26. It reached a five-month high above 158 yen in late December, potentially putting pressure on the Bank of Japan, which is expected to raise interest rates early this year, but possibly not immediately. “If dollar/yen were to break above 160 ahead of the next BOJ meeting, that could be a catalyst for the BOJ to hike in January rather than wait until March,” said Hardman. “Though for now markets are leaning towards March after the dovish comments from (governor Kazuo) Ueda at his last press conference.” Even those who are more cautious about sustained dollar strength think it could take a long time to play out. “The dollar may be vulnerable – but only if the U.S. data confound market expectations that the Fed doesn’t cut rates more than once in the first half of this year, and not by more than 50bp in the whole of 2025,” said Kit Juckes chief FX strategist at Societe Generale (OTC:SCGLY) in a note. “There’s a good chance of that happening, but it seems very unlikely that cracks in U.S. growth will appear early in the year – hence my preference for taking any bearish dollar thoughts with me into hibernation until the weather improves.” China’s yuan languished at 14-month lows as worries about the health of the world’s second-biggest economy, the prospect of U.S. import tariffs from the Trump administration and sliding local yields weighed on investor sentiment. [CNY/]Elsewhere, the Swiss franc, another victim of the recent dollar strength, gave back early gains to last trade flat at 0.90755 per dollar. CHF=EBS > The Australian and New Zealand dollars, however, managed to break away from two-year lows touched on Tuesday. The Aussie was 0.36% higher at $0.6215 having dropped 9% in 2024, its weakest yearly performance since 2018. [AUD/]The kiwi rose 0.47% to $0.5614. More

At 05:23 a.m. ET on Thursday, Dow E-minis were up 198 points, or 0.46%, S&P 500 E-minis were up 34 points, or 0.57%, and Nasdaq 100 E-minis were up 160.25 points, or 0.75%.Wall Street’s main indexes logged stellar gains in 2024 and the benchmark S&P 500 notched its best two-year run since 1997-1998.The main catalysts were the Fed easing interest rates for the first time in four years, investor hype around artificial intelligence and expectations of companies potentially benefiting from President-elect Donald Trump’s policies.Equity valuations are sitting above their long-term averages, but could be justified if corporate profits stay strong. Earnings per share for S&P 500 companies are projected to rise 10.67% in 2025, according to data compiled by LSEG.Brokerages expect the S&P 500 to touch levels between 6,000 and 7,000 points this year, up from Tuesday’s close of 5,881.However, 2024’s surge ended with the benchmark index and the Dow posting monthly declines in December as markets priced in Trump’s proposals on corporate tax cuts, loose regulations, stricter immigration laws and tariffs to be inflationary and likely to slow down the pace of the Fed’s monetary policy easing this year.With inflation still above the 2% target, traders see the central bank leaving interest rates unchanged at its meeting later this month, and expect borrowing costs to be lowered by a total of 50 basis points by year-end, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.Markets also weighed the likelihood that the new administration could issue more debt to finance its policies, which could worsen market volatility. The yield on the 10-year benchmark Treasury note hovered near its eight-month high. [US/]”Investors are hopeful that a goldilocks scenario will be the story of 2025, amid promises of lower taxes and the deregulation under a second Trump presidency,” said Susannah Streeter, head of money and markets at Hargreaves (LON:HRGV) Lansdown.”But with fresh trade wars looming, if the worst of the tariff threats are imposed, the bears could be back to disrupt what has been a fairytale performance for the U.S. stock market.”On Thursday, traders will be eying a report on weekly jobless claims, followed by a final estimate on manufacturing activity in December, but the main focus will be a slew of labor market data next week.In premarket trading, Tesla (NASDAQ:TSLA) added 1.3% ahead of the release of its quarterly deliveries numbers. Among other megacaps, Meta (NASDAQ:META) and Amazon.com (NASDAQ:AMZN) added 0.8% each, while chip stocks Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) climbed 1% and 1.9%, respectively.These stocks were among the ones behind the S&P 500 Growth index’s 35% jump in 2024. The Value index rose 9.8%.SoFi Technologies (NASDAQ:SOFI) dropped 2.4% after brokerage KBW downgraded the stock to “underperform” from “market perform”. In a week shortened by Wednesday’s New Year’s holiday, trading volumes are expected to be light. More

A manufacturing slowdown in the euro zone intensified last month, with scant signs of a rebound anytime soon as the bloc’s three largest economies – Germany, France and Italy – remained stuck in an industrial recession.Manufacturing purchasing managers’ indexes for December from across Asia published on Thursday showed factory activity slowing in China and South Korea although there were some signs of a pickup in Taiwan and Southeast Asia.U.S. President-elect Trump has pledged to impose tariffs across the board, with bigger barriers on imports from three major trading partners – Mexico, Canada and China.The Caixin/S&P Global manufacturing PMI for China nudged down to 50.5 in December from 51.5 the previous month, undershooting analysts’ forecasts and indicating activity grew only modestly. Gabriel Ng, assistant economist at Capital Economics, said Beijing’s increased policy support in late 2024 provided a near-term boost to growth, which is likely to be seen in other fourth quarter indicators.”And this improvement should carry over into early 2025,” Ng said. “But the boost probably won’t last more than a few quarters, with Trump likely to follow through on his tariff threat before long and persistent structural imbalances still weighing on the economy.”In Europe, HCOB’s euro zone manufacturing Purchasing Managers’ Index, compiled by S&P Global, dipped to 45.1 in December, just under a preliminary estimate and further below the 50 mark separating growth from contraction, where it has been since mid-2022.”Output in the euro zone remained under pressure at the end of 2024, held back by a continued slide in new orders in both the domestic market and in exports,” noted Claus Vistesen, chief euro zone economist at Pantheon.Factory activity in Germany fell deeper into contraction territory last month on sharper declines in output and new orders while activity in France declined at the fastest pace in more than four years.In Britain, outside the European Union, factory activity shrank at the quickest rate in 11 months and firms reduced staffing levels due to higher taxes and weak foreign demand.Elsewhere in Asia, South Korea’s PMI showed activity shrinking in December and the decline in output gathering pace, a stark contrast to better-than-forecast export growth figures released on Wednesday.South Korea’s central bank governor said on Thursday the pace of monetary policy easing would need to be flexible this year due to heightened political and economic uncertainty.In addition, South Korea is dealing with the hit to business confidence from a national political crisis after a failed bid by President Yoon Suk Yeol last month to impose martial law.Earlier in the week, Japan’s PMI showed activity shrinking in December, albeit at a slower pace. Malaysia and Vietnam also reported declines in factory activity. India’s manufacturing activity grew at its weakest pace for 2024, its PMI showed, although the South Asian economy’s factories continued to outperform regional peers, reporting uninterrupted expansion for the past three-and-a-half years. More

The short-term repo allows banks to borrow money from the BoE – usually for a seven-day period – in exchange for high-quality collateral and is designed by the BoE to keep interbank lending rates close to its policy interest rate.The highest amount allotted in the repo was 46.743 billion pounds on Oct. 24.($1 = 0.8033 pounds) More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and happy New Year. Here are today’s highlights: A warning about the impact of Trump’s protectionist policies US authorities investigate an “act of terrorism” in New OrleansAfrica’s newest stock exchange prepares to open Ten tips to get your personal finances into shapeDonald Trump’s vision to reshape the world’s largest economy through protectionist policies that put “America First” will damage growth, according to economists polled by the Financial Times, in contrast to investors who believe the US president-elect’s plans are good for the economy.Surveys of more than 220 economists in the US, UK and Eurozone on the economic impact of Trump’s return to the White House showed most respondents believed his protectionist shift would overshadow the benefits of what the president-elect has dubbed “Maganomics”.Many economists in the US, who were polled jointly by the FT and the University of Chicago’s Booth School of Business, also believe a new Trump term will spur inflation and lead to more caution from the Federal Reserve on cutting interest rates.Some content could not load. Check your internet connection or browser settings.However, most economists — including at the IMF, the OECD and the European Commission — forecast stronger growth in the US than in Europe in 2025.Overall, more than half of the 47 economists polled specifically on the US economy expect “some negative impact” from the Trump agenda, and another tenth forecast a “large negative impact”. On the other hand, a fifth of those surveyed expect a positive impact.The gloom among economists contrasts with investors’ optimism over Trump’s second term. Read the full results of the survey. We will be publishing a special edition of FirstFT Americas in the run-up to Donald Trump’s inauguration and we need your help. Please email any questions you have about the incoming administration to firstft@ft.com and remember to include your name and location details for publication. Also, there is a subscriber-only webinar on January 23 to discuss what Trump’s return to the White House means for America and the world. Register for free here. Five more top stories1. The FBI is investigating an “act of terrorism” after a man drove a pick-up truck into a large crowd in the heart of New Orleans yesterday. The agency identified Shamsud-Din Jabbar, a 42-year-old US citizen from Texas, as the main suspect and said it did not believe he acted alone. US President Joe Biden said authorities were also investigating the explosion of a Tesla Cybertruck outside the Trump hotel in Las Vegas to see if the two incidents were related. Here’s more on the twin investigations.2. Nvidia invested $1bn in artificial intelligence companies in 2024, as it emerged as a crucial backer of start-ups trying to gain from the AI revolution the group’s chips are powering. The semiconductor group, which surpassed a $3tn market capitalisation in June, spent a total of $1bn across 50 start-up funding rounds and several corporate deals in 2024. Read more on Nvidia’s investments. 3. Banks are on course to generate their highest annual trading revenues since 2010, according to estimates from Coalition Greenwich, an industry research group. The industry is expected to bring in almost $225bn in trading revenues in 2024 as volatility around the US election and the unwinding of the so-called yen carry trade helped bolster business. 4. European scientists have started work on a project to create simple forms of life from scratch in the lab by using inanimate chemicals that they hope will divide and show “Darwinian evolution” within six years. The “MiniLife” project is sponsored by the European Research Council and plans to capitalise on theoretical and experimental advances in the fast-growing field of synthetic biology. Read more about how the project works. 5. Russian gas flows through Ukraine stopped in the early hours of yesterday after a transit deal between the two countries expired in the wake of Moscow’s full-scale invasion. The pipeline was one of the last two routes still carrying Russian gas to Europe, nearly three years into the full-scale war. EU countries will lose about 5 per cent of gas imports in the middle of winter.What to watch in 2025© FT montage/James FergusonFinancial Times reporters consider the rise of “sovereign” artificial intelligence, whether the “masters of the universe” will be investing your pension savings and the threat looming over the luxury goods sector, in our survey of business trends to watch in the year ahead.We’re also reading . . . ‘The mother of all stress tests’: Donald Trump has consistently vowed to use the tools of US justice to settle scores with enemies. He should be taken literally as well as seriously, writes our editorial board. Crypto’s golden era: The sector expects lighter regulation and wider adoption under Donald Trump, but some worry about systemic risks.Financial to-do list: From money-saving work perks to investments and tax planning, Claer Barrett has 10 tips to get your finances in shape this new year.Chart of the daySome content could not load. Check your internet connection or browser settings.Later this month Ethiopia will open its first stock market since the last days of emperor Haile Selassie, a milestone for one of the poorest countries on Earth. The opening of the Addis Ababa exchange is part of efforts by Prime Minister Abiy Ahmed to modernise the economy of Africa’s second-most populous nation following a devastating civil war that killed at least 600,000 people. Take a break from the newsThe FT’s critics pick the most anticipated hot tickets in 2025, from film, theatre, dance and TV to art exhibitions, games, pop and classical music.© ​Kerry James Marshall/Jack Shainman GalleryThank you for reading and remember you can add FirstFT to myFT. You can also elect to receive a FirstFT push notification every morning on the app. Send your recommendations and feedback to firstft@ft.comRecommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More