Economy

The S&P 500 dropped 1.47% on Wednesday, facing resistance near its Jan. 4, 2022, record high of 4,818.62. Despite the recent decline, the index has still gained approximately 15.7% since bottoming out at a five-month low of 4,103.78 on Oct. 27.U.S. personal consumption data for November is due at 1330 GMT. It could potentially shape expectations for how quickly interest rates might fall in 2024. U.S. equity value funds saw their first weekly outflow in four weeks, worth about $5.88 billion. Investors also sold roughly $11.31 billion worth of growth funds on a net basis.Among sector funds, the tech sector saw $1.08 billion worth of net selling, the second weekly outflow in seven weeks. Financials and gold & precious metal funds also lost about $200 million each in outflows. Industrials, meanwhile, received $336 million worth of inflows, the most in nine weeks.U.S. investors also liquidated $7.55 billion worth bond funds, extending outflows into a fourth successive week. U.S. short/intermediate government & treasury funds logged about $5.1 billion worth of net selling, their seventh weekly outflow in a row. Investors also pulled a net $4.91 billion out of general domestic taxable fixed income funds but poured $1.42 billion into short/intermediate investment-grade funds.U.S. money market funds, meanwhile, suffered $25.54 billion worth of net selling, the biggest outflow in a week since Oct. 18. More

TOKYO (Reuters) -Japan’s finance minister on Friday said he would strive to contain the risk of runaway debt after unveiling an annual budget as speculation mounts the central bank will shift away from more than two decades of ultra-easy monetary policy.The world’s third-largest economy is under pressure to restore its fiscal health after prolonged stimulus and spending worsened a national debt that is the heaviest in the industrialised world. In calculating borrowing costs, the government adopted a higher interest rates estimate – 1.9% from the current 1.1% – in the budget plan for the coming fiscal year, which would mark the first increase in 17 years.”When we return to life with interest rates, and if interest rates continue to rise to push up interest payments, that could affect fiscal management, squeezing policy outlay,” Shunichi Suzuki told reporters after the government crafted the fiscal 2024/25 budget.”The government needs to minimise such risks. To achieve that, we must limit bond issuance and curb interest payments for the future through efforts such as securing stable funding sources and strike a balance in compiling budgets.”The budget for the fiscal year that starts in April is estimated at 112.07 trillion yen ($787 billion), down 2% from the current year’s initial amount of 114.4 trillion yen.The budget is still above 110 trillion yen for two straight years, inflated by the cost of military outlay to deal with threats from China and North Korea and welfare costs for Japan’s ageing population.The plan shows its debt dependence at 31.2%, meaning new bond sales account for one third of the budget.More than two decades of super-low interest rates have loosened fiscal discipline in a country whose public debt is more than double the size of the economy as a result of rounds of fiscal stimulus.”The bulk of spending cuts comes from reduction of COVID-led emergency reserves. Excluding such factors, spending reform made little headway,” Takahide Kiuchi, economist at Nomura Research Institute, said.”Policymakers must have a sense of crisis and guide responsible fiscal policy as the Bank of Japan normalises monetary policy. Unexpected rate rises would further aggravate public finances.”The higher assumed rates would push up debt-servicing costs to 27 trillion yen in fiscal 2024/25, up 7% from this year.Analysts say it is unlikely Japan will meet its aim of getting the primary budget balance, excluding new bond sales and debt servicing costs, into the black by the fiscal year-end in March 2026. “What’s important is to present a credible plan to restore public finances even if it causes a delay in achieving the target,” Takuya Hoshino, senior economist at Dai-ichi Life Research Institute, said.”I think they are going to review the target sooner or later,” Hoshino said. “They would likely delay the PB target.” ($1 = 142.4400 yen) More

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HONG KONG (Reuters) -Chinese regulators announced on Friday a wide range of rules aimed at curbing spending and rewards that encourage video games, dealing a blow to the world’s biggest games market, which returned to growth this year.The new rules, which will effectively set spending limits for online games, sparked panic among investors, wiping off nearly $80 billion in market value from China’s two biggest gaming companies, as investors sought to gauge the potential impact on earnings and more restrictions in the offing. Online games will now be banned from giving players rewards if they log in every day, if they spend on the game for the first time or if they spend several times on the game consecutively. All are common incentive mechanisms in online games.Shares in Tencent Holdings (OTC:TCEHY), the world’s biggest gaming company, tumbled as much as 16% at one point, while those of its closest rival, NetEase (NASDAQ:NTES), plunged as much as 25% after the National Press and Publication Administrations published the new draft rules.Shares of tech investor Prosus (OTC:PROSF) followed Tencent lower, losing 14.2% in early trade on Friday and were among the biggest fallers on the pan-European stock index. Prosus owns a 26% stake in Tencent.”It’s not necessarily the regulation itself – it’s the policy risk that’s too high,” said Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong. “People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot.”When asked about the draft rules’ impact, Tencent Games’ vice president Vigo Zhang said Tencent has been strictly implementing regulation requirements. The new draft rules have not veered from regulators’ ongoing focus on ensuring companies have “reasonable business models and operating cadence”, he said. Zhang added that minors had been spending a historically low level of money and time on Tencent’s games since 2021 when minor protection became a focus for Beijing. NetEase declined to comment. Beijing has become increasingly tough on video games over the years. In 2021, China set strict playtime limits for under 18s and suspended approvals of new video games for about eight months, citing gaming addiction concerns. Although the crackdown formally ended last year with the resumption of new game approvals, regulators have continued to impose restrictions to curb “in-game” spending. The new rules revealed on Friday are the most explicit yet aimed at curbing in-game spending. Besides banning reward features, games are also required to set limits on how much players can top up their digital wallets for in-game spending.”The removal of these incentives is likely to reduce daily active users and in-app revenue, and could eventually force publishers to fundamentally overhaul their game design and monetisation strategies,” said Ivan Su, an analyst at Morningstar.Games are also banned from offering probability-based lucky draw features to minors, and from enabling the speculation and auction of virtual gaming items.But the new rules included a proposal that is widely expected to be welcomed by the industry, requiring regulators to process game approvals within 60 days. Meanwhile, Chinese regulators announced on the same day licences for 40 new imported games for domestic releases, seen as a signal of Beijing’s willingness to allow more games in the country, despite the draft rules on game spending. The new rules also reflect Beijing’s concerns over user data, requiring game publishers to store their servers within China.The administration is seeking public comment on the rules through Jan. 22, 2024. As a result of Beijing’s crackdown on gaming in 2021, 2022 was the Chinese gaming industry’s most difficult year on record as total revenue shrank for the first time. China’s video game market returned to growth this year as domestic revenue rose 13% to 303 billion yuan ($42.6 billion), according to Industry association CGIGC. More

LONDON (Reuters) -Global shares steadied on Friday, while the dollar inched up ahead of U.S. inflation data that could shape expectations for how quickly interest rates might fall in 2024.Asian equities dropped after Chinese internet stocks slumped after the regulator issued draft rules that would impose spending limits on gamers. This left the MSCI All-Shares index flat on the day, but up 0.5% on the week, set for an eighth straight weekly gain, its longest stretch since early 2018.Markets have been in festive mood for weeks as inflation data around the world has showed a slowdown and the U.S. Federal Reserve signalled it was done raising interest rates.The S&P 500 is heading for an eighth straight weekly rise, its longest such stretch since late 2017, enjoying a “Santa rally” – where equities often rise in the week leading up to Dec. 25 – for the first time in two years. The data has markets girding for a downside surprise on the last key number before Christmas, November’s personal consumption expenditure index, due at 1330 GMT with consensus expectations for a monthly increase of 0.2%.But with around 150 basis points of rate cuts priced into markets for 2024, there is a limit to how much more investors can bank on in terms of easing.”I think if it does come in slightly below expectations, it’s going to add fuel to that ‘Santa rally’,” Fiona Cincotta, market strategist at City Index, said.”It’s almost going to be the confirmation that the market is look for to cement those expectations,” she said. Overnight, U.S. stocks bounced back from a sudden slide at the end of Wednesday’s session and the S&P 500 rose 1%.The index is within 2% of its record high.S&P 500 futures were flat while Nasdaq 100 futures were down 0.1%. Nike (NYSE:NKE) shares slid in premarket trading after the company cut its sales forecast, blaming cautious consumers, which in turn, weighed on European sportswear makers such as Adidas (OTC:ADDYY), Puma and JD (NASDAQ:JD) Sports.The STOXX 600 (STOXX) was steady on the day. The index has gained nearly 13% this year. Most of that gain has materialised in the last eight weeks alone, thanks to a mighty tailwind from falling inflation in the euro zone that has fed an expectation for interest rates to drop swiftly next year.Trading in the oil market remained jittery given concerns over the security of Red Sea shipping. Oil prices recouped some overnight losses triggered by Angola saying it would quit OPEC, which has raised questions about unity among the producer group over its efforts to limit global supply.Brent crude futures rose 0.8% to $80.00 a barrel.TALE OF TWO HAVENSIn the currency market, the euro touched its highest against the dollar since August, rising by 0.13% to $1.1024.The European Central Bank is expected to cut rates almost as quickly as the Fed next year, according to pricing in the futures market.The dollar has been battered as a result in recent weeks and was last down 0.2% against a basket of major currencies.Sterling rose 0.4% to $1.2743, shaking off government data earlier that showed the UK economy contracted by 0.1% in the third quarter and was estimated to have shown no growth in the second quarter.The Japanese yen, which has been the worst performing major currencies against the dollar this year thanks to the Bank of Japan’s policy of forcibly keeping interest rates low, was last unchanged at 142.05.The yen has lost around 8% in value in 2023, compared with a 4% loss in the Norwegian crown, the next worst performer. Top of the pack is the Swiss franc, which has gained 7.5%, followed by the pound, with a rise of 4.7%.Gold is set to end the week and the year ahead, with a 12% gain so far this year to $2,049 an ounce.Bitcoin is up 160% this year to $44,114. More

All eyes will be on personal consumption expenditure data – the Fed’s preferred inflation gauge – due at 8:30 a.m. ET. A majority of economists polled by Reuters expect the price index to show a 2.8% rise on an annual basis in November, softening from a 3% increase the month before. Core prices, excluding volatile items like food and energy, is expected to have risen by 3.3% last month, compared with 3.5% growth in October. The S&P 500 and the Nasdaq finished over 1% higher on Thursday after data signaled third-quarter U.S. economic growth was not as robust as originally stated, aiding hopes that the Fed could reduce borrowing costs next year. All three indexes are poised for their eighth-straight week in the green, with the S&P 500 set for its longest weekly winning streak since 2017, and the Nasdaq and the Dow since 2019.The rally gained momentum last week after the central bank acknowledged that inflation was nearing the target rate, bringing interest rate cuts “into view”.Traders see a 83.7% chance of at least a 25 basis point (bps) rate cut in March next year, and expect borrowing costs to be lower by 125 bps in September 2024, according to the CME FedWatch Tool.Meanwhile, Nike (NYSE:NKE) plunged 11.9% before the bell after the sports-wear maker trimmed its annual sales forecast blaming cautious consumer spending, a weaker online business and more promotions, and said it plans to cut supplies of key product lines to manage costs.Shares of other sports-wear firms like Lululemon Athletica (NASDAQ:LULU), Foot locker and DICK’S Sporting Goods dipped between 2.6% and 6.9% in thin trading.At 5:46 a.m. ET, Dow e-minis were down 120 points, or 0.32%, S&P 500 e-minis were down 4.5 points, or 0.09%, and Nasdaq 100 e-minis were down 28.75 points, or 0.17%.Among other movers, U.S.-listed shares of Chinese gaming firms NetEase (NASDAQ:NTES) and Bilibili (NASDAQ:BILI) tumbled 23.2% and 10.7%, respectively after Chinese regulators announced a wide range of rules aimed at curbing spending and rewards that encourage video games.Occidental Petroleum (NYSE:OXY) climbed 0.8% after Warren Buffett-led Berkshire Hathaway (NYSE:BRKa) raised its stake in the oil firm, bringing it closer to 28%. More

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