Economy

MEXICO CITY (Reuters) – Chinese products are not entering the United States and Canada through Mexico, the president of the Latin American nation said on Friday, and the government will make that clear in upcoming trade meetings.”In the meetings we have with Canada and (U.S. President-elect) Trump, we’ll show that the idea that (Chinese) products are entering through Mexico is false,” Mexican President Claudia Sheinbaum said in her morning press conference. More

(Reuters) – Investors are hoping President-elect Donald Trump will name a Treasury secretary soon who will assuage their concerns about the Republican’s policy promises that have weighed on an already sagging U.S. government bond market.The benchmark U.S. 10-year yield, which moves inversely to bond prices, is hovering near a five-month high as traders fret about the potential for a rebound in inflation and increase in the federal budget deficit from Trump’s economic plans such as tax cuts and import tariffs.More recently, uncertainty over who will fill the Treasury role has added to investor concerns.The latest leg of the Treasury selloff is due to worries over “fiscal concerns, increased spending and (the) Treasury secretary,” said George Catrambone, head of fixed income and trading at DWS. According to a Wall Street Journal report on Thursday, former investment banker Kevin Warsh, who served on the Federal Reserve Board, is one of Trump’s Treasury secretary candidates on the understanding that he could later become Fed chairman. That deepened uncertainty and fueled investors’ hopes that a resolution would be quick in coming. Other top candidates include investor Scott Bessent and Apollo Global Management (NYSE:APO) Chief Executive Marc Rowan. Wagers on who will get the job have drawn over $5 million in bets on the Polymarket prediction platform with Warsh in the lead, followed closely by Bessent. The Treasury secretary oversees U.S. economic and tax policy, and Trump’s nominee will be tasked with carrying out his plans. As a result, the investment world, from global bond traders to U.S. corporate treasurers, is keenly interested in the individual’s economic views and the kind of counsel they will give Trump behind closed doors.  Campe Goodman, Wellington Management Company fixed income portfolio manager, said yields would ease if Trump nominated a Treasury secretary who makes a point of addressing worries that key Trump policies will add to the budget deficit and inflation.“I think whoever (Trump) gets is probably going to talk a little more fiscally responsible than the market expects,” he said. “I think he’ll want someone who talks somewhat responsibly.” Analysts at BMO Capital Markets said investor anxiety over the pick has been comparatively subdued because all three top contenders “fall into the category of qualified adults in the room” though the market prefers the question be settled quickly.     Investors are also focused on the new administration’s position on Fed independence since central bank policy is a key factor in Treasury price moves. Trump in August said the president should have a “say” in Fed decisions, and according to media reports, his allies have drafted proposals to erode the Fed’s independence.  “I hope the Fed stays independent because that’s good for the bond market,” said Goodman.  More

WASHINGTON (Reuters) – President-elect Donald Trump may have campaigned hard against high inflation, but by the time of his Nov. 5 election victory financial professionals had moved on from rising prices and begun worrying about rising U.S. debt, possible recession, and risks to global trade as among the top threats to the stability of the financial sector, according to a new Federal Reserve survey released on Friday.”Concerns over U.S. fiscal debt sustainability was the top-cited risk. It was noted that increased Treasury issuance could begin to crowd out private investment or constrain policy responses in an economic downturn,” the U.S. central bank survey found, while a potential weakening of the economy and possibility of a global trade war moved higher on the list of worries.These concerns have also been reflected in recent bond market behavior, with yields on 10-year Treasury notes, for instance, rising sharply over the last two months despite the Fed having cut its benchmark lending rate twice by a total of 75 basis points. Alongside that, an estimate of Treasury term premium – a measure of the compensation that investors require to hold longer-term Treasury securities rather than shorter-term ones – was near the top of its range since 2010. Moreover, measures of interest rate volatility were above historic norms, in part due to “high uncertainty about the economic outlook and the associated path of monetary policy as well as heightened sensitivity to news about output growth, inflation, and the supply of Treasury securities.”Meanwhile a potential weakening in the economy and the possibility of a global trade war moved higher on the list of worries. “Risks to global trade were specifically cited in this survey, with some respondents noting the potential for tariff barriers to prompt retaliatory protectionist policies that would negatively affect global trade flows and put renewed upward pressure on inflation,” the survey found. “Others noted that a deterioration in global trade could depress economic activity and raise the risk of a downturn.””Persistent inflation” alongside tight Fed monetary policy had been cited as the top risk in a prior survey issued in the spring, but fell to sixth place, alongside global trade, in the current poll.TRUMP POLICIESThe survey, published as part of the Fed’s biannual financial stability report, was conducted among two dozen financial sector participants and observers from August to October. While that preceded Trump’s election win, the poll highlights issues likely to be central in coming debates on taxes, tariffs, and other economic issues.Some economists see Trump’s anticipated combination of tax cuts and import tariffs as potentially fueling both inflation and already large federal deficits at a time when bond markets have been keeping yields elevated on U.S. Treasury bonds.The list of near-term risks to stability published on Friday is reminiscent of the two 2019 financial stability reports, when “trade frictions” were the top concern after Trump had launched a trade war with China and had forced Mexico and Canada to renegotiate the North American Free Trade Agreement.The document also shows Trump inheriting a financial system that seems largely solid from many perspectives, but with some notable pressures emerging. Asset values “remained elevated,” the report concluded, a concern since rich pricing can mean steeper reversals if sentiment or conditions change, with liquidity low and commercial property prices under stress. Household borrowing was “modest,” but delinquency was rising on some types of loans, and businesses had borrowed heavily. Banks, many of them under Fed supervision with closely watched capital levels, “remained sound and resilient.”One particular asset class, the “stablecoins” used as part of the cryptocurrency system, was called out as both growing and “vulnerable to runs.” More

(Reuters) -Amazon.com pumped another $4 billion into OpenAI competitor Anthropic, as the e-commerce giant goes up against Big Tech rivals in a race to capitalize on generative artificial intelligence technology.This doubles Amazon (NASDAQ:AMZN)’s investment in the firm known for its GenAI chatbot Claude, but it remains a minority investor, the startup said on Friday. Similar to Amazon’s previous $4 billion investment, it comes in the form of convertible notes and comes in phases, first at $1.3 billion. Anthropic is also in talks with additional investors to raise more capital on the back of Amazon backing, sources added, who requested anonymity for discussing private matters. Anthropic declined to comment.Amazon, which has gradually established itself as Anthropic’s primary cloud partner, is fiercely competing with Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL)’s Google to offer AI-powered tools for its cloud customers. AWS is bringing significant revenue to Anthropic as a major distributor of its latest models.”The investment in Anthropic is essential for Amazon to stay in a leadership position in AI,” said D.A. Davidson analyst Gil Luria. The e-commerce company’s increased investment in Anthropic underscores the billions of dollars funneled into AI startups over the past year, as investors look to cash in on a boom in the technology, which became popular with the launch of OpenAI’s ChatGPT in late 2022.Microsoft-backed OpenAI raised $6.6 billion from investors last month, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world.Anthropic plans to train and deploy its foundational models on Amazon’s Trainium and Inferentia chips. The intensive process of training AI models requires powerful processors, making securing pricey AI chips a top priority for startups.”It (partnership) also allows Amazon to promote its AI services such as leveraging its AI chips for training and inferencing, which Anthropic is using,” Luria said.Nvidia (NASDAQ:NVDA) currently dominates the market for AI processors and counts Amazon among its long list of so-called hyperscaler customers.Still, Amazon has been working to develop its own chips through its Annapurna Labs division, which Anthropic said it was “working closely with” to aid in developing processors. Amazon has also been trying to build its own AI model code-named “Olympus,” which it hasn’t released. Anthropic, co-founded by former OpenAI executives and siblings Dario and Daniela Amodei, said last year it had secured a $500 million investment from Alphabet, which promised to invest another $1.5 billion over time.The startup also uses Alphabet’s Google Cloud services as part of its operations. More

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WASHINGTON (Reuters) -The Biden administration is set to unveil new export restrictions on China as soon as next week, the U.S. Chamber of Commerce told members in a Thursday email. The new regulations could add up to 200 Chinese chip companies to a trade restriction list that bars most U.S. suppliers from shipping goods to the targeted firms, the email from the powerful Washington-based lobbying group said, according to an excerpt seen by Reuters on Friday.The Commerce Department, which oversees U.S. export policy, plans to publish the new regulations “prior to the Thanksgiving break,” next Thursday, according to the email.The Chamber of Commerce did not respond to a request for comment. The Commerce Department declined to comment.The update, if accurate, shows the Biden administration is plowing ahead with plans to further crack down on China’s access to semiconductors even as the start of Republican President-elect Donald Trump’s second terms in January approaches.Another set of rules curbing shipments of high-bandwidth memory chips to China is expected to be unveiled next month as part of a broader artificial intelligence package, the email continues. Biden has slapped a raft of export controls on China aimed at halting its technological advances, amid fears the technology could be used to bolster China’s military.Sources briefed on the matter said the first round of regulations are likely to include restrictions on chipmaking tool shipments to China.Reuters reported in July that the U.S. planned to unveil a new package of export controls on China, including adding about 120 Chinese entities to its restricted trade list. More

“Investors should expect the Fed’s median forecast of the longer-run (or neutral) policy rate to rise ahead,” strategists at MRB Partners said. “The implication is that Fed will ease rates less next year than what it had signaled in the September dot-plot, and what the bond market has been pricing in.”The Fed cut rates by 25 basis points in November after kicking off the rate-cut cycle in September with a jumbo 50 basis point rate cut and forecast. At the September meeting, the Fed provided projection forecasting rates to fall to 3.4% by 2025, and to 2.9% by 2026.But following a slew of positive economic data and the risk that progress against curbing inflation could be slowing, some Fed members have suggested the neutral rate — one that neither stimulus nor weighs on economic growth — could be higher and expressed cautioned on the rate-cut outlook ahead. Earlier this week, Dallas Fed President Lorie Logan acknowledged the possibility of a much higher 4.5% nominal neutral rate.”Among widely consulted models, point estimates of the neutral real interest rate currently range from 0.74 percent to 2.60 percent,” Logan said. “Adding in the 2 percent inflation target, those figures correspond to a neutral fed funds rate of 2.74 to 4.60 percent.”This is sharp contrast to the Fed’s s current estimate of the neutral rate, at 2.9%, which is “clearly too low,” the strategists said.  The “realistic estimate” of the neutral policy rate for the U.S., the strategists added, should be at least in the 4.5% range or even higher. The strategists based this on a 3% inflation target and 2% economic growth. The impact of higher neutral rate is likely to “have significant implications for U.S. Treasury yields and the shape of the yield curve,” the strategists warned. They expect yields to move higher and the curve to steepen as a result, with 10-year Treasury yield potentially moving to a 5.25% to 5.5% range. More

“We are close to an agreement: China could commit to offering e-cars in the EU at a minimum price,” Bernd Lange told n-tv, without elaborating. “This would eliminate the distortion of competition through unfair subsidies, which is why the tariffs were originally introduced.”The European Commission was not immediately available for comment.The European Union last month decided to increase tariffs on Chinese-built electric vehicles to as much as 45.3% in its highest-profile trade investigation, a move that has divided Europe and triggered retaliation from Beijing.The tariffs, which became effective on Oct. 30, were imposed to counter what it says are unfair subsidies including preferential financing and grants as well as land, batteries and raw materials at below market prices.Despite the tariffs coming into force, both sides have continued negotiations to find a solution, fuelling hopes primarily among German carmakers — which heavily depend on the Chinese market — that a trade dispute can be averted.China’s Chamber of Commerce to the EU at the time said it was profoundly disappointed by the “protectionist” and “arbitrary” EU measure. More