Economy

SYDNEY (Reuters) – Asian shares started cautiously on Monday ahead of a week packed with a quintet of central bank meetings and data on U.S. inflation that could make or break market hopes for an early and rapid fire round of rate cuts next year.An upbeat payrolls report has already seen investors scale back expectations for a March cut by the Federal Reserve, though May remains priced at a 76% chance.The Fed is considered certain to hold rates at 5.25-5.50% this week, putting the focus on the “dot plots” for rates and Chair Jerome Powell’s press conference.The consumer price report for November on Tuesday will also influence the outlook with analysts forecasting an unchanged headline rate and a 0.3% rise in the core. “We look for another Fed-friendly CPI report but, barring surprises, anticipate the policy statement to signal that economic conditions have not changed enough for officials to drop their tightening bias just yet,” said John Briggs, global head of strategy at NatWest Markets.”We think Powell will leave the option of a possible hike on the table, but the hurdle seems quite high for the Fed to follow through,” he added. “We also expect the ECB to cut early while the BoE will continue to push-back against market pricing of cuts in the first half of 2024.”The European Central Bank, Bank of England, Norges Bank and the Swiss National Bank all meet on Thursday, with Norway the only one considered a possible hiker. There is also a risk the SNB may toy with renewed intervention to weaken the franc.With so much riding on the outcomes, investors were understandably cautious and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.08%.Japan’s Nikkei bounced 1.2%, after shedding 3.4% last week amid speculation of an end to super-easy monetary policy. S&P 500 futures and Nasdaq futures were little changed. Chinese markets are at risk of another tough week after data showed consumer prices fell 0.5% in November, the sharpest drop since late 2020. The Treasury market faces a test of its own in the shape of $108 billion in new supply of three-year, 10-year and 30-year paper. Yields on 10-year notes were steady at 4.24% having risen on Friday in the wake of the jobs report, though they still ended flat on the week. [US/]In currency markets all eyes were on the yen after some wild swings as speculation swirled the Bank of Japan could signal another step away from its super easy policy at a meeting next week. The dollar was last at 144.97 yen, having lost 1.3% last week and briefly touching a low of 141.60.The dollar fared better on the euro at $1.0761, which was pressured by market pricing for early ECB rate cuts. [FRX/]”With inflation falling quickly in the Eurozone, we do not expect the ECB post-meeting communication to provide too much push back against current market pricing for a rate cutting cycle beginning in April,” said analysts at CBA in a note.”We expect the first rate cut will come a little later in June.”In commodity markets, gold took a knock after the jobs report and was last at $1,006 an ounce. [GOL/]Oil prices idled after sliding 3.9% last week to five-month lows amid doubts that all OPEC+ members would stick with supply cuts. Prices did get some support on Friday when Washington announced it would rebuild its strategic oil reserves. [O/R]The market will also be watching the outcome of the COP28 climate summit, which is working on a first-of-its-kind deal to phase out the world’s use of fossil fuels.Brent was up 5 cents at $75.89 a barrel, while U.S. crude was steady at $71.23. More

LONDON (Reuters) – Britain’s struggling factories are seeing some signs of recovery, helped by a long-awaited burst of restocking and a pickup in export orders that could help the sector in a challenging 2024, a manufacturing trade body said on Monday.Make UK said factories raised output at three times the pace of growth in orders in the final three months of 2023.That represented the greatest degree to which output has outpaced orders since a rush to stockpile in late 2019 when companies were worried about a possible no-deal Brexit.The share of firms seeing a rise in export orders rather than fall rose to a balance of +10% from -3% but domestic orders stayed flat, the first time that export orders have exceeded UK orders since the coronavirus pandemic.”After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers,” Fhaheen Khan, Senior Economist at Make UK, said.”While growth is not exactly supercharged, the positive announcements in the Autumn Statement can at least allow companies to plan with more certainty without having to constantly fight fires.”Finance minister Jeremy Hunt announced on Nov. 22 that he was making permanent the tax incentives for businesses to invest that he introduced earlier in the year.Make UK said expectations for export and UK orders in the first quarter of 2024 were positive at +7% and +8% respectively while recruitment expectations for early 2024 hit +19%. Investment intentions slowed but stayed positive.The group increased its forecast for manufacturing growth in 2023 as a whole to +0.8% from -0.5% but that improved pace remained weak. Growth was expected to slow in 2024 to just 0.1% as the impact of higher borrowing costs took its toll.The report, which was conducted with accountants BDO, surveyed 303 companies between Oct. 25 and Nov. 29. More

The consumer price index (CPI) dropped 0.5% both from a year earlier and compared with October, data from the National Bureau of Statistics (NBS) showed on Saturday. That was deeper than the median forecasts in a Reuters poll of 0.1% declines both year-on-year and month-on-month. The year-on-year CPI decline was the steepest since November 2020. The numbers add to recent mixed trade data and manufacturing surveys that have kept alive calls for further policy support to shore up growth.Xu Tianchen, senior economist at the Economist Intelligence Unit, said the data would be alarming for policymakers and cited three main factors behind it: falling global energy prices, the fading of the winter travel boom and a chronic supply glut.”Downward pressure will continue to rise in 2024 as developers and local governments continue to deleverage and as global growth is expected to slow,” Xu said.Year-on-year core inflation, excluding food and fuel prices, was 0.6%, the same as October. Bruce Pang, chief economist at Jones Lang Lasalle (NYSE:JLL), said the weak core CPI reading was a warning about persistently sluggish demand, which should be a policy priority for China if it is to deliver more sustainable and balanced growth.Although consumer prices in the world’s second-biggest economy have been teetering on the edge of deflation in recent months, China’s central bank Governor Pan Gongsheng said last week inflation was expected to be “going upwards”.The producer price index (PPI) fell 3.0% year-on-year against a 2.6% drop in October, marking the 14th straight month of decline and the quickest since August. Economists had predicted a 2.8% fall in November.China’s economy has grappled with multiple headwinds this year, including mounting local government debt, an ailing housing market and tepid demand at home and abroad. Chinese consumers especially have been tightening their purse strings, wary of uncertainties in the elusive economic recovery. Moody’s (NYSE:MCO) on Tuesday issued a downgrade warning on China’s credit rating, saying costs to bail out local governments and state firms and to control the property crisis would weigh on the economy.China’s finance ministry called the decision disappointing, saying the economy would rebound and risks were controllable.The authorities will spur domestic demand and enhance economic recovery in 2024, the Politburo, a top decision-making body of the ruling Communist Party, was quoted by state media as saying on Friday.Markets are awaiting more government stimulus at the annual agenda-setting “Central Economic Work Conference” later this month. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The European mortgage market is on course to grow at its slowest rate for a decade this year, as lower economic growth and higher borrowing costs weigh on demand for loans.Falling house prices across the eurozone are also a factor in EY’s forecasts that the mortgage market will grow by only 1.5 per cent this year and 2.4 per cent in 2024, compared with 4.9 per cent last year. The consultancy said rising interest rates — which reached a historic eurozone high of 4 per cent in September — and persistently high inflation had suppressed interest in mortgages.“The housing market is taking the biggest hit,” said Omar Ali, EY’s financial services managing partner for Europe, the Middle East, India and Africa. “For households across Europe, high living and borrowing costs mean fewer people are buying houses, which means mortgage lending is falling to the lowest level in a decade.” Eurozone bank lending has shrunk this year after the European Central Bank made 10 consecutive interest rate increases, from an all-time low of minus 0.5 per cent in July 2022, to try to tackle rampant inflation.Since September, the ECB has held rates at 4 per cent and investors predict it is unlikely to start cutting them until the second half of next year.The UK housing market has begun to recover after prices and sales fell over the summer, but the eurozone is further behind in the interest rate cycle. EY’s annual European Bank Lending Forecast report, which was published on Monday, pointed to hard-hit housing markets in the eurozone — notably Germany — as well as tightening lending criteria from some banks, which have caused demand and availability of mortgages to shrink.“Over the course of this year, as interest rates and geopolitical tensions have risen, Europe’s economy — and the banks that underpin it — have been tested to new limits,” said Nigel Moden, EY’s banking and capital markets leader for EMEIA.But he added that the capital buffers European banks had built up over the past 15 years meant they were much better prepared for a slowdown in the mortgage market than they were after the global financial crisis.“While bank lending growth is set to slow in the short term, the picture further out is one of recovery. It might be slow, but, in the absence of further, major unforeseen challenges, we expect steady economic and lending volume improvement.”EY estimates that Europe’s mortgage market will grow by 3.3 per cent in 2025 and 3.2 per cent in 2026.More broadly, lending across European banks is expected to grow by just 2.1 per cent in 2023, down from a 14-year high of 5 per cent last year. More

The White House in a statement on Sunday said the two will discuss the “urgent needs” facing Ukraine. The meeting comes as the White House looks to strike an agreement with Congress that would provide military aid for Ukraine and Israel.Zelenskiy’s office also said on Sunday on the Telegram messaging app that the Ukrainian leader would arrive in Washington on Monday and that he would meet Biden during a working visit that would include “a series of meetings and discussions.”Zelenskiy has also been invited to address U.S. senators on Tuesday at 9 a.m. EST (1400 GMT) in the Capitol, a Senate leadership aide said on Sunday.A private meeting between Zelenskiy and U.S. House of Representatives Speaker Mike Johnson will also be held in the Capitol on Tuesday, Johnson spokesman Raj Shah said in an email to Reuters.Key topics during Zelenskiy’s visit would include defense cooperation between the United States and Ukraine, “particularly through joint projects on the production of weapons and air defense systems, as well as the coordination of efforts between our countries in the coming year,” Zelenskiy’s office said. More

(Reuters) – A look at the day ahead in Asian markets.Asian markets are set for a positive open on Monday, taking the baton from Wall Street on Friday after a surprise fall in the U.S. unemployment rate bolstered the view that an economic ‘soft landing’ will be achieved and recession avoided. Looked at through a ‘good news is good news’ prism, the rise in Treasury yields and the dollar on Friday should not be a drag on Asian and emerging markets, like they often are. The two-year U.S. yield posted its biggest rise since June after data showed that the unemployment rate fell to 3.7%. Any lingering hopes for a rate cut this week quickly vanished, and the first fully priced rate cut was pushed back to May next year from March. If the S&P 500 and Nasdaq’s rise on Friday to their highest levels since early 2022 lifts most Asian markets on Monday, Chinese assets may struggle after figures this weekend showed that deflationary pressures intensified in November.Consumer prices fell 0.5% both from a year earlier and compared with October, much deeper than the median forecasts in a Reuters poll of 0.1% declines for both. The year-on-year decline was the steepest since November 2020.Factory-gate deflation deepened too – producer prices have been falling on a year-on-year basis or more than a year now – indicating rising deflationary pressures, weak domestic demand, and increasing doubt over the economic recovery.Figures like these will only deepen calls for more stimulus from Beijing, and are a reminder as to why Chinese markets are underperforming so much – China’s blue chip CSI 300 index has lagged the MSCI World Index, S&P 500, and Nikkei 225 this year by 24%, 27% and 30%, respectively.A batch of major economic indicators from Beijing will be released on Friday – industrial production, retail sales, house prices, unemployment and business investment for November. The Asian economic and policy calendar is light on Monday – money supply and a quarterly business survey index from Japan, and industrial production figures from Malaysia are all investors have to get their teeth into.For the rest of the week, interest rate decisions from Taiwan and the Philippines, inflation data from India, and that data dump from China on Friday are the main regional calendar events.But market sentiment and direction will largely be driven by the key events in developed economies. They include policy meetings from the Bank of England and European Central Bank, U.S. inflation, and the one everyone is waiting for – the Federal Reserve’s policy decision on Wednesday.The Fed is widely expected to keep its fed funds target range steady at 5.25-5.50%, so all eyes will be on the accompanying statement, policymakers’ revised projections, and Chair Jerome Powell’s press conference.Here are key developments that could provide more direction to markets on Monday:- Malaysia industrial production (November)- Japan money supply (November)- U.S. bills, 10-year note auctions (By Jamie McGeever; Editing by Diane Craft) More

Such a deal likely would have faced scrutiny from the U.S. Justice Department (DOJ), which in 2017 successfully stopped Anthem, now Elevance Health, from buying Cigna for $54 billion, and thwarted Aetna’s plan to purchase rival Humana for $34 billion. Here’s a look at what happened with those deals first announced in 2015. WHAT WAS THE RATIONALE FOR THE PROPOSED MERGERS? Aetna, Humana, Anthem and Cigna cited the Affordable Care Act, popularly known as Obamacare, which was passed by Congress in 2010 to significantly expand access to affordable health insurance. They said aspects of the new law meant their industry needed to consolidate to cope with the costs of expanding coverage.WHAT DID THE JUSTICE DEPARTMENT SAY IN ITS COMPLAINTS?In each of the two complaints filed in federal court in Washington in 2016, the Justice Department noted the other deal and the extraordinary consolidation that was being planned for the industry. It asked federal judges to order each transaction stopped.The Justice Department argued that Anthem’s deal for Cigna would mean “higher prices and reduced benefits” for consumers, including big national employers who pay health insurers to cover their workers. The government complaint also cited Cigna as an innovator that was finding ways to lower medical costs. “Without the merger, Cigna expects to double in size in the next seven to eight years,” it said in its complaint. The department’s argument against the Aetna deal to buy Humana focused on Medicare Advantage, which is federal Medicare coverage provided by private health insurers. The government said the merger would end competition for Medicare Advantage business between the two. “Competition between Humana and Aetna has led to lower premiums, more generous benefits, better provider networks, and improved coordination of care,” the government said in its complaint. Aetna is now part of CVS.TWO JUDGES, TWO RULINGS FOR THE GOVERNMENTIn January 2017, just days into the Trump administration, Judge John Bates of the U.S. District Court for the District of Columbia said Aetna’s proposed deal with rival Humana was illegal because it would “substantially lessen competition in the sale of individual Medicare Advantage plans in 364 counties identified in the complaint and in the sale of individual commercial insurance on the public exchanges in three counties in Florida.”In February 2017, Judge Amy Berman Jackson ordered Anthem’s deal for Cigna stopped, agreeing with the government’s assessment that it would reduce competition in an already concentrated health insurance market, particularly for big national employers.Anthem fought on, and an appeals court upheld the decision to block the deal in April 2017. Future Supreme Court Justice Brett Kavanaugh dissented, saying that a combined Anthem/Cigna would require higher payments to manage the accounts but that would be offset by better negotiated rates paid to providers.DOES THE DOJ ALWAYS WIN?No. The Biden administration fought a plan by UnitedHealth (N:UNH), the largest U.S. health insurer, to buy Change Healthcare (NASDAQ:CHNG) for $8 billion, arguing it would give UnitedHealth access to its competitors’ data and ultimately push up healthcare costs.The DOJ lost in 2022. The judge said efforts the companies undertook to address antitrust concerns were sufficient. More

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