Economy

1. Futures inch lowerU.S. stock futures pointed lower prior to start off a fresh trading week, as investors attempted to gauge how customer spending habits during a series of annual post-Thanksgiving promotional drives may impact Federal Reserve interest rate policy decisions.By 04:55 ET (09:55 GMT), the Dow futures contract had slipped 91 points or 0.3%, S&P 500 futures had dropped by 12 points or 0.3%, and Nasdaq 100 futures had fallen by 38 points or 0.2%. Last week, the main indices on Wall Street jumped to a fourth-consecutive winning week.Prior to both Black Friday and today’s Cyber Monday sales events (see below), many retail companies had flagged that American shoppers could be less willing to spend big on holiday gifts this year due to high inflation and elevated interest rates.Traders are curious to see if any signs that consumers are reining in expenditures may convince Fed officials to end their long-standing campaign of monetary policy tightening aimed at cooling inflationary pressures. The U.S. central bank is already widely anticipated to leave rates steady at a meeting in December, while bets have grown that it could even begin to slash borrowing costs sometime next year.These expectations supported a surge in gold prices to their highest level since May during Asian trading on Monday. Bolstering gold’s rise has been weakness in the U.S. dollar, with the greenback on track for its biggest monthly slide in a year.2. Cyber Monday discounts in focusMarkets will be keeping a close eye on Cyber Monday promotions today, after retailers rolled out deeper discounts on Black Friday to entice price-conscious U.S. customers.Cyber Monday, when firms typically offer special sales online during the first Monday after American Thanksgiving, is expected to be one of the busiest shopping days of the year in the world’s largest economy.Fueling these projections were numbers from Black Friday. According to third-party analytics groups cited by the Wall Street Journal, U.S. retail sales both online and in stores during the day after Thanksgiving grew by 2.5% versus the previous year.An executive at Salesforce (NYSE:CRM), which tracks retail data, told Reuters that online spending in particular totaled $16.4 billion on Black Friday, as shoppers raced to take advantage of discounts averaging 30%. The strong online demand is estimated to push Cyber Monday sales up by 5.4% year-on-year to a record $12B, Reuters reported, quoting an analyst at Salesforce peer Adobe (NASDAQ:ADBE) Digital Insights.3. Musk to meet with Israel’s presidentElon Musk is due to meet with Israeli President Isaac Herzog on Monday, Herzog’s office announced over the weekend.The talks come as Musk, the tech tycoon behind electric carmaker Tesla (NASDAQ:TSLA) and rocket firm SpaceX, has faced criticism from civil rights groups regarding anti-Jewish content on his X social media platform. It also coincides with a four-day truce in hostilities between Israel and Hamas in Gaza.Herzog’s office said that the two will discuss “the need to act to combat rising antisemitism online.”Musk previously spoke in September with Israeli Prime Minister Benjamin Netanyahu, who called for a balance between shielding free expression and preventing hate speech on X. Musk also said at the time that he was against statements that promote “hate and conflict.”4. Crude falls ahead of delayed OPEC+ meetingOil prices fell Monday, as investors warily awaited the delayed OPEC+ meeting later in the week for news of upcoming production levels.By 04:57 ET, the U.S. crude futures traded 1.2% lower at $74.65 a barrel, while the Brent contract dropped 1.1% to $79.63 per barrel.The crude benchmarks are coming off their first winning week in five, despite dropping sharply after the Organization of the Petroleum Exporting Countries and its allies, also known as OPEC+, postponed a meeting to Nov. 30 from Nov. 26. The delay was reportedly caused by disagreements over planned production cuts.The group has since moved closer to a compromise that could potentially see an extension of unilateral Saudi and Russian output reductions through at least the first quarter of next year, according to reports.5. Biden to miss COP28 – reportsU.S. President Joe Biden will not be attending the COP28 climate conference in the United Arab Emirates that is set to begin later this week, according to U.S. officials cited by various news outlets.The president was already widely tipped not to attend the event as he faces twin concerns over violence in the Middle East and a looming re-election battle next year.Biden, who has made fighting climate change a key pillar of both his domestic and foreign agendas, will miss out on an opportunity to personally take part in a gathering that will reportedly center around the future of fossil fuels.He had previously attended COP summits in the U.K. and Egypt following his inauguration in 2021. More

WARSAW/BUDAPEST (Reuters) – The central bank governors of Poland and Hungary are caught up in noisy disputes with opponents over their rate-setting policy, raising new hazards for investors willing to brave central Europe’s bitterly polarised politics.In Poland, governor Adam Glapinski stands accused of having tried to boost the economy with rate cuts to help his longtime allies in the Law and Justice (PiS) party secure a new term in last month’s elections – unsuccessfully, as it turned out.In Hungary, central bank governor Gyorgy Matolcsy is under pressure from Viktor Orban’s government to cut rates further ahead of local and European Parliament elections next year.The rows come against a backdrop of regional inflation that remains markedly higher than that in western Europe, driven up by structural factors like very tight labour markets but also repeated patterns of pre-election stimulus in recent years.Regional CEE assets like others around the world are being buoyed by the perception in financial markets that the U.S. Federal Reserve has put the brake on monetary tightening, and so have been shielded from losses over the political noise so far.The election triumph of Donald Tusk’s pro-EU coalition has even sparked a rally in Polish assets. But investors and credit rating agencies are monitoring closely the pressure on local central bankers given that inflation is still way over target and unlikely to get back on track till late-2025.”The overall monetary settings and the credibility of CEE central banks have been adequate ahead of the recent shocks,” said Karen Vartapetov, Lead Analyst for Sovereign Ratings at S&P Global Ratings.”This year and next will put that credibility to the test.”TANGIBLE BENEFITSA 2021 World Bank survey found that political meddling in central bank policy led to sustained periods of high inflation in emerging market economies such as Turkey and Argentina.Investor worries about central bank independence add to long-standing criticisms about the rule of law in Poland and Hungary, which have seen billions of euros of funds suspended by the EU due to its concerns about a backsliding of democratic standards. The governments have rejected the criticisms.”Policy credibility is a negative rating sensitivity for Hungary and entrenched high inflation is incorporated in a negative sensitivity for Poland,” said Paul Gamble, Head of Emerging Europe Sovereign Ratings at Fitch Ratings.The incoming Polish government cites Glapinski’s move to cut interest rates by a combined 100 bps ahead of the election but then keep them on hold after the vote as evidence he was tailoring monetary policy to the needs of his PiS allies. It is currently building a legal case that could see the governor being put before the State Tribunal.Glapinski has repeatedly denied those allegations. In response to a request to his office for comment, an NBP spokesman said officials had acted within legal mandates at all times and that moves to oust Glapinski could hit Polish assets.”Attempts to bring the president of the NBP before the State Tribunal can be directly interpreted as an attack on the independence of the central bank,” the spokesman said.The State Tribunal consists of lawyers chosen by the lower house of parliament.Local media says the body has handed down only two convictions since the collapse of communism and the procedure that could see Glapinski end up there could take months. If he is suspended, Deputy Governor Marta Kightley would take over.CAPITULATION?In Hungary, all eyes are on how Matolcsy – a former Orban ally who turned vocal critic of his economic policies – will deal with the government’s demands that rates are reduced further from 11.5%, the highest in the EU.Hungary’s central bank has cut borrowing costs by 650 bps since May, refraining from a larger cut last week despite a somewhat better inflation outlook, with price growth seen easing to 7% by December from an eye-watering 25% in the first quarter.”While there appear to be many solid reasons for accelerating the pace of rate cuts, a large proportion of foreign investors might see this as a capitulation to political pressure,” ING economist Peter Virovacz said.The bank said its base rate could fall into single digits in February, implying 75-bp cuts each over the next two months. The office of Matolcsy, whose term expires in March 2025, did not respond to questions for comment.Polish five-year bonds carried a 282 bps spread over German Bunds on Friday, while Hungarian five-year bonds carried a 437 bps spread. How those premia evolve will depend partly on how politics in Poland and Hungary is perceived by investors to influence the central banks in the months to come.”Everything else being equal, the less independent the central bank, the more real yield you need to have to be compensated for the risk,” said Arif Joshi at Lazard (NYSE:LAZ) Asset Management. (This story has been refiled with a change to the headline) More

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The statement was issued following the fifth round of the Japan-UK financial dialogue held in Tokyo and led by Japanese vice finance minister for international affairs Masato Kanda and Lindsey Whyte, Britain’s director-general of international finance. More

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Turkey’s exports to Russia of goods vital for Moscow’s war machine have soared this year, heightening concerns among the US and its allies that the country is acting as a conduit for sensitive items from their own manufacturers.The growing trade, and the corresponding rise in imports to Turkey of 45 civilian materials used by Russia’s military, has undermined US and European attempts to curb Moscow’s ability to equip its armed forces, fuelling tensions between Ankara and its Nato partners.In a sign of how it has become a priority in Washington to rein in this trade, Brian Nelson, US Treasury under-secretary for terrorism and financial intelligence, will visit Istanbul and Ankara this week, where he is set to discuss “efforts to prevent, disrupt, and investigate trade and financial activity that benefit the Russian effort in its war against Ukraine”. It will be Nelson’s second trip to Turkey this year and comes amid indications that some dual-use parts — identified by the US and its allies as being of particular value to the war — are being transported directly to Russia even when they have been labelled as going to another country.Efforts to cut off this ghost trade to Russia have been complicated as the items have both commercial and military applications.In the first nine months of 2023, Turkey reported $158mn of exports of 45 goods the US lists as “high-priority” to Russia and five former Soviet countries suspected of acting as intermediaries for Moscow. That was three times the level recorded over the same period in 2022, when the war in Ukraine began. The average figure for 2015-21 was $28mn, according to a Financial Times analysis of data from customs database Trade Data Monitor.The 45 categories of goods, which include items such as microchips, communications equipment and parts such as telescopic sights, are subject to US, EU, Japanese and UK export controls aimed at preventing them from entering Russia. But these can be circumvented by companies using middlemen structures to disguise their ultimate destinations.Turkey’s imports of high-priority goods from G7 countries are up more than 60 per cent so far this year compared with the same periods between 2015 and 2021 to nearly $500mn.The trade flourishes by exploiting regulatory gaps between US export controls and EU enforcement, according to Emily Kilcrease, director of the Energy, Economics and Security Program at the Center for a New American Security think-tank.“With some of the third-party countries like Turkey, we’re really at a weaker enforcement position than we’d ultimately like to be,” said Kilcrease, a former deputy assistant US trade representative. “We really have to lean on those countries to take enforcement actions in their own jurisdictions, to get at the specific entities that are facilitating the trans-shipment.”Turkey, along with the United Arab Emirates, often serves as an intermediary destination for Russian entities seeking to exploit multistage import routes to get around controls, said a European sanctions official. It was particularly used to procure European goods, the official added.Official data from Turkey showed a surge in declarations of exports of high-priority goods to ex-Soviet nations Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan and Uzbekistan, but those countries’ statistical agencies have not recorded a matching rise in imports. These large discrepancies suggest that items reported by Turkey as destined for intermediaries were instead being transported directly to Russia, analysts said. Kazakhstan recorded high-priority goods imports from Turkey of $6.1mn in the year to September, but Turkey’s data shows exports of those goods to Kazakhstan amounted to $66mn over the same period.“It’s obvious these goods are going to Russia,” said Elina Ribakova, a senior fellow at the Peterson Institute for International Economics think-tank and vice-president for foreign policy at the Kyiv School of Economics.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Russia uses the high-priority goods in its cruise missiles, drones and helicopters, according to US and EU battlefield assessments.Washington and its European allies have called on Turkey to take steps to limit the trade, according to two western officials briefed on the matter. The US Treasury department also flagged the issue this month in its latest round of sanctions on Russia.Kilcrease said if Ankara did not crack down on the trade, then “the US and its partners are going to have to take enforcement action”.Turkey has retained strong diplomatic and trade links with Russia, while also pledging not to help Moscow circumvent western export controls.The county’s foreign ministry said while it did not abide by western sanctions, “strict monitoring and prevention of efforts to skirt sanctions through Turkey is an integral part of our . . . policy”.It added that although Turkey’s large financial and industrial businesses “strictly comply” with measures to avoid this type of trade, “inevitably, there are evasion attempts by obscure and insignificant entities that are uneducated about or indifferent to sanctions”.Azint Elektronik, an Istanbul-based electronics supplier, was hit by US sanctions this month for allegedly making “shipments to Russia containing high-priority goods such as electronic integrated circuits”.Russian customs data showed the company sold $1.3mn of equipment to the country in the year to July, of which $300,000 comprised high-priority items. Azint told the FT: “We were confident that the products we sent were legal.”The listed buyer of the high-priority goods was IC Component, a St Petersburg company whose filings list one director and shareholder, Elena Frolova. Leaked Russian records suggest Frolova has a connection to another St Petersburg group, EKB Neva, on which the US imposed sanctions in May.The US state department described EKB Neva as a “supplier of electronic components, including radio components, microcircuits, connectors, resonators, diodes, capacitors, and resistors”.Frolova’s phone number is listed in address books as being for EKB Neva. She has also ordered takeaway food to be delivered to the company’s address. Frolova did not reply to a request for comment.The trade tensions come at a sensitive moment for Turkey’s relations with the west. Ankara is seeking to purchase billions of dollars worth of American F-16 fighter jets, while the US and Europe are pushing Turkey to approve Sweden’s accession to Nato. More

Pesquería just outside Monterrey, Mexico, has been nicknamed “Pes-Korea” by locals as carmaker Kia increased production at its factory, which is soon to be expanded to produce electric cars.Across town, warehouses are springing up along the road to a vast Chinese industrial park. Some property billboards are translated into English, Korean or Mandarin.Industrial real estate is expanding, yet at the same time vacancy rates are below 2 per cent. Developers are even building a physical symbol of the hubris: a skyscraper taller than the Empire State Building.“A week doesn’t go by for us without meeting Chinese, Korean, Japanese executives, looking to open offices or a plant,” said Lorenzo Barrera Segovia, chief executive of Banco Base, a bank based in the city.Monterrey, a business-friendly city a few hours’ drive from Texas, is a bellwether for Mexico’s ability to reap the rewards of nearshoring — a shift that is taking place thanks to the coronavirus pandemic, trade tariffs between the US and China, and geopolitical instability since Russia invaded Ukraine. Mexico has been singled out by investors as one of the countries best placed to economically benefit from geopolitical changes. Already, the country’s northern cities churn out thousands of high-skilled graduates and send millions of tonnes of goods, from refrigerators to Lego, north to the US.A worker assembles a vehicle at the Kia assembly plant in Pesqueria, Mexico. The town has been nicknamed ‘Pes-Korea’ as the carmaker has increased production at the factory More

Job search website Adzuna said annual advertised salaries averaged 36,946 pounds ($46,038.41) last month, down 0.4% from September and taking the decline since April to 1.9%.”Falling advertised salaries may not appear to be good news for jobseekers but it does signal that the menace of inflation is finally in retreat,” Andrew Hunter, co-founder of Adzuna said.However, online job ads climbed 0.35% to 1.03 million adverts, the biggest month-on-month jump since June, helped by pre-Christmas hiring in sectors such as retail and warehousing.The Bank of England has held interest rates at its last two meetings after 14 increases in a row. But it is closely watching for signs of inflation pressure in the jobs market.Britain’s official budget forecasters warned last week price growth would be more persistent than it previously thought. Employers have struggled to fill jobs in recent years after many workers left the labour market during the COVID-19 pandemic with Brexit also reducing the supply of candidates.An official measure of vacancies, published earlier this month, showed vacancies hit a two-year low of 957,000 in the three months to October and near record wage growth cooled slightly from in the quarter to September.Adzuna’s measure of the number of jobseekers per vacancy rose marginally and companies needed the least time to fill roles so far this year. ($1 = 0.8025 pounds) More