Economy

The service sector, in particular, has been hit hard, with activity dipping to its lowest level in over two years. The index fell to precisely 46.5 points, indicating a contraction in the sector and reflecting broader economic challenges.Despite these troubling economic signals released today, the Australian dollar (AUD) has demonstrated resilience in the foreign exchange markets. In early trading on Thursday, the AUD held its ground against the US dollar (USD), trading around 0.6540, despite opening slightly stronger on Wednesday at 0.6557.Investors and market observers are closely monitoring these developments as the Australian economy grapples with internal and external pressures. The stability of the AUD amidst weakening economic fundamentals suggests a complex interplay of market forces and anticipations that may be influencing currency valuations.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

BENGALURU (Reuters) -Most key global stock indexes are forecast to rise modestly over the coming year, closing 2024 below record highs, while a slim majority of stock market experts polled by Reuters expected their markets to touch new peaks within the next six months.Much will depend on interest rate expectations now central banks are mostly done with a season of aggressive rate rises since the COVID pandemic to dampen a burst of inflation still not completely under control.Traders and analysts mostly assume the U.S. Federal Reserve will be cutting interest rates by the middle of next year, an outcome that is far from certain and does not clearly align with policy statements from top central bankers. Those rate cut expectations are partly behind the views of a slim majority of survey respondents, 46 of 82, who said most key indexes would reclaim record highs by then.However, only a handful of the 15 top stock indexes were predicted to trade at record peaks by end-2024, based on a wider Nov. 9-22 poll of more than 120 stock market experts.”After two straight quarters recommending cash over stocks and bonds, we now expect equities to eke out high single-digit returns in 2024 and outperform core fixed income,” noted Ajay Rajadhyaksha, global chairman of research at Barclays.”Yes, we expect the economy to grow more slowly next year, in both real and nominal terms…But the downside risks to the world economy have diminished greatly. We think stocks will benefit from a fairly benign bottom to this business cycle.”A strong majority of respondents, 72 of 85, expected corporate earnings in their local market to increase over the coming six months. The remaining 13 said they would decrease.Despite high interest rates, cooling global inflation, and with it, economic activity, only a slim majority of respondents, 44 of 80, said value stocks would outperform growth stocks over the next six months.LOWER BOND YIELDSFor now, markets are pricing in a series of 2024 rate cuts, which is sending bond yields lower and stock prices higher. U.S. 10-year Treasury note yields breached 5.00% last month for the first time since July 2007 but are not expected to revisit that level according to a separate Reuters poll of bond strategists who were proven wrong on the same call for three straight months. Lower bond yields will likely be required to further any expected gains in stocks, as they had reached a point where investors had got used to years of paltry yields but now represent good value along with security.But it is not at all guaranteed that trend will continue, having fallen around 60 basis points on U.S. 10-year yields in the last few weeks alone.”Falling bond yields are being interpreted by equity markets as a positive in the near-term,” said Marko Kolanovic, chief global markets strategist at J.P. Morgan.”However, we believe that equities will soon revert back to an unattractive risk-reward as the Fed is set to remain higher for longer, valuations are rich, earnings expectations remain too optimistic, pricing power is waning, profit margins are at risk and the slowdown in topline growth is set to continue.”The benchmark S&P 500 index was forecast to finish next year at 4,700, only about 3% higher from its Monday close, with a possible U.S. economic slowdown or recession among the biggest risks for the market in 2024.European equity markets were also expected to eke out modest gains in 2024 as optimism global interest rates have peaked is offset by worries the economy could fall into a recession.The pan-European benchmark STOXX 600 index was forecast to rise 4.1% to 475 points by the end of next year, from Monday’s close at 456.26.Canada’s main stock index was expected to rise less than previously thought over the coming year as a slowdown in the global economy weighs on the outlook for corporate earnings.Among the indices surveyed Japan’s Nikkei 225 and India’s BSE index were expected to continue their strong performance into the next year with the Nikkei expected to reach a three-decade high of 35,000 by end-June of next year and the BSE forecast to hit new highs in 2024.(Other stories from the Reuters Q4 global stock markets poll package:) More

The ESR group projects annual home sales to hit about 4.8 million for the current year, with a slight dip to approximately 4.7 million in the coming year before rising to around 5.3 million thereafter. This comes against the backdrop of October’s home sales falling by 40% from early 2022 and plunging by 14.6% year-over-year at a rate of 3.79 million—the lowest since the third quarter of a decade ago, based on data from the National Association of Realtors.Mortgage rates are anticipated to average at about 7.7% this quarter, with expectations for a decrease to around 7.3% next year and further to approximately 6.9% subsequently. Meanwhile, purchase volumes have been revised down to $1.3 trillion this year but are projected to climb annually up to $1.6 trillion.On the economic front, the ESR group foresees the economy growing by about 1.6%, with unemployment peaking at roughly 5.4%. Despite this growth, a mild recession is expected next year with GDP decreasing by about 0.4%. Recent economic indicators have shown a marginal rise in unemployment to nearly 4%, while CPI has decreased slightly to about 3.2%. Notably, energy prices have fallen significantly but are offset by the ongoing rise in shelter costs, as reported by the Bureau of Labor Statistics.Joe Seydl from J.P. Morgan commented on housing affordability challenges, noting that despite existing home sales plummeting by 40% since early 2022 and median prices increasing to $392,000 after rising by 3.4%, there isn’t necessarily a need for a market crash for homes to become affordable again. Seydl argues that if incomes keep rising at their current pace against stable mortgage rates and unchanged home prices, affordability could be restored in approximately three and a half years.He also highlighted that the Federal Reserve’s aggressive interest rate hikes since March 2022 have led to higher borrowing costs amidst a continuing housing shortage due to under-building since 2008 and strict regulations—factors contributing to high mortgage rates and limited supply availability.However, while the used home market remains slow with sellers holding onto their lower-rate mortgages, new housing developments are seeing more activity thanks to builder incentives that have reduced prices by over ten percent from last year during this period. The trend of remote work has also influenced buying patterns, with millennials increasingly moving into more affordable areas such as Phoenix and Minneapolis.Seydl suggests that barring any significant economic downturns or bond market instability which could exacerbate economic strain, potential decreases in mortgage rates might accelerate the timeline for Americans reaching an affordable housing market from three and a half years closer to approximately three years.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Countries at the UN have voted for it to take a greater role in international tax matters, in a move that threatens the ascendancy of the OECD, the body that has led these discussions for decades.Developing nations have been pushing for a greater UN role after growing frustrated at global tax negotiations co-ordinated by the Paris-based OECD. In 2021, more than 130 countries agreed a landmark deal aimed at curbing corporate tax avoidance by multinationals. But developing countries have complained they will receive relatively little revenue from the reforms compared with richer nations. A vote held at the UN on Wednesday adopted a resolution that will begin the process of creating a greater role for the UN through establishing a convention on international tax co-operation. The measure, which was championed by African countries, was supported by 125 nations, most of which were low or middle-income countries — including Nigeria, Ghana, China, India, Brazil and South Africa. In contrast, most of the 48 nations that voted against the measure were developed countries, including EU member states, the US, UK, Japan and Korea. There were nine abstentions, including from OECD member states Norway, Iceland, Mexico and Turkey. Chile and Colombia, both OECD members, voted in support of the resolution.The African Union said: “The decades-long fight of Global South countries to establish a fully inclusive process at the United Nations to participate in agenda setting and norm setting on international tax is now a reality.”The union added that it looked forward to agreeing “an effective UN Framework Convention on International Tax Cooperation to urgently mobilise resources for our development”.However, an EU official said that while EU countries supported “multilateralism and effective, inclusive international co-operation in tax matters”, the bloc did not believe the proposed convention would provide “the flexibility needed to reach consensus”.A convention “would result in the duplication of ongoing or completed international standards”, the official said.This person voiced concern that a new UN tax convention “could imply reopening negotiations, potentially on issues for which promising outcomes already exist, and for which a considerable network of agreements ensuring tax transparency and tax fairness has been built over the years, to the direct benefit of all participating countries”.Mathias Cormann, head of the OECD, said in a statement posted on X that the OECD was “proud of its record of achieving consensus-based solutions to address tax evasion and avoidance, stabilise the international tax system and support developing countries”.The OECD remained committed to implementing the global corporate tax deal, he said.“We are committed to continue to collaborate with global partners — including at the UN — to strengthen inclusivity and continue to deliver a better and fairer international tax system,” Cormann added.Espen Barth Eide, Norway’s foreign minister, told the Financial Times that the country had chosen to abstain and not vote against the resolution because it wanted to “send a signal” about building bridges with developing countries. He said: “The world is unfortunately becoming more polarised and we are seeing an unhelpful division forming between the west and the rest. We want to connect through a more global agenda.”“We don’t want to contribute to the divide,” he added, saying he “saluted the Africa Group for raising the issue as a global issue”.Last year, 54 African countries successfully brought a resolution at the UN general assembly. This recommended that the UN secretary-general produce a report assessing ways to strengthen the “inclusiveness and effectiveness” of international tax co-operation. The report laid out three options for giving the UN more of a role on the global tax stage — two legally binding, including the framework convention, and one voluntary option. More

(Reuters) – A look at the day ahead in Asian markets from Lewis Krauskopf, markets correspondent.Markets were buoyant ahead of Asia trading and the Thanksgiving holiday in the U.S., with stocks resuming their massive rally this month that has been fueled by hopes of a more benign interest rate backdrop.Wall Street’s benchmark S&P 500 closed up 0.4%, and was nearing a fresh high for 2023. The S&P 500 and MSCI’s all-country index are both up over 8% this month alone, with the tech-heavy Nasdaq Composite up 11%.Markets were still digesting minutes from the Federal Reserve’s latest meeting, which revealed that central bank officials agreed they would proceed carefully and only raise interest rates if progress in controlling inflation faltered.Indeed, many investors now seem confident the Fed may be done raising rates for this cycle, and are eyeing the middle of next year for when the central bank may start to make cuts.Even Nvidia (NASDAQ:NVDA)’s selloff following its results couldn’t dampen Wednesday’s mood. After soaring well over 200% this year, Nvidia shares ended down 2.5% on Wednesday amid fears that widening U.S. chip curbs would sap growth in China.Aside from Nvidia, other members of the Magnificent Seven megacap group rallied on Wednesday, with Amazon (NASDAQ:AMZN) gaining nearly 2% and Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) up over 1%.A Reuters poll of stock market experts found most key global stock indexes are forecast to rise modestly over the coming year.Japanese markets were also set to be closed for a national holiday on Thursday. On Wednesday, the Nikkei edged up 0.3%, putting the Japanese index near a fresh three-decade high.Also in Wednesday’s session, China stocks slid as market participants awaited more stimulus for the Chinese economy. The blue-chip CSI 300 Index sank 1%.Reuters reported that Chinese government advisers will recommend economic growth targets for next year ranging from 4.5% to 5.5% to an annual policymakers’ meeting, as Beijing seeks to create jobs and keep long-term development goals on track.Meanwhile, the dollar index rose, bouncing back from a 2-1/2 month low. Economic data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week.The yen weakened on Wednesday, trading at around 150 per dollar. While speculation that the Bank of Japan could exit from negative interest rates early next year stands to help stabilize the yen, the Japanese currency still faces strong headwinds.Oil prices dropped as OPEC+ producers unexpectedly delayed a meeting on production cuts.Trading volumes were set to be subdued for the rest of the week with markets in the U.S. closed on Thursday.Here are key developments that could provide more direction to markets on Thursday:- Singapore CPI- Indonesia Central Bank meeting- Euro zone flash PMIs More

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(Reuters) – Four U.S. lawmakers have asked the Securities and Exchange Commission to investigate whether Elon Musk committed securities fraud by allegedly misleading investors about the safety of a brain implant being developed by the billionaire’s firm Neuralink, according to a letter to the regulator. The request for an inquiry came from Democratic House Reps. Earl Blumenauer of Oregon, Jim McGovern of Massachusetts, and Barbara Lee and Tony Cardenas of California, according to the letter sent to the SEC on Tuesday and reviewed by Reuters. Scrutiny over Neuralink’s handling of safety protocols comes as the company prepares to test the brain implant in humans for the first time, a critical milestone for the startup’s ambitions to help patients overcome paralysis and a host of neurological conditions. The letter cites veterinary records obtained from Neuralink experiments in monkeys that indicate the animals suffered “debilitating health effects” from the implants, including paralysis, seizures and brain swelling. At least 12 young and healthy monkeys were euthanized “as a direct result of problems with the company’s implant,” the letter said.Yet Musk, Neuralink’s CEO, downplayed investor concerns about the results of its animal testing, the letter said. Musk wrote that “no monkey has died as a result of a Neuralink implant,” in a post to his social media site, X, on Sept. 10. He added that the company chose “terminal” monkeys to minimize risk to healthy ones.Neuralink did not respond to requests for comment on the letter to the SEC. Blumenauer and other lawmakers wrote to the SEC that evidence they have reviewed shows that the death of animals in Neuralink experiments “relate directly to the safety and marketability of Neuralink’s brain-computer interface.”As a result, Musk’s statement “may have violated” SEC rules in denying a connection, the lawmakers wrote.Last year, Neuralink employees told Reuters that the company was rushing and botching surgeries on monkeys, pigs and sheep, resulting in more animal deaths than necessary. Reuters found that the push for speed came from Musk, who pressured staff to provide the safety data required by the U.S. Food and Drug Administration to authorize human testing. In May, Neuralink announced it had received FDA clearance for its first-in-human clinical trial, without disclosing details of the planned study. More

LONDON (Reuters) – Demand for British government bonds has recovered from the damage dealt by the market turmoil which followed then Prime Minister Liz Truss’ mini-budget last year, the chief executive of the UK Debt Management Office said on Wednesday.Robert Stheeman, who is responsible for selling 237 billion pounds ($295 billion) of British gilts to investors this financial year, said he had been impressed by the rapid rebound.”Considering the challenges that the gilt market faced last year, the speed with which conditions have returned to normal and the extent to which the market has stabilised I think is notable,” he said.The recovery included renewed appetite from foreign investors, he told Reuters after a mid-year update on the DMO’s issuance plans.”I talked about how quickly things return to normal, and that definitely includes international interest,” Stheeman said.In September 2022, the Bank of England (BoE) was forced to intervene in the bond market – buying 19 billion pounds of long-dated and inflation-linked gilts – after record price falls in response to Truss’ budget plans put some pension funds at risk of collapse.Since then, Prime Minister Rishi Sunak has put Britain’s finances on a more orthodox course.Britain no longer pays a big risk premium for its borrowing, but outright interest rates are still high, reflecting a global rise in central bank rates.Just a month ago, 30-year gilt yields reached their highest since 1998 at 5.209%.However yields have fallen in the past month, as investors judge central banks, including the BoE, will cut rates in 2024.The DMO announced minimal changes to its plans on Wednesday, lowering gilt issuance by just 500 million pounds to 237.3 billion pounds, wrong-footing some investors. A Reuters poll had pointed to a 15 billion pound reduction. Instead, the DMO used lower borrowing needs created by strong tax revenues to reduce net issuance of short-dated Treasury bills by 10 billion pounds. Before the pandemic, the DMO regularly used changes in T-bill issuance to smooth out small changes in borrowing needs, and Stheeman said the decision represented a return to that.BOND SALES Stheeman said the DMO’s debt issuance plans had not been influenced by the BoE’s quantitative tightening. In September, the BoE said it would reduce its gilt holdings by 100 billion pounds over the next 12 months, after an 80 billion pound reduction during the previous 12.”Categorically it has not affected our decisions or our strategies,” Stheeman said.Some investors have said BoE sales of long-dated gilts were having an outsize impact on that part of the market, which is typically less liquid. BoE Governor Andrew Bailey told lawmakers on Tuesday that sales had only added 0.1-0.15 percentage points to yields.However, the DMO did need to consider changing demand, which included a slow long-term reduction in pension funds’ need for long and ultra-long gilts, Stheeman said.”We have over the last 10 years seen a very slow trend towards that demand shortening compared to where it was previously, in part due to the growth of pension scheme buy-outs. I wouldn’t be surprised if that trend were to continue.”Britain issues a higher proportion of long-dated debt than other countries.Overall gilt issuance is also at a record level on a net basis. While gross issuance is half the 486 billion pounds sold in 2020/21 during the pandemic, the BoE is now a net seller, rather than a heavy buyer as it was in 2020/21.Issuance is set to remain high for years to come. The DMO estimated ‘gross financing needs’ would rise to 277 billion pounds in 2024/25 and fall only slightly to 270 billion pounds the year after. Gross gilt issuance is a little lower than this, as the total includes around 10 billion pounds raised direct from household savers and other sources.”If you look at the projections … we’ll stay in business for a little while yet,” said Stheeman, who is due to retire next year after more than two decades at the DMO.($1 = 0.8025 pounds) More