Economy

(Reuters) – U.S. East and Gulf Coast port workers are set to go on strike at midnight on Monday with no talks currently scheduled to head off a stoppage threatening to halt container traffic from Maine to Texas and cost the economy as much as $5 billion a day.The labor contract between the International Longshoremen’s Association (ILA) union representing 45,000 port workers and the United States Maritime Alliance (USMX) employer group expires late Monday, with negotiations at an impasse over pay.A port strike will go ahead starting Tuesday at 12:01 a.m. ET, the ILA said on Sunday. The USMX “refuses to address a half-century of wage subjugation,” the union said in a statement on Sunday.If union members do walk off the job, it would be the first coast-wide ILA strike since 1977, affecting ports that handle about half of the nation’s ocean shipping.No negotiations are taking place and none are planned before the Monday deadline, a person familiar with the matter said on condition of anonymity as the matter is a sensitive one. The union has previously said the strike would not impact military cargo shipments or cruise ship traffic.But a strike could stop the flow of everything from food to automobiles at major ports, potentially jeopardizing jobs and stoking inflation weeks ahead of the U.S. presidential election.Business Roundtable, which represents major U.S. business leaders, said it was “deeply concerned about the potential strike at the East Coast and Gulf Coast ports.”The group warned a labor stoppage could cost the economy billions of dollars daily, hurting businesses, workers and consumers across the country. “We urge both sides to come to an agreement before Monday night’s deadline.”A short strike could have a limited economic impact given many companies have imported extra goods ahead of a possible work stoppage or shifted more shipments to West Coast ports. But a strike that continues for weeks could have serious economic impacts.”These people today don’t know what a strike is,” Harold Daggett, the ILA’s fiery leader, said in a recent video post. “I’ll cripple you. I will cripple you.”For months, Daggett has threatened to shut down the 36 ports covered by his union if employers like container ship operator Maersk and its APM Terminals North America do not deliver significant wage increases and stop terminal automation projects.The dispute is worrying businesses that rely on ocean shipping to export their wares, or secure crucial imports.Steve Hughes, CEO of HCS International, which specializes in automotive sourcing and shipping, accused the ILA of “holding the entire country over a barrel.” HIGH STAKESAn ILA strike could wedge labor-friendly President Joe Biden into a no-win position as Vice President Kamala Harris runs a razor-tight election race against former President Donald Trump.Biden on Sunday said he did not intend to intervene to prevent a walkout if dock workers failed to secure a new contract.U.S. presidents can intervene in labor disputes that threaten national security or safety by imposing an 80-day cooling-off period under the federal Taft-Hartley Act, forcing workers back on the job while negotiations continue.On Friday, Biden administration officials met with the USMX employer group to directly convey “that they need to be at the table and negotiating in good faith fairly and quickly” – a message it had delivered earlier to the ILA.The USMX has accused the ILA of refusing to negotiate. Retailers that account for about half of all container shipping volume, and are headed into their all-important winter holiday sales season, have been busily employing backup plans.”There is potential for another violent move across consumer stocks next week if – as is consensus thinking – the East Coast Longshoremen do indeed strike,” Jefferies analysts said in a client note.Many of the big retail players rushed in Halloween and Christmas merchandise early to avoid any strike-related disruptions – incurring extra shipping and storage costs. Retail behemoth Walmart (NYSE:WMT), the largest U.S. container shipper, and membership warehouse club operator Costco (NASDAQ:COST) say they are doing everything they can to mitigate any impact. But a lot of shippers do not have that flexibility as they are small, do most of their business on the East and Gulf Coasts or lack the financial might to load up on safety stock. Ash Bhardwaj, CEO of Onx Homes, has factories in Florida and imports materials used to build homes in the company’s planned communities through the Port of Miami.Like other shippers in his position, he was resigned to his fate. “Everyone will have the same problem,” Bhardwaj said. More

1. Futures mutedUS stock futures hovered around the flatline, with investors looking ahead to a speech from Powell on Monday and the fresh jobs market data (more below).By 03:30 ET (07:30 GMT), the Dow futures contract had shed 30 points or 0.1%, while S&P 500 futures and Nasdaq 100 futures were unchanged.The 30-stock Dow Jones Industrial Average ended the prior session at a new record high. Fueling sentiment was a Commerce Department report that suggested a waning in inflationary pressures and a muted uptick in consumer spending.The figures bolstered bets that the Fed may roll out another outsized 50-basis point interest rate cut at its next gathering, according to the CME Group’s (NASDAQ:CME) FedWatch Tool. The central bank, prompted by indications of easing price pressures and weakening in labor demand, slashed borrowing costs by 50 basis points earlier this month.Traders are now turning their attention to comments on the outlook for the economy from the Fed’s Powell at the National Association for Business Economics annual meeting in Tennessee at 13:55 ET.2. Jobs market report ahead this weekHighlighting the economic calendar this week will be the latest US nonfarm payrolls report, which may offer a glimpse into the health of the labor market.Economists expect the US economy to add 144,000 jobs in September, up slightly from 142,000 in the prior month. The unemployment rate, meanwhile, is seen matching August’s level of 4.2%.In August, payrolls rose from a downwardly revised reading of 89,000 and were below forecasts of 164,000, while the jobless rate ticked down from 4.3%. As a whole, the numbers indicated a downshift in labor demand — a trend identified by several Fed officials as a key driving force behind their decision to announce a jumbo rate reduction.Analysts at ING argued in a note to clients that the jobs market continues to hold “the key to the pace” of upcoming potential interest rate cuts, particularly as inflation — once the major focus of a series of aggressive Fed borrowing cost hikes — shows signs of abating.”If we get the unemployment rate rising back to 4.3% next Friday and a sub 75,000 payrolls print expect the calls for a second 50 [basis point] rate cut to grow markedly,” the ING analysts said.3. CA governor vetoes controversial AI billCalifornia governor Gavin Newsom has vetoed a bill that aimed to place fresh regulations on artificial intelligence, arguing that the measure could stifle innovation.The bill would have set strict guidelines around those creating AI tools, including mandates for safety testing for advanced AI models that cost more than $100 million to develop. It would have also made AI software developers create a mechanism to turn off AI models, amounting effectively to a kill switch.Democratic State Senator Scott Wiener, the bill’s sponsor, had said it would help to protect the public from AI before the technology becomes too unwieldy.However, big-name tech groups, including Instagram-owner Meta Platforms (NASDAQ:META) and ChatGPT-maker OpenAI, voiced their opposition to it, warning that the proposed rules would hinder both AI’s development and California’s role as a destination for crafting the nascent technology.In a letter to the state’s senate, Newsom flagged that 32 of world’s most important AI firms are based in California, adding that the new framework would “curtail the very innovation that fuels advancement in favor of the public good.”4. Chinese manufacturing activity dips in SeptemberChinese factory activity contracted in September, although it was just above economists’ forecasts, in a sign of the challenges facing lawmakers in Beijing as they attempt to reinvigorate the world’s second-largest economy.The official manufacturing purchasing managers’ index (PMI) came in at 49.8 during the month, rising from 49.1 in August and topping expectations of 49.4. A mark below 50 indicates contraction.The Caixin manufacturing PMI was 49.3, slipping from 50.4 in August and below projections of 50.5.Meanwhile, the official non-manufacturing PMI read 50 and the Caixin services PMI index was 50.3, dropping from a prior level of 51.6.Last week, China unveiled a raft of new stimulus measures as lawmakers push to deliver on a target of 5% annual growth.”While the official PMIs held up okay in September, the Caixin PMIs dropped quite sharply which suggests that the economy lost some momentum this month. The stimulus package announced last week thus comes at a much needed time, and should provide some near-term support to activity,” analysts at Capital Economics said in a note to clients.5. Crude rises amid Middle East tensionsOil prices rose Monday on the possibility of a widening Middle East conflict after Israel stepped up its attacks on the Iranian-backed Hezbollah and Houthi militant groups.By 03:30 ET, the Brent contract climbed 0.9% to $72.20 per barrel, while U.S. crude futures (WTI) traded 0.8% higher at $68.71 a barrel.Israel said it bombed Houthi targets in Yemen on Sunday, just a few days after killing Hezbollah leader Sayyed Hassan Nasrallah in an escalating conflict in Lebanon.Both contracts fell last week as demand worries increased after fiscal stimulus from China, the world’s top oil importer, failed to reassure market confidence. More

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SINGAPORE (Reuters) – A surging yen steadied on Monday as Japan’s incoming prime minister signalled monetary policy should remain accommodative, while the dollar slipped on commodity currencies underpinned by investor expectations of a turnaround in China’s economy.Japan’s yen had leapt on Friday when Shigeru Ishiba, a former defence minister and erstwhile critic of aggressively easy policy won the leadership of the ruling Liberal Democratic Party, which controls parliament and will vote him into office.The yen slipped about 0.4% to 142.75 per dollar after jumping 1.8% on Friday. Ishiba told public broadcaster NHK that from the government’s standpoint, policy must remain accommodative as a trend given current economic conditions.Analysts said that was enough to pause the sharp rise in the yen following his victory and that the likelihood of a snap election in the coming months – something Ishiba hinted at on Sunday – could weigh on the yen at least over the short term.”An election basically takes the Bank of Japan out of the equation until December…a marginal yen negative,” said Ray Attrill, National Australia Bank (OTC:NABZY)’s head of foreign exchange strategy.Elsewhere the euro was stable at $1.1172 and sterling traded at $1.3381 with markets looking to U.S. jobs data on Friday as the next major data point that could guide the pace of U.S. interest rate cuts.European inflation data on Tuesday and Chinese data due later on Monday are also keenly awaited. The Australian and New Zealand dollars traded near the 2024 highs they struck on Friday as rate cuts and expectations of fiscal support in China raised hopes of an improvement in the slowing economy.The Australian dollar rose 0.3% to $0.6920, after climbing to a 20-month high of $0.6937 on Friday. The New Zealand dollar was up 0.3% at $0.6360 after hitting its highest since December on Friday.Last week the U.S. Federal Reserve’s favoured inflation measure showed inflation running at a pretty benign 2.2% for the 12 months to August, sending U.S. yields and the dollar lower.”The trend over next year or so is for the dollar to go down,” said Commonwealth Bank of Australia (OTC:CMWAY) strategist Joe Capurso.”Inflation is under control. Interest rates are going down and that’s good for the global economic outlook, good for risk taking and good for commodity currencies like the Aussie.”Beijing’s raft of stimulus measures drove a rally in China’s yuan last week, even as interest rates were lowered, as investors piled into Chinese stocks which notched their best week in a decade. The yuan broke the psychological 7-per-dollar mark in offshore trade on Friday and was last at 6.9761 ahead of the onshore open. More

Boric said the budget would focus on increasing safety for Chilean citizens, with a budget for justice and security $1.5 billion higher than this year’s, helping put more police on the streets, raise pay for officers and invest more in prisons.”Guaranteeing your right to security is the first priority for my government,” Boric said on national television, adding that with this proposal the budget for security would be up 15% in three years.The South American government would also look to limit migration, he said. Boric has hardened his tone on illegal migration in recent months, saying he will expel migrants who have not attended the official biometric registration process.Boric had raised concerns this week at the United Nations General Assembly over the crisis in Venezuela, which has seen a quarter of its population emigrate in 10 years, and said his country was not in a condition to receive more migrants.The 2025 budget, Boric added, will also help boost pensions, the health sector, education and culture. Resources for Chilean immunization programs would be up 42%, he said.The proposal also includes resources to digitize 240 sector permit processes, which Boric said should speed up investment.Earlier this month, Chile’s central bank said it expects inflation to close this year at 4.5% before slowing to 3.6% next year, while trimming its economic growth forecast to between 2.25% and 2.75% from a prior forecast of up to 3%.Boric said the government is targeting growth of 2.6%.The government is set to present the bill to Congress on Monday and lawmakers will have 60 days before deciding whether to approve it. Congress recently approved new tax legislation that should bring an additional $1.2 billion to state coffers. More

SYDNEY (Reuters) – Asia share markets were mostly firmer on Monday as China announced more stimulus measures, though the Nikkei dived on concerns Japan’s new prime minister favoured normalising interest rates.Continued Israeli strikes across Lebanon added geopolitical uncertainty to the mix, though oil prices were still weighed down by the risk of increased supply. [O/R]The week is packed with major U.S. economic data including a payrolls report that could decide whether the Federal Reserve delivers another outsized rate cut in November.The Nikkei led the early action with a dive of 4.0% as investors anxiously waited for more direction from new Prime Minister Shigeru Ishiba, who has been critical of the Bank of Japan’s easy policies in the past.However, he sounded more conciliatory over the weekend saying monetary policy “must remain accommodative” given the state of the economy.That helped the dollar bounce 0.5% to 142.85 yen, after sliding 1.8% on Friday from a 146.49 top. [USD/] “Ishiba has endorsed the BoJ’s intention to normalise monetary policy, albeit leaving it uncertain as to the pace and timing,” said HSBC economist Jun Takazawa.”If additional stimulus measures are realised, this would also likely buttress the recovering trend in spending, thereby strengthening the BoJ’s conviction to raise interest rates at a gradual pace,” he added. “All in all, we continue to see a constructive outlook for Japan.”Over in China, the central bank said it would tell banks to lower mortgage rates for existing home loans by the end of October, likely by 50 basis points on average.That follows a barrage of monetary, fiscal and liquidity support measures announced last week in Beijing’s biggest stimulus package since the pandemic.”We believe deflation risks are now being taken more seriously,” said Christian Keller, head of economic research at Barclays. “At the same time, the Politburo suggests a consensus has likely been reached in Beijing that fiscal stimulus and central government leverage are necessary to arrest the downturn.””This is an important shift in a market that was looking for more than just the bare minimum.”WALL ST ON A ROLLThe blue-chip CSI300 and Shanghai Composite indexes gained roughly 16% and 13%, respectively, last week. Hong Kong’s Hang Seng index jumped 13%.On Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.2%, having surged 6.1% last week to a seven-month high.Wall Street also had a rousing week helped by a benign reading on core U.S. inflation on Friday that left the door open to another half-point rate cut from the Fed.Futures imply around a 53% chance the Fed will ease by 50 basis points on Nov. 7, though the presidential election two days earlier remains a major unknown.A host of Fed speakers will have their say this week, led by Chair Jerome Powell later on Monday. Also due are data on job openings and private hiring, along with ISM surveys on manufacturing and services.S&P 500 futures were up 0.1% on Monday, while Nasdaq futures added 0.2%. The S&P 500 index is up 20% year-to-date and on track for its strongest January-September performance since 1997.In currency markets, the dollar index was flat at 100.41 after easing 0.3% last week. The euro stood at $1.1169 , having bounced on Friday in the wake of the benign U.S. inflation report. [USD/] The euro zone releases its inflation figures this week, along with producer prices and unemployment. German inflation and retail sales are due later on Monday, while European Central Bank President Christine Lagarde speaks to parliament.A softer dollar combined with lower bond yields to help gold reach record highs at $2,685 an ounce. It was last at $2,664 an ounce, and on track for its best quarter since 2016. [GOL/]Oil prices were erratic as concerns about possible increased supply from Saudi Arabia countered tensions in the Middle East. [O/R]Brent fell 1 cent to $71.86 a barrel, while U.S. crude rose 3 cents to $68.21 per barrel. More

Commercial banks should, in batches, reduce interest rates on existing mortgages to no less than 30 basis points (bps) below the Loan Prime Rate (LPR), the central bank’s benchmark rate for mortgages, according to a statement released by the People’s Bank of China (PBOC). It is expected to cut existing mortgage rates by about 50 bps on average.Across China, a slew of policies including reductions in down-payment ratios and mortgage rates have been introduced this year to support China’s crisis-hit property market.But the stimulus measures have struggled to boost sales or increase liquidity in a market shunned by buyers that has remained a big drag on broader economic growth.Adding to such efforts, Guangzhou city announced on Sunday the lifting of all restrictions on home purchases, while Shanghai and Shenzhen said they would ease restrictions on housing purchases by non-local buyers and lower the minimum downpayment ratio for first homebuyers to no less than 15%. Reuters reported on Friday that Shanghai and Shenzhen were planning to lift key remaining restrictions to attract potential buyers.The announcements on Sunday come after China unveiled on Tuesday its biggest stimulus since the COVID pandemic to pull the economy out of its deflationary funk.’URGENT ADJUSTMENTS’ TO BOOST SALESProperty-related figures released earlier this month showed new home prices fell at the fastest pace in more than nine years in August and property sales slumped 18.0% in the first eight months of the year.The mortgage rate reduction set out by the central bank aims to ease homeowners’ mortgage burden, seeking to boost the property market and weak domestic consumption demand. “As market-oriented reforms on interest rates continue to deepen, and the supply and demand relationship in the real estate market undergoes major changes, the current mortgage rate pricing mechanism has exposed some shortcomings,” the PBOC said in its statement.”With the public showing strong responses (to the situation), the mechanism needs urgent adjustments and optimisation,” the PBOC added. China’s biggest four state-owned banks, including Industrial and Commercial Bank of China Ltd and China Construction Bank (OTC:CICHF) Corp, said they would actively respond to the policy and were promoting the orderly adjustment of existing mortgage interest rates.Most local governments, except for some megacities including Beijing and Shanghai, have already scrapped floors on mortgage rates. Previous mortgage rate reductions primarily benefited new homebuyers, leaving existing homeowners with higher-rate loans. This has resulted in a rush by households to pay off existing mortgages early, further constraining households’ spending and consumption.The outstanding value of individual mortgages stood at 37.79 billion yuan ($5.39 billion) at the end of June, down 2.1% year-on-year, according to official data.The PBOC also announced on Sunday that it would extend supportive measures of developers’ real estate development loans and trust loans to the end of 2026, to better fulfil developers’ financing demand.($1 = 7.0110 Chinese yuan renminbi) More

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect seasonally adjusted output to increase 2.0% in September and expand 6.1% in October.Separate data showed Japanese retail sales rose 2.8% in August from a year earlier, above the median market forecast for a 2.3% rise. More