Economy

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SINGAPORE (Reuters) – U.S. interest rate cuts and China’s economic stimulus package for markets will be conducive to private equity deals in Asia, with lower funding costs and better market sentiment expected to make exits easier, industry players said.The U.S. central bank last week cut interest rates for the first time in more than four years, with more easing expected. High interest rates over the past two years have weighed on private equity firms’ financing costs, making leveraged buyouts trickier.China, on the other hand, this week unveiled broader-than-expected monetary stimulus and property market support measures to restore confidence in the world’s second-largest economy, with more fiscal measures expected to be rolled out soon.Private equity firms typically exit from their portfolio firms via initial public offerings of shares and trade sales, which have been made tougher due to the volatile market conditions. “With the Fed entering a rate-cut cycle, we expect financing conditions to improve which will likely drive a recovery in exit activity and asset valuations, narrowing the valuation gap between buyers and sellers and creating more opportunities for dealmaking,” Janice Leow, head of Swedish private equity firm EQT (ST:EQTAB) Private Capital Southeast Asia, told Reuters.She added that liquidity would improve, creating a more favorable backdrop for private equity firms to achieve strong exits.A senior private equity investor, focusing on Asia, said the rally in the Asian stock markets would be helpful to get companies listed and get the “valuations back up to reasonable levels” for a lot of the portfolio companies.PE-backed mergers and acquisitions in the Asia Pacific, including Japan, jumped 14% on-year to $105 billion in the first three quarters this year, according to LSEG data, largely boosted by the $16 billion takeover of Australian data centre provider AirTrunk by a Blackstone-led consortium. Still, the number of new deals plunged 43% from the same period last year.Asian markets have climbed this week following the unveiling of China’s stimulus measures, and latest data showing consumer confidence dropped by the most in three years have fueled expectations of another bumper rate cut in the U.S.”We are hopeful and optimistic that rates coming down will be positive for exits by GPs,” said an executive at one of the world’s biggest institutional investors, referring to general partners or fund managers which make the investment decisions for a PE firm. Blackstone (NYSE:BX) is one of the GPs active in monetizing their assets recently. In July, the U.S. private equity firm announced it was selling Japanese drugmaker Alinamin Pharmaceutical to a North Asian buyout fund.”We have sold multiple companies in Japan and Korea to the other sponsors. So overall for us, I would say that finger cross (it is a) very robust exit environment,” Blackstone’s senior managing director Amit Dalmia said at a Singapore conference this week. More

The PCE price index, a measure the Fed focuses on to measure the cost of goods and services in the U.S. economy, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%.
Excluding food and energy, core PCE rose 0.1% in August and was up 2.7% from a year ago.
The all-items inflation gauge was below Wall Street estimates and the lowest since early 2021.

Inflation moved closer to the Federal Reserve’s target in August, easing the way for future interest rate cuts, the Commerce Department reported Friday.
The personal consumption expenditures price index, a gauge the Fed focuses on to measure the cost of goods and services in the U.S. economy, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%, down from 2.5% in July and the lowest since February 2021. The Fed targets inflation at 2% annually.

Economists surveyed by Dow Jones had been expecting all-items PCE to rise 0.1% on the month and 2.3% from a year ago.

Excluding food and energy, core PCE rose 0.1% in August and was up 2.7% from a year ago, the 12-month number 0.1 percentage point higher than July. Fed officials tend to focus more on core as a better measure of long-run trends. The respective forecasts were for 0.2% and 2.7% on core.
“All quiet on the inflation front,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. “Add today’s PCE Price Index to the list of economic data landing in a sweet spot. Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”
Though the inflation numbers indicated continued progress, the personal spending and income numbers both came in light.
Personal income increased 0.2% on the month while spending rose 0.2%. The respective estimates were for increases of 0.4% and 0.3%.

Stock market futures were positive following the report while Treasury yields were negative.
The readings come a little more than a week after the Fed took down its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5%.
The progress in August came despite continued pressure from housing-related costs, which increased 0.5% on the month for the largest move since January. Services prices overall rose 0.2% while goods declined by 0.2%.
It was the first time the central bank had eased since March 2020 in the early days of the Covid pandemic and was an unusually large action for a Fed that prefers to move rates in quarter-point increments.
In recent days, Fed officials have switched their focus from inflation fighting to an emphasis on supporting a labor market that has shown some signs of softening. At their meeting last week, policymakers indicated a likelihood of another half percentage point in cuts this year then a full point in reductions for 2025, though markets expect a more aggressive path.

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Liquidators of debt-laden China Evergrande are still in talks with a potential buyer to sell a stake in the electric vehicle arm of the company with a view to provide a new credit line to support production.In its initial days, the electric vehicle (EV) maker aimed to take on Tesla (NASDAQ:TSLA) and had a market valuation higher than Ford Motor (NYSE:F), but it has since been mired in the debt crisis engulfing its property developer parent.China Evergrande New Energy Vehicle said on Thursday liquidators of its parent company China Evergrande had not yet entered an agreement with any potential stake buyer nor has there been any deal to extend credit to the electric vehicle manufacturer. The non-binding deal put-forth by China Evergrande Group liquidators provides for a third-party buyer to take a stake of 29% in the unit, with an option for 29.5% more, the EV arm had said in a statement in late May.The EV maker, which in August said two of its units had commenced bankruptcy proceedings, has been severely short of funds and has faced pressure from its creditors and a local government. More

NAIROBI (Reuters) -Senegal’s sovereign dollar bonds fell on Friday after a government audit revealed larger debt and deficit figures than the previous administration had reported, Tradeweb data showed. Recently elected President Bassirou Diomaye Faye, who ordered the audit, blamed the previous government for releasing false figures, but it underscored the daunting task ahead for the West African nation already grappling with slower economic growth. “The announcement does sound like a credit-negative event,” said Evghenia Sleptsova, senior emerging markets economist at consultancy Oxford Economics.The dollar bonds fell by more than 2 cents in early trading before retracing the losses to bid roughly 1.3 cents lower between 73.01-85.52 cents on the dollar by 1200 GMT.The International Monetary Fund, which has $1.9 billion bailout programme with Senegal, said the government had shared initial audit findings and that it was working with them to determine appropriate next steps. The audit showed a more than 10% deficit at the end of 2023, in contrast with the roughly 5% reported by the previous government, economy minister Abdourahmane Sarr said late on Thursday.Public debt, meanwhile, averaged 76.3% of GDP, according to the audit, compared with the previously reported 65.9%, due to higher-than-published public deficits. Sarr said the concerning figures, and fear of running afoul of IMF rules, kept the government from requesting IMF cash that could have been disbursed in July. Abdoulaye Ndiaye, professor of macroeconomics and public finance at New York University’s Stern School of Business, said the audit, unprecedented in Senegal, underscored the need for “courageous choices.” “The results are troubling, and there needs to be a thorough legal investigation,” he said.The IMF had already lowered Senegal’s growth forecast for this year, and warned of a wider fiscal deficit due to slow revenue growth. Earlier this month, Faye called a snap legislative election, scheduled for Nov. 17, to try to break deadlock over a new budget and efforts to cut government waste.Still, nascent oil production, which began in June, and gas output expected by the end of the year, could boost government finances. More

NEW YORK – This was originally published in the Reuters On the Money newsletter, where we share U.S. personal finance tips and insights every other week. Sign up here to receive it for free.Even before the U.S. Federal Reserve approved its outsized half-percentage-point interest rate cut last week, financial markets started making credit cheaper for households and businesses as they bid down mortgage rates, cut corporate bond yields and chipped away at what consumers pay for personal, auto and other loans.While bonds have been a good bet for investors at the start of the Fed’s rate-cutting cycles, Treasuries already experienced a huge rally this time around. Some investors believe they’re unlikely to run much further unless the economy enters a recession.And stocks? So far they’ve been on a tear, but the long-term outlook is a little more complicated. Follow our Markets coverage here for the latest insights and news!Has the latest rate cut helped or hurt your finances? Send me your thoughts at .Life lessons: Sherri Shepherd’s path to Hollywood’s Walk of FameAs a popular talk show host, Sherri Shepherd’s job is to get celebrities to share their personal stories. But the most fascinating tale might be her own.The host of Sherri, which kicked off its new season on Monday, has come a long way from the hardscrabble early days of getting evicted from her Los Angeles apartment as she tried to make it in show business.My favorite quote from this Reuters’ interview: “I remember back in the days when my car used to get repossessed, I would be on the bus going by Hollywood Boulevard, where the Walk of Fame is located. I would look at the stars and dream that I would have a star one day. Now I’m having a ceremony for it. Never let go of that dream.”What I’m reading and watchingBananas, cars, clothes: US port labor dispute threatens products Housing market sees some relief as mortgage rates fallConsumer confidence sours on labor market jitters Monthly house prices in the US edge up in July Want an under-30-minute commute? These American cities have itSmart moves for investors after the Fed rate cuteUS accuses Visa (NYSE:V) of monopolizing debit card swipes Going solo: How to plan for retirement when you’re on your ownHoliday spending on buy now, pay later to hit record due to debt-laden shoppers Like what you’re reading? Subscribe to On The Money here.In defense of consumer staplesThe consumer staples sector has outperformed the wider market since the summer on recession worries and a shift away from pricier technology stocks. Satya Pradhuman of Cirrus Research explains why he thinks these stocks are no longer just a recession play. Watch here.An expert’s guide to retirementIf you find it hard to plan for retirement, here is a little secret: It is hard for everyone – even the world’s foremost experts on the topic.Take Christine Benz, for example. As the longtime director of personal finance and retirement planning for investment research firm Morningstar, Benz knows pretty much everything there is to know on the subject.But when her own father started experiencing cognitive decline, she assumed financial responsibilities for her parents – and was swarmed with hundreds of retirement-related challenges one cannot fully understand until experienced.So Benz wrote a book about it, where she shares these five main pointers on how to retire.A$K LAURENThanks to everyone who wrote to me about taxing Social Security and rising pet care costs! I read every single one of your emails, so keep ‘em coming.Speaking of which: Do you need to take out a student loan? Are you planning to retire in the next year? Send your money questions to , and I’ll tap my extensive source network and braintrust for expert advice.Don’t forget to subscribe to this newsletter! Even better, share it with a friend!  More

Inflation by the Fed’s targeted measure, the year-over-year rise in the personal consumption expenditures price index, was 2.2% in August, the Commerce Department reported. That’s in line with what Fed Chair Jerome Powell said he expected in a news conference after last week’s half-point cut. The big start to what’s expected to be further reductions in the policy rate ahead was aimed at bolstering what Fed policymakers see as a softening but still-solid labor market. “If the Fed wants to cut by another 50 basis points in November, the inflation data isn’t going to stand in their way,” wrote Inflation Insights Omair Sharif after the report. “In fact, the faster inflation cools, the more impetus there is for them to move faster to get to neutral.”Interest rate futures contracts now reflect a 54% chance of a half-point cut in November, versus a still-hefty 46% chance of a quarter-point cut. Either way traders are betting the policy rate – now in the 4.75%-5.00% range – will be 75 bps lower by year end, and in the 3.00%-3.25% range by mid-2025. That’s just above what most Fed policymakers see as the neutral rate where the level of borrowing costs is neither stimulating nor braking a healthy economy. More