Economy

By Shariq KhanNEW YORK (Reuters) -Oil prices settled more than 2% lower on Friday as traders grew less fearful of prolonged supply disruptions from a hurricane in the U.S. Gulf of Mexico, while China’s latest economic-stimulus packages failed to impress some oil traders.U.S. West Texas Intermediate futures led the decline and settled at $70.38 per barrel, down by 2.7%, or $1.98. Global benchmark Brent crude futures fell by 2.3%, or $1.76, to$73.87 per barrel.Energy producers shut in more than 23% of oil output in the U.S. Gulf of Mexico by Friday to brace against Hurricane Rafael. However, the latest forecasts on trajectory and intensity reduced the risks Rafael poses to oil production.”Threats of supply outages due to Hurricane Rafael are subsiding as the storms shifts to circling in the center of the Gulf of Mexico for the next five days or so,” Alex Hodes, analyst at brokerage firm StoneX told clients in a note. The storm, which left a trail of destruction in Cuba this week, had weakened to a Category 2 hurricane on Friday, according to the U.S. National Hurricane Center’s latest advisory.Meanwhile, top oil importer China’s latest round of fiscal support disappointed oil investors. Chinese authorities announced a package easing debt-repayment strains for local governments, but those measures do little to directly target demand, UBS analyst Giovanni Staunovo said.”I guess some market participants were hoping for more stimulus measures coming from China,” he said. “Hence, the disappointment weighing on prices earlier today.”Deflationary pressures on the Chinese economy have been a heavy drag on oil prices this year, with customs data showing a sixth consecutive month of year-over-year declines in the country’s crude oil imports for October.Despite Friday’s losses, oil prices gained more than 1% week-over-week, drawing support from expectations of tighter sanctions on Iran and Venezuela by U.S. President-elect Donald Trump, which could cut oil supply to global markets.The U.S. Federal Reserve’s decision to cut interest rates by a quarter percentage point on Thursday could also helped lift oil prices by more than 1% in the previous session. More

TOKYO (Reuters) -Bank of Japan policymakers were divided on how soon they could raise interest rates with some warning of the risk of renewed market volatility, a summary of opinions at the October policy meeting showed on Monday (NASDAQ:MNDY).Many in the nine-member board highlighted the need to scrutinise market developments, particularly yen moves, in determining whether Japan’s economy can weather higher borrowing costs, the summary showed.While the risk of a U.S. hard landing has subsided, the BOJ must spend time scrutinising market developments “as it was too early to conclude markets will restore calm,” one member said.Another member said the BOJ must “take time and exercise caution” when raising rates.Others, however, saw the need to communicate clearly the BOJ’s resolve to continue raising rates if its economic and price forecasts are met, the summary showed.”The Bank should consider further rate hikes after pausing to assess developments in the U.S. economy,” one member was quoted as saying, adding that Japan’s economy no longer needed substantial monetary support.At the Oct. 30-31 meeting, the BOJ maintained ultra-low interest rates but said risks around the U.S. economy were somewhat subsiding, signalling that conditions are falling into place to raise interest rates again. More

In its latest stimulus measures, the country’s top legislative body approved a 10 trillion yuan ($1.4 trillion) package on Friday to ease local government “hidden debt” burdens, rather than directly injecting money into the world’s second-biggest economy, as some investors had hoped. Analysts say the package will likely do little to boost economic activity, demand and prices in the near term.The consumer price index (CPI) rose 0.3% from a year earlier last month, slowing from September’s 0.4% rise and marking the lowest since June, data from the National Bureau of Statistics showed, short of the 0.4% increase forecast in a Reuters poll of economists.However, core inflation, excluding volatile food and fuel prices, rose 0.2% in October, accelerating from 0.1% in September.”Due to the Golden Week holiday in October, the effect of stimulus policies on promoting domestic demand issued since late September is not obvious yet,” said Bruce Pang, chief economist at JLL. He expected CPI to maintain an upward trend while core inflation remains mild, opening up space for the authorities to cut interest rates further early next year.China’s central bank in late September unveiled the most aggressive monetary support measures since the COVID-19 pandemic to revive economic growth.MORE SUPPORT EXPECTEDThe highly anticipated stimulus plan passed on Friday by the standing committee of the National People’s Congress may leave investors who speculated on a fiscal bazooka disappointed, as it fell short of expectations for strong policy steps to boost consumption and reflate the economy.Finance Minister Lan Foan indicated on Friday that more stimulus was coming, telling a press conference that tax policies to support the housing market would come soon and that the authorities were accelerating the work of recapitalising banks.Some analysts say Beijing may want to retain some economic ammunition until Donald Trump resumes the U.S. presidency in January.On a month-on-month basis, China’s CPI dropped 0.3%, versus an unchanged outcome in September and below a forecast 0.1% decline.Declining food prices dragged down the month-on-month CPI, Dong Lijuan of the statistics bureau said in a statement.With 70% of Chinese household wealth tied up in the ailing real estate sector, which at its peak made up a quarter of the economy, consumers are holding onto their money tightly, subjecting the economy to deflationary pressures.China’s headline consumer inflation will likely remain low next year at 0.8%, while producer prices will not turn positive until the third quarter of 2025, Goldman Sachs said in a note this month.Producer prices slid 2.9% on year in October, deeper than the 2.8% fall the previous month and below an expected 2.5% decline. It marked the biggest drop in 11 months. Factory-gate deflation deepened in the petroleum and natural gas extraction, oil and coal processing, chemical products manufacturing and auto manufacturing sectors.”The implementation of some better-than-expected counter-cyclical adjustment policies is expected to improve consumption and investment momentum,” said Zhou Maohua, a macroeconomic researcher at China Everbright (OTC:CHFFF) Bank. “But a recovery in the domestic housing market, household consumption and a balance of supply and demand would require some time.”($1 = 7.1785 Chinese yuan renminbi) More

SINGAPORE (Reuters) -Singapore’s biggest lender DBS Group Holdings Ltd (OTC:DBSDY) is exploring expanding into Malaysia with potential acquisitions of stakes in banks in its Southeast Asian neighbour, including in one of Malaysia’s smallest banks by assets, two sources said. DBS is exploring a purchase of Singapore state investor Temasek’s 29.1% stake in Alliance Bank Malaysia Bhd, said the two sources with knowledge of the matter, a slice currently valued at about $460 million. Temasek is biggest shareholder in DBS with a 28.9% stake, according to LSEG data. Other options for expanding into Malaysia include buying Kuwait Finance House’s Malaysian retail banking assets, worth more than $500 million and which have been put up for sale, one of the sources said. Deliberations are in very early stages, however, the sources said, and any formal negotiations for an acquisition of a stake in a Malaysian bank would need approval from the Malaysian central bank, or Bank Negara Malaysia. The two sources declined to be named as talks on the possible acquisitions were confidential. “We do not comment on market rumours and speculation,” said a spokesperson for DBS, Southeast Asia’s biggest lender by assets. Temasek declined to comment. Alliance Bank, the second smallest listed bank in Malaysia by total assets, and Bank Negara Malaysia did not respond to requests for comment after business hours on Friday.Kuwait Finance House said the process for selling its retail banking portfolio in Malaysia was in preliminary stages, and that it was not able to share additional information. DBS is the only Singaporean bank without a retail banking presence in Malaysia. Local rivals Oversea-Chinese Banking Corporation and United Overseas Bank (OTC:UOVEY) both have retail banking operations in Malaysia.DBS’ plan to foray into Malaysia comes amid improving economic prospects for the Southeast Asian nation, with new infrastructure projects and investments expected to result in a surge in credit growth.In the second quarter, Malaysia’s economy expanded by an annual 5.9%, its fastest in 18 months, on higher household spending, exports and investment. Its monetary unit, the ringgit, is Southeast Asia’s best-performing currency this year.’BOLT-ON ACQUISITIONS’ DBS emerged as a regional banking powerhouse under outgoing Chief Executive Piyush Gupta’s 15-year tenure, bolstered by acquisitions that established significant presences in markets including China, India, Indonesia and Taiwan. DBS completed the acquisition of Citigroup (NYSE:C)’s consumer banking business in Taiwan in August last year. In July, Gupta said DBS was looking for bolt-on acquisitions that would support further strategic expansion in the region. Tan Su Shan, who heads up DBS’ institutional banking group and is deputy CEO, will take over from Gupta in March next year, making her the first woman to lead the bank. On Thursday, DBS posted its highest ever quarterly net profit for July-September on record fee income. DBS last attempted to buy Temasek’s stake in Alliance Bank in 2012. Those plans did not go through because of regulatory hurdles, according to sources at the time. The current Malaysian government under Prime Minister Anwar Ibrahim has been more forthcoming and open to ideas and investments with an aim to boost economic growth, said the sources with knowledge of DBS’ plan for Malaysia.  More

Below are the key details of the plan: THE MEASURES Authorities increased the amount of debt local governments are allowed to raise through special bonds by 6 trillion yuan ($836 billion) over the next three years. This raises their special bond quota to 35.52 trillion yuan, and their overall debt ceiling to 52.79 trillion. China’s local government debt under official quotas was at 40.74 trillion yuan at the end of 2023, finance ministry data show. The new funds will help repay debt accumulated through local government financing vehicles (LGFVs), which Beijing refers to as “hidden debt”, given that local administrations used them to circumvent the official debt limits. Additionally, local governments will be allowed to use 800 billion yuan per year for the next five years in debt issuance already approved by Beijing, also for paying back the loans, bonds and shadow credits of LGFVs. Beijing said local officials responsible for reckless borrowing would be investigated and held accountable and that China will speed up LGFV reforms to better control debt. THEIR IMPACT Local governments, facing high debt and falling revenues, have been cutting civil servants’ pay and delaying payments to contractors, choking money flows to the real economy and fanning deflationary pressures. Their strains, stemming from a severe property crisis since 2021 that decimated revenues from residential land auctions to developers – a key source of funds for cities and provinces – had put China’s 2024 growth target of roughly 5% at risk. Officials estimate swapping hidden for official debt will save 600 billion yuan in interest for local governments over five years. Having money available for principal repayment also eases cost-cutting pressures on these administrations. The finance ministry estimates “hidden debt” was at 14.3 trillion yuan at the end of 2023. Authorities plan to trim that to 2.3 trillion yuan by 2028, with officials saying about 2 trillion yuan in past debts accumulated for shanty town renovation programmes will also be repaid by 2029. The International Monetary Fund, however, estimates LGFV debt amounted to 60 trillion yuan at the end of 2023, or 47.6% of gross domestic product. WHAT ABOUT REAL STIMULUS? While the debt swap programme unclogs money pipes to the real economy, it marks a departure from the fiscal packages China unleashed during past episodes of economic slowdown or market turmoil, when vast sums were spent on urbanisation and infrastructure. In part, that’s because those past stimulus programmes are what caused debt to spike in the first place. Still, Finance Minister Lan Foan said on Friday more support is coming. Authorities plan measures to reduce a giant inventory of unsold homes and repurchase idle land from developers; to recapitalise big state banks; and to expand subsidy schemes to factories for upgrading equipment and to consumers for replacing old appliances and other goods. Lan gave no details on the size and timing of these measures. WHAT’S NEXT?Key meetings this year may provide more hints.The Communist Party’s top decision making body, the politburo, convenes again at the end of the month. Leaders are also holding the annual Central Economic Work Conference in December to discuss growth targets and policies for next year.Growth headwinds are about to intensify as Donald Trump returns to the White House in January. Trump threatened tariffs in excess of 60% on U.S. imports of Chinese goods, rattling China’s industrial complex. Analysts say Beijing may be saving fiscal ammunition for the next round of its trade war with Washington. ($1 = 7.1785 yuan) More

(Reuters) – A look at the day ahead in Asian markets. Investors in Asia have their first chance on Monday (NASDAQ:MNDY) to react to a batch of key economic indicators and news out of China, and should do so in a relatively bullish frame of mind after the record-setting rally on Wall Street on Friday.The S&P 500 rose above 6,000 points for the first time, continuing its powerful rally following Donald Trump’s victory in the U.S. presidential election on Tuesday and the Federal Reserve’s interest rate cut on Thursday.That sealed a weekly gain of almost 5%, the S&P 500’s best week since September 2023. This helped lift the MSCI World equity index to a new high on Friday, too.It is worth recapping how monumental last week was for world markets – the U.S. election and Fed rate cut super-charged risk appetite and the dollar, while investors also navigated a UK rate cut and the collapse of the German government.The news flow from China was potentially no less significant for investors, although the outlook is not quite as uniformly bullish for local or risk assets. China unveiled a 10 trillion yuan ($1.4 trillion) debt package to ease local government financing strains and stabilize flagging economic growth. But this will disappoint investors, who had built up hopes for something special to pre-empt another round of fractious Sino-U.S. tensions and trade barriers.And on Saturday, official figures showed that inflation in China remains weak, an indication that the economy’s revival and path to reflation will be slow and long. Producer prices in October slid 2.9% on the year – deeper than the 2.8% fall in September, below an expected 2.5% decline, and the biggest drop in 11 months. Annual consumer price inflation slowed to 0.3% from 0.4%, the slowest in four months.While investor sentiment globally looks strong, the optimism that exploded around China in the wake of Beijing’s wave of stimulus measures in September is fading. Mainland China saw net outflows for the fourth consecutive week, according to Goldman Sachs. SocGen analysts advise caution on China, noting that the risk of higher U.S. tariffs on China and other parts of Asia is very real, implying lower growth in Asia and a stronger dollar against Asian currencies. They now expect USD/CNY to peak at 7.40 in the second quarter of next year, arguing that China’s stimulus measures may not fully compensate for the increased tariff risk. The dollar is certainly on a tear. It clocked its sixth weekly gain in a row last week against a basket of major currencies, something not seen since August-September 2023.Here are key developments that could provide more direction to markets on Monday:- Japan trade and current account (September)- Japan money supply (October)- Japan corporate earnings More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.We kick off the next seven days with the start of the world’s most important climate negotiation event, the UN COP29 summit in Azerbaijan’s capital city Baku. Choosing an economy highly dependent on oil sales to host the two-week gathering of politicians, business executives and activists was a contentious decision when it was announced, made more so last week when video footage emerged showing the chief executive of Azerbaijan’s COP29 team, Elnur Soltanov, discussing “investment opportunities” in the state oil and gas company.To make matters worse, the summit that organisers had dubbed “the finance COP” is expected to be shunned by prominent financiers, including the bosses of Bank of America, BlackRock, Standard Chartered and Deutsche Bank, according to FT sources. FT Live will be part of the action, however, hosting debates on the summit’s key announcements and agreements. Register for free at ftcop.live.ft.com.Elsewhere, and while the US further digests the implications of a second Donald Trump presidency, the current man in the job, Joe Biden, is boarding a plane to South America. He begins a state visit to Peru and Brazil on Thursday where he will meet the two countries’ leaders and take part in the Asia-Pacific Economic Cooperation summit, this year being held in Lima. In the UK, chancellor Rachel Reeves and Bank of England governor Andrew Bailey will be explaining themselves to senior bankers and other bosses from the country’s financial services sector at the annual Mansion House dinner, so called because it is held at the official residence of the City of London’s Lord Mayor. This year’s after dinner speeches will be delivered at a key moment, with Reeves’ late October Budget still fresh in the memory and concerns raised about the subsequent challenges now faced by the bank in taming inflation.Some content could not load. Check your internet connection or browser settings.The run of economic data reports picks up this week. For the US, there will be various key indicators of the state of the economy Trump will inherit, with fresh updates on inflation — the headline figure is expected to rise slightly while core inflation trends lower — retail sales and industrial production numbers. The scale of China’s challenge in restoring growth is the backdrop to its publication of retail sales, industrial production and property data. Meanwhile, the UK number-crunchers make available the latest labour market figures and, along with Japan and the EU, have a first stab at third-quarter GDP.There will also be a smattering of earnings calls, including mobile and broadband provider Vodafone, fresh from getting the Competition and Markets Authority nod for its £16.5bn merger with Three UK, and fashion brand Burberry, itself a takeover target in the ailing market for luxury goods. One more thing . . . Thank you to my newsletter colleague Harvey for filling in last week, giving me a few days at home assisting/haranguing my youngest two children, on half-term break, to stay on track revising for pre-Christmas GCSE mock exams and completing the dreaded statement for university applications. Next we enter the season of getting ready for Christmas itself, and the FT’s HTSI has got in early for those with an eye on dates by picking the best luxury advent calendars.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayUK: CIPD Labour Market OutlookResults: Continental 9M, Direct Line Q3 trading update, IAC Q3,TuesdayOpec November Oil Market ReportGermany: October consumer price index (CPI) and harmonised index of consumer prices (HICP) inflation rate dataIndia: October CPI inflation rate dataUK: November labour market statistics, including the unemployment rateUS: National Federation of Independent Business (NFIB) October Business Optimism IndexResults: AstraZeneca Q3, Bayer Q3, Home Depot Q3, Infineon Technologies Q4, Oxford Instruments HY, SoftBank Q2, Spotify Q3, Vodafone HY WednesdayFrance: ILO Q3 unemployment rateRussia: Q3 GDP first releaseUS: October CPI inflation rate dataResults: ABN Amro Bank Q3, Allianz Q3, Alstom HY, Bertelsmann Q3, Cisco Systems Q1, Experian HY, Fuller, Smith & Turner HY, RTL Q3, RWE Q3, Smiths Group Q1 trading update ahead of AGM, SSE HY, Tencent Q3ThursdayBank of England governor Andrew Bailey speaks alongside UK chancellor Rachel Reeves at the annual financial and professional services dinner at the City of London’s Mansion HouseFederal Reserve chair Jay Powell takes part in the Global Perspectives event in DallasReserve Bank of Australia governor Michele Bullock speaks on a panel debate about the state of the economy at the ASIC Annual Forum in SydneyIEA Oil Market ReportEU: Q3 GDP estimateUK: RICS Residential Market SurveyUS: October producer price index (PPI) inflation rate dataResults: 3i Group HY, Applied Materials Q4, Asahi Q3, Aviva Q3 trading update, B&M European Value Retail HY, Burberry HY, Deutsche Telekom Q3, Eon Q3, First Group HY, Foxconn Q3, Great Portland Estates HY, Keller Group trading statement, Kier Group trading update, Metro Bank Q3, Premier Foods HY, Qinetiq HY, Siemens FY, Swiss Re 9M, United Utilities HY, Walt Disney Company Q4, WHSmith FYFridayChina: October industrial production and retail sales figuresEU: Autumn Economic Forecast for GDP, inflation, employment and public finances in the Eurozone areaFrance: October CPI and HICP inflation rate dataIndia: Guru Nanak’s Birthday. Financial markets closedJapan: flash Q3 GDP estimateUK: flash Q3 GDP and productivity estimates.US: October retail sales and industrial production figures.Results: Alibaba Q3, Land Securities HY, Lenovo Q2World eventsFinally, here is a rundown of other events and milestones this week. MondayArmistice Day (commemorated in the US as the federal holiday Veterans Day), marking the date that first world war ended in 1918, in which countries now pause to honour all those who have given their lives in times of conflictAzerbaijan: COP29, bringing together governments from 197 countries, plus the EU, to check progress on meeting climate change targets, begins in Baku StadiumChina: Singles Day, an annual holiday created for unmarried people, used by retailers as an opportunity to push store salesUK: Kemi Badenoch, the Conservative party’s new leader, is due to give evidence relating to her time as business and trade secretary to the Post Office Horizon IT Inquiry, the investigation into the scandal of sub-postmasters being wrongly accused of theft when the software system they were using was at faultTuesdayChina: 15th Airshow China opens in Zhuhai. The biennial event runs until SundayUK: The Booker Prize, the most prestigious award for English language fiction writers, is announced at a ceremony in LondonWednesdaySomaliland: the breakaway region of Somalia holds a presidential election, whose outcome could affect the future of a port deal with Ethiopia that has raised tensions with MogadishuThursdaySri Lanka: parliamentary electionsUK: 76th birthday of King Charles. Military gun salutes will take place across the country to mark the eventUS: President Joe Biden begins a state visit to Peru and BrazilFridaySaturdaySundayRecommended newsletters for youInside Politics — What you need to know in UK politics. Sign up hereUS Election countdown — Money and politics in the race for the White House. Sign up here More

Last month the ECB cut interest rates for the third time this year and four sources close to the decision told Reuters a fourth cut was likely in December unless data turned around in the coming weeks.”As things look at the moment, it is possible (that there will be a cut in December). There is nothing at the moment that would argue against that but that does not mean it will automatically happen,” Holzmann, who heads the Austrian National Bank, said in an interview with the Kleine Zeitung newspaper.”We do not have the latest forecasts and data. We will receive those in December. We will decide on that basis, yes or no,” he said.Holzmann said last month a week after the latest rate cut that a cut of 25 basis points was possible in December while at the same time repeating that it would depend on the economic data available at the time. More