Economy

LONDON (Reuters) -The dollar headed for its best weekly performance in a month on Friday, as investors priced in the possibility of the Federal Reserve cutting rates more slowly next year, while sterling fell after a surprise contraction in UK economic activity.The U.S. currency held firm against the euro and Swiss franc following rate cuts by those central banks a day earlier, and rose against the yen after reports that the Bank of Japan could forgo a rate hike at its meeting next week.The dollar index, which measures the currency against six others, was flat at 106.94, but still set for a weekly gain of nearly 1%, its biggest in a month.U.S. data on Thursday showed the job market is gradually cooling in line with expectations, while producer price inflation helped reinforce the market’s current scenario of a Fed cut on Dec. 18, but a slower pace of reductions in 2025.Markets fully expect a cut at the upcoming meeting, but only price a roughly 24% chance of another one in January, with March the most likely point for another move, according to CME’s FedWatch tool.”What is clear from recent Fed speakers and the data flow is that progress toward the inflation target has slowed down and the economy has continued to perform, therefore policymakers can afford to take a more cautious approach to easing over 2025,” said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY).San Francisco Fed President Mary Daly, for example, said this month that she was comfortable cutting rates in December, but advocated “a more thoughtful and cautious approach” on further reductions.The dollar rose 0.5% to 153.465 yen its highest since late November. The yen has been the worst performer this week against the dollar, which has gained 2% on the Japanese currency. Traders see just a 23% chance of a quarter-point hike by the BOJ on Dec. 19, following reports by Reuters and Bloomberg that pointed to officials forgoing tightening this time in order to wait for more evidence of wage growth and see how U.S. policy takes shape under incoming president Donald Trump. “While the outcome is uncertain, one thing is clear: a hike exceeding 15 bps would likely trigger a downside move in dollar/yen as the yen strengthens,” City Index market analyst David Scutt said.”On the other hand, if the BoJ keeps rates unchanged, there’s a solid chance of a kneejerk upside reaction.” Either way, the outlook is volatile for this currency pair and likely will be driven by the dollar, he added. EUROPE UNDER PRESSURE In Europe, the pound fell after data showed the UK economy shrank unexpectedly in October, adding to signs of a bigger-than-expected slowdown. The Office for National Statistics said the economy contracted 0.1% in October, compared with forecasts in a Reuters poll for growth of 0.1%.Sterling was last down 0.2% at $1.2647, around its weakest since the start of the month. Against the euro the pound was down 0.48% at 82.985 pence, but still not far off its strongest since June 2016, when the UK voted to leave the European Union.The euro pared earlier losses against the dollar and rose 0.26% to $1.0493. The European Central Bank on Thursday cut rates by 25 basis points and kept the door open to further easing.The Swiss franc remained under pressure after the central bank’s shock half-point rate reduction the day before. The dollar was last up 0.1% at 0.8935 francs, while the euro rose 0.4% to 0.9375 francs.Rate cuts and the threat of the U.S. imposing tariffs have Canada’s dollar pinned to a 4-1/2 year low. [CAD/]The Chinese yuan held at 7.2826 per dollar in the offshore market. Reuters reported this week China is considering allowing its currency to fall further to counter the impact from any U.S. trade war. Bitcoin nudged above $100,000, heading back towards Dec. 5’s all-time high of $103,649. More

He said Thursday’s decision to cut the ECB’s key rate by 0.25 percentage points to 3% was ‘fortunately absolutely consensual’.”In the future, the expectation is that the restrictiveness of interest rates will be reduced,” Centeno, who is also governor of the Bank of Portugal, told a briefing, adding that monetary policy should be normalised in a few quarters’ time, with rates close to 2%, if no new shocks materialise.The ECB cut the key deposit rate for the fourth time this year on Thursday, and kept the door open to more easing as the euro zone economy is dragged down by political instability at home and the threat of a fresh U.S. trade war. More

BEIJING (Reuters) -New bank lending in China rose by far less than expected in November, highlighting weak credit demand in the world’s second-largest economy as policymakers pledge to roll out more stimulus measures.Chinese banks extended 580 billion yuan ($79.72 billion) in new yuan loans in November, up from October but missing analysts’ forecast as the central bank steps up support for the economy.Analysts polled by Reuters had predicted new yuan loans would rise to 990 billion yuan last month, from 500 billion yuan in October and against 1.09 trillion yuan a year earlier.”With policymakers planning a larger budget deficit next year, strong government bond issuance will continue to prop up credit growth over the coming quarters,” Capital Economics said in a note. “But we don’t envisage much of a pick-up in private sector credit demand.”The People’s Bank of China (PBOC) does not provide monthly breakdowns, but Reuters calculated the November figures based on the bank’s Jan-Nov data on Friday, compared with the Jan-Oct figure.The PBOC said new yuan loans totalled 17.1 trillion yuan for the first 11 months of the year, versus 21.58 trillion yuan a year earlier. Household loans, including mortgages, rose to 270 billion yuan in November from 160 billion yuan in October, while corporate loans rose to 250 billion yuan from 130 billion yuan, according to Reuters calculations based on central bank data.China’s leaders, at the annual agenda-setting Central Economic Work Conference that concluded on Thursday, pledged to increase the budget deficit and cut interest rates and banks’ reserve ratios to counter the impact of expected U.S. trade tariffs on next year’s economic growth.Earlier this week, the Politburo promised to switch to an “appropriately loose” monetary policy stance.Reuters reported last month that government advisers recommended that Beijing keep its growth target of around 5% unchanged next year.China’s economy has struggled this year, prompting policymakers to act in September, with the central bank unveiling its most aggressive monetary easing since the pandemic, cutting interest rates and injecting 1 trillion yuan into the financial system, among other steps.The government launched a $1.4 trillion debt package last month to ease local government balance sheets and unveiled tax incentives on home and land transactions to spur demand and ease the financial burden on developers.DIFFICULT TASK China may just be able to reach its growth target of around 5% this year, but maintaining that pace next year would be a difficult task as higher U.S. tariffs loom.Analysts at UBS expect the PBOC to cut its key policy rate by 30-40 basis points in 2025 and another 20-30bp in 2026, which could help lead to more cuts in loan prime rate – the benchmark lending rate – and mortgage rates.Broad M2 money supply grew 7.1% in November from a year earlier, central bank data showed, below analysts’ 7.5% forecast in the Reuters poll. In October, M2 grew 7.5%.The narrower M1 money supply fell 3.7% in November from a year earlier, moderating from a 6.1% drop in October.Outstanding yuan loans grew 7.7% in November from a year earlier. Analysts had expected 7.9% growth, slower than the 8.0% recorded in October.The outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, grew 7.8% in November, unchanged from October – a record low. Acceleration in government bond issuance could help boost growth in TSF.TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies, and bond sales.In November, TSF rose to 2.34 trillion yuan from 1.4 trillion yuan in October. Analysts polled by Reuters had expected TSF of 2.8 trillion yuan.($1 = 7.2754 Chinese yuan renminbi)  More

The 24 workers from Nepal and Bangladesh, one of whom has died and whose estate brought the case, sued Dyson Technology Ltd, Dyson Ltd and a Malaysian subsidiary in 2022.The claimants were workers for Malaysian firm ATA Industrial or its sister company and made components for Dyson products. Their lawyers say the workers had money unlawfully deducted from their wages and were sometimes beaten for not meeting onerous targets, alleging in a lawsuit at London’s High Court that the Dyson companies were ultimately responsible.Dyson, whose Malaysian subsidiary cancelled its contract with ATA in 2021, denies the claimants’ allegations and argued that any lawsuit should be brought in Malaysia rather than Britain.Last year, the High Court threw the case out and ruled that the workers could sue in Malaysia.But the Court of Appeal overturned that decision, saying in a written ruling that London was “clearly and distinctly the appropriate forum” for the cases to be heard.”This was a procedural hearing to determine where the main case should ultimately be heard,” a Dyson spokesperson said. “The High Court was right last year in its carefully considered ruling that it should be heard in Malaysia and we disagree with today’s appeal decision,” the spokesperson added, explaining that Dyson was reviewing its legal options.The company – founded by James Dyson, the inventor of the bagless cleaner – employs around 2,500 people in Britain, including at its R&D centre in Malmesbury, west England, having announced in July that it was cutting about 1,000 jobs. More

Investors snapped up global equity funds worth a net $10.18 billion during the week, following about $21.19 billion worth of net purchases in the prior week, LSEG Lipper data showed.Last week’s U.S. employment report showed a surge in job growth for November, rebounding from disruptions caused by hurricanes and strikes, but the unemployment rate increased to 4.2%, signaling a loosening labor market that could prompt the Federal Reserve to cut interest rates again this month.U.S. equity funds continued to attract investors for a sixth consecutive week, receiving net inflows of $6.36 billion. European funds gained $3.24 billion, but Asian funds experienced a net outflow of $278 million.Sectoral funds faced their first weekly outflow in five weeks, totaling a net $1.94 billion. Notably, healthcare, technology and consumer discretionary sectors saw outflows of $1.08 billion, $654 million and $616 million, respectively.Global bond funds marked their 51st consecutive week of net investments, attracting $10.19 billion.Corporate bond funds led with a robust $3.21 billion – the highest weekly inflow since September 18 – while loan participation funds recorded their 12th consecutive weekly inflow, totaling $1.32 billion.Last week, investors liquidated $16.29 billion from money market funds, following substantial purchases of $169.16 billion the previous week. In commodities, the energy segment experienced a net outflow of $256 million, marking its third weekly loss in four weeks, while gold and precious metal funds saw net inflows of $190 million. Data covering 29,593 emerging market funds showed that investors withdrew $2.35 billion from equity funds for the fifth consecutive week, while bond funds saw $721 million in net sales. More

PARIS (Reuters) – French President Emmanuel Macron on Friday named Francois Bayrou his fourth prime minister of 2024, tasking the veteran centrist with steering the country out of its second major political crisis in the last six months. The priority for Bayrou, a close Macron ally, will be passing a special law to roll over the 2024 budget, with a nastier battle over the 2025 legislation looming early next year. Parliamentary pushback over the 2025 bill led to the downfall of former Prime Minister Michel Barnier’s government.Bayrou, 73, is expected to put forward his list of ministers in the coming days, but will likely face the same existential difficulties as Barnier in steering legislation through a hung parliament comprising three warring blocs. His proximity to the deeply unpopular Macron will also prove a vulnerability.France’s festering political malaise has raised doubts about whether Macron will complete his second presidential term, which ends in 2027. It has also lifted French borrowing costs and left a power vacuum in the heart of Europe, just as Donald Trump prepares to return to the White House.Macron spent the days after Barnier’s ouster speaking to leaders from the conservatives to the Communists, seeking to lock in support for Bayrou. Marine Le Pen’s far-right National Rally and the hard-left France Unbowed were excluded.Any involvement of the Socialist Party in a coalition may cost Macron in next year’s budget.”Now we will see how many billions the support of the Socialist Party will cost,” a government adviser said on Friday.NO LEGISLATIVE ELECTION BEFORE SUMMER Macron will hope Bayrou can stave off no-confidence votes until at least July, when France will be able to hold a new parliamentary election, but his own future as president will inevitably be questioned if the government should fall again. Bayrou, the founder of the Democratic Movement (MoDem) party which has been a part of Macron’s ruling alliance since 2017, has himself run for president three times, leaning on his rural roots as the longtime mayor of the south-western town of Pau. Macron appointed Bayrou as justice minister in 2017 but he resigned only weeks later amid an investigation into his party’s alleged fraudulent employment of parliamentary assistants. He was cleared of fraud charges this year.Bayrou’s first real test will come early in the new year when lawmakers need to pass a belt-tightening 2025 budget bill. However, the fragmented nature of the National Assembly, rendered nigh-on ungovernable after Macron’s June snap election, means Bayrou will likely be living day-to-day, at the mercy of the president’s opponents, for the foreseeable future.Barnier’s budget bill, which aimed for 60 billion euros in savings to assuage investors increasingly concerned by France’s 6% deficit, was deemed too miserly by the far-right and left, and the government’s failure to find a way out of the gridlock has seen French borrowing costs push higher still.(This story has been corrected to to show Bayrou is Macron’s fourth, not third prime minister of 2024, in paragraph 1) More

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The euro zone’s central bank cut interest rates for the fourth time this year on Thursday and kept the door open to more easing, although some analysts felt President Christine Lagarde’s signal in that direction was less clear than they had hoped for.French central bank governor Francois Villeroy de Galhau, his Spanish colleague Jose Luis Escriva, Austria’s Robert Holzmann and Luxembourg’s Gaston Reinesch appeared to sharpen the message on Friday. “There will be further rate cuts next year,” Villeroy told France’s BFM business radio.Speaking on Spanish TV, Escriva added it was “logical” that the ECB would “lower interest rates again at future meetings” if inflation continued to converge to target. It was 2.3% in November. The ECB lowered the rate it pays on banks’ reserves by 25 basis points to 3.0% on Thursday and investors expect at least another 100 basis points worth of cuts by June.Lagarde refused to speculate about the future path for rates, flagging risks ranging from possible U.S. tariffs to political uncertainty at home, where France is currently without a government and Germany faces new elections, as well as stubbornly high domestic inflation.Villeroy, a centrist who has become increasingly supportive of easier policy in recent months, threw his weight behind market pricing.”I note that we are collectively rather comfortable with the financial markets’ interest rate forecasts for next year,” he said.Even Austria’s central bank governor Robert Holzmann, a hawk who was once the lone dissenter against easing, backed the return of rates to a neutral level, which neither stimulates nor curbs the economy, of around 2%.”Interest rates will go in that direction,” he told reporters. “If the market assessments as they are at the moment come true, then they will match our forecasts. And if our forecasts match, then we will probably have to adjust our interest rates to be consistent.”Luxembourg’s Reinesch, who rarely discusses policy in public, told local media RTL that it would “not be unreasonable” for the deposit rate to “decrease to 2.5% by early spring”, likely implying back-to-back 25 bp cuts in January and March. Escriva played down the prospect of a larger 50 bp rate cut, an option has been raised by some of his colleagues and adopted by central banks in Switzerland and the United States. “In the discussions we had yesterday, the idea that prevailed is that we should keep having moves of 25 basis points downwards, which is the form that will allow us to keep evaluating the effects in terms of disinflation,” the recently appointed Spanish governor said. More