Economy

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Any downward pressure on banks’ margins would be countered, at least in part, by a “more favourable evolution of the volume of activity,” the bank said in its semiannual financial stability report.Spanish banks benefited when interest rates rose following an inflation hike in 2022 and 2023 by increasing the rates they charged on loans, while limiting the rates they paid on deposits.That tailwind is now reversing and European lenders are having to adapt to a changing market environment as benchmark interest rates fall.In the first half of this year, the consolidated net profit at Spanish banks rose 22% year-on-year, boosting their return-on-equity ratio (ROE) by 2.2 percentage points to 13.9%.Net interest income, earnings on loans minus deposit costs, rose 14.5% year-on-year to June, down from a 27% rise in the first half of 2023.Banks expect lower borrowing costs will bolster lending activity. Against that backdrop, the stock of loans to the private sector in Spain has returned to an upward trend and grew a seasonally adjusted 0.5% between May and August.The central bank said the main risk to the banks’ stability was a possible escalation of tensions in the Ukraine and the Middle East as well as the outcome of the U.S. elections because of potential repercussions on trade relations. More

UK Chancellor Rachel Reeves detailed £40 billion of tax hikes to plug shortfalls while also adding just over £30 bn in annual borrowing to the previous government’s Spring Budget projections.Following on from the budget, gilt yields have risen. Short-term interest rate expectations have picked up, and higher interest costs have added effectively another £5 bn in debt servicing costs to the Chancellor’s bill, eating further into her fiscal headroom.“To be sure, for the Autumn Budget to pay off, we will need to see a bigger growth dividend from both day-to-day spending and capex. At present, the OBR expects sustained growth improvement to only crystalise between 2030 and 2035. The faster it does, the better,” analysts at Deustche Bank aid, in a note dated Nov. 5.Following the Budget, Reeves noted that the public finances were now unequivocally on stabler footing. However, “despite the big tax raising event, big challenges remain for the Chancellor. New fiscal rules have shifted the fiscal headroom arithmetic – but given that the Chancellor has opted to use much of this, fiscal constraints will continue to be a big feature of future fiscal events,” the German bank added.And more risks linger going forward. “The Chancellor may have to return to raise more taxes or cut spending – or more borrowing may ultimately be inevitable over the course of parliament’s session,” Deutsche Bank said. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to receive the newsletter every weekday. Explore all of our newsletters hereGood morning and welcome back to FirstFT. Today we’re covering:After a tumultuous campaign that has seen two assassination attempts, a candidate withdraw and months of deadlocked polls, we have finally made it to voting day.After entering the race for the White House only in July after President Joe Biden withdrew, Kamala Harris made her final pitch to voters outside the Philadelphia Museum of Art in Pennsylvania. She gave voters an upbeat message and called on them to back her “fresh start” for America. Donald Trump was also in Pennsylvania, the biggest prize of the seven swing states, on the final day of campaigning where he focused on his key themes of the economy and immigration. He promised supporters in Pittsburgh a new “golden age” before finishing his campaign in Grand Rapids, Michigan, at 2am. Both candidates revealed last-minute endorsements to cheering supporters. Harris was backed by rapper Fat Joe, whose parents are of Puerto Rican and Cuban descent. He called on Latinos to vote for Harris.Trump, meanwhile, was backed by podcaster Joe Rogan, who has a large, young male following, and Fox News host Megyn Kelly at the Pittsburgh rally.In the closing days of campaigning the Harris camp has been lifted by polling that suggests support from late-breaking undecided voters, particularly women who have been flocking to her and the message on reproductive rights. Trump, on the other hand, has tapped into male anxieties and grievances to build up a strong lead among male voters. What to look out for as results come in: Expect a long evening. Polls will start closing at 6pm Eastern time (11pm GMT), with the last polls closing at midnight ET in Alaska. News agencies will project results for each state, not just for the presidency but also for races in the House of Representatives and Senate. The winner needs 270 of the 538 electoral college votes to clinch the presidency. The FT will be following the results as they are announced on this live map.But we may not have a clear result for several days. Each of the swing states counts votes at different speeds, with Arizona, for instance, estimating it could take 10 to 13 days to report full results. Razor-thin margins could lead to recounts, and legal challenges could drag out the process. Just after midnight local time, the tiny hamlet of Dixville Notch, New Hampshire, became the first to declare results, with Trump winning three votes and Harris winning three. Make sure you are signed up to receive our US election newsletter, with editions both today and tomorrow. And here is more analysis, including on how authorities are braced for the prospect of civil unrest, the corporate winners and losers and Mohamed El-Erian on the five crucial economic areas for the incoming president.Here’s what else we’re watching today:Results: Apollo Global, Ferrari, Burger King owner Restaurant Brands and commodities group ADM report results.Five more top stories1. Boeing workers have voted by 59 per cent to support an improved pay offer and end their strike. The industrial action, which began on September 13, has cost Boeing an estimated $50mn a day and halted production of the 737 Max at Boeing’s Washington factories. Here’s more on the terms of the deal. 2. Shares in Palantir Technologies surged as much as 15 per cent in after-hours trading yesterday as Peter Thiel’s data analytics group reported record quarterly income and raised its revenue forecast, citing high demand for its artificial intelligence software. Read the full story.3. Ukrainian officials said yesterday that their forces had fired at North Korean soldiers for the first time since the latter’s deployment by Russia to its western Kursk region. The clashes mark the first direct intervention by a foreign army since Russia’s full-scale invasion of Ukraine began in 2022. We have more updates.4. Taiwan’s soaring energy prices and growing outages are affecting TSMC, the world’s largest chipmaker. Following a series of price increases, the company now expects to pay more for power in its home country than anywhere else. Here’s how Taiwan’s shaky energy transition is straining its industry.5. Lawsuits over decisions taken by previous governments in Argentina, from expropriations to changes to bond payments, are winding their way through courts in the US and Europe, and plaintiffs are piling pressure on the government of Javier Milei to negotiate. Billions of dollars in damages are at stake and could complicate the president’s attempts to fix the country’s struggling economy.The Big Read© FT montage/GettyOver the past three years, Europe’s largest economy has slowly but steadily sunk into crisis. Germany has seen no meaningful quarterly real GDP growth since late 2021, and annual GDP is poised to shrink for the second year in a row, with the car, chemicals and engineering sectors all in a slump. What is happening right now is “unprecedented”, one analyst said, and “of a completely different order of magnitude” from previous crises.We’re also reading . . . Israel unbound: Buoyed by military gains, Israeli Prime Minister Benjamin Netanyahu now wants to dismantle Iran’s forces across the Middle East and reshape the region.Chinese property: After a more than three-year slowdown, there are some signs of life in the country’s real estate market. But interviews in six cities show there are lingering doubts about its longer-term prospects.Trade policy: Politicians reach easily for tariffs, but problems such as climate change and inequality have more effective but less popular solutions, writes economist Minouche Shafik.Chart of the dayThe frenzied contest between Trump and Harris, and Joe Biden before her, has generated reams of data, shedding light on US public opinion and voter attitudes on everything from the economy and foreign policy to the candidates’ character. Here are seven charts that have defined the 2024 presidential election.Some content could not load. Check your internet connection or browser settings.Take a break from the newsQuincy Jones worked with artists including Michael Jackson, Frank Sinatra and Billie Holiday More

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The East African nation secured a $3.4 billion, four-year financing program from the IMF in July after carrying out a series of reforms including floating its birr currency. It is also in the midst of a fresh push to put its debt restructuring back on track.”An increase in near-term target is warranted by Ethiopia’s vulnerabilities and heightened uncertainty around outlook,” the IMF said in a report published late on Monday.Lower-than-expected volumes of hard currency sales by the central bank through auctions and higher gold exports contributed to an over-performance of the net international reserves target for August, the IMF said. The net international reserves stood at $1.3 billion in mid-August, more than double the target of $630 million, the Fund said. It raised the end-June 2025 target by $300 million to $400 million, to help create a buffer for the country to settle maturing letters of credit for fuel imports issued before reforms started.The flotation of the birr currency resulted in the convergence of the official and the black market rates, the IMF said, but market activities had picked up at a slower pace than expected, leading to persistent unmet demand for dollars.Ethiopia plans to reach a deal with bilateral creditors by year-end, the Fund said, followed by a deal with its Eurobond investors “as soon as is feasible” after that.Bondholders have rejected the size of the proposed reduction in the principal amount, known as a haircut, indicated at 18% in a recent investor presentation, saying the government was ignoring the fact that Ethiopia faces a liquidity issue, not an insolvency one. “The authorities are making good faith efforts to agree terms with Eurobond holders,” the IMF said. More

1. US Election DayMany Americans will head to the polls on Tuesday to cast their ballots in the US presidential election, in what is shaping up to be one of the closest races in modern political history.Donald Trump and Kamala Harris were campaigning furiously across key battleground in the final day before the vote as they tried to secure any last-minute support. In her final rally in the all-important state of Pennsylvania, Harris argued America was ready for a “fresh start.” Trump, meanwhile, urged his backers to vote in his last event in Michigan, another state with huge election implications.Trump and Harris are locked in a virtual tie heading into Election Day, especially in the crucial swing states that will likely heavily impact the outcome of the election.Investors will be closely monitoring the returns, with the winner’s policies set to potentially have a major influence on everything from the oil and gas sector and Big Tech to electric vehicles and financial services.2. Futures mutedUS stock futures hovered just above the flatline on Tuesday, with markets awaiting the election results, gauging a raft of quarterly corporate earnings, and eyeing an upcoming Federal Reserve interest rate decision.By 03:30 ET (08:30 GMT), the Dow futures contract was mostly unchanged, S&P 500 futures had risen by 3 points or 0.1%, and Nasdaq 100 futures had inched up by 28 points or 0.1%.The main averages on Wall Street ended slightly lower on Monday, as uncertainty clouded over a week filled with possibly market-moving events. A poll suggesting Harris held an advantage in the typically conservative-leaning state of Iowa hit so-called “Trump trades” like the US dollar and Bitcoin. Her chances of winning also improved on online betting markets, which traders have been using to assess election expectations.”The narrative is shifting in a pro-Harris direction […] but given that the race still seems extremely close, people are reluctant to have on massive Harris or Trump trades,” analysts at Vital Knowledge said in a note.3. Boeing workers vote to end strikeStriking Boeing (NYSE:BA) workers voted in favor of the planemaker’s latest contract offer on Monday evening, ending a long-running labor action that had severely disrupted production for nearly two months.Local media reports from Seattle said 59% of striking workers voted in favor of a new contract, which will entail wage hikes of 38% over the next four years. But the contract still did not include the return of a defined-benefit pension plan scrapped a decade ago.Monday’s vote was the third time the workers voted on a contract offer from Boeing, having rejected two prior proposals. Roughly 33,000 machinists on the US West Coast have been on strike.The work stoppage began on September 13 and halted most of Boeing’s plane production while also costing the firm about $100 million a day in lost revenue.4. Chinese stocks, Bitcoin rise ahead of electionChinese stocks advanced on Tuesday, outperforming other Asian markets, as investors assessed the US election and data showing faster-than-expected growth in China’s services sector in October.The Shanghai Shenzhen CSI 300 jumped by 2.5% and the Shanghai Composite rose 2.3%, while Hong Kong’s Hang Seng index added 2.0%. Comments from China’s Premier Li Qiang that included a vow to further open up the country’s economy also bolstered sentiment.Still, regional markets in Asia took middling cues from the negative session on Wall Street, with anticipation over a tight race between Trump and Harris keeping investors on edge.Elsewhere, the price of Bitcoin increased, paring back losses from the prior week. The world’s most popular digital token, which has become somewhat of a proxy for Trump’s chances after the former president positioned himself as a champion of the cryptocurrency industry, had been dented in the prior session by the unexpected Iowa poll.5. Oil steadiesOil prices stabilized Tuesday, after the previous session’s strong gains, with the proximity to the extremely tight US presidential election limiting trading ranges.By 03:30 ET, the Brent contract gained 0.2% to $75.22 per barrel, while U.S. crude futures (WTI) traded 0.2% higher at $71.58 a barrel.Both benchmarks had registered gains of over 2% on Monday after the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, announced that it will again delay a planned output hike of 180,000 barrels per day by at least a month.This was the second time OPEC+ has extended its 2.2 million bpd cut, illustrating how concerned the producing countries are about global demand. More

TOKYO (Reuters) – The Bank of Japan is likely to raise interest rates in coming months with January emerging as the most likely timing, when there will be more clarity on political and market developments, former BOJ board member Makoto Sakurai said on Tuesday.The central bank will eventually aim to raise short-term borrowing costs – currently at 0.25% – to 1.5% or 2% by the end of Governor Kazuo Ueda’s term in April 2028, he said.”The BOJ probably wants to hike rates once more by March next year. The exact timing will depend much on market and political developments,” Sakurai told Reuters in an interview.”With domestic politics still in flux, acting in December might be tricky. January seems to be more likely as the BOJ would have more data including on whether consumption and wage growth will hold up,” said Sakurai, who retains close contact with incumbent policymakers.But the chance of a December rate hike would heighten if the yen resumes its decline towards the three-decade trough near 162 to the dollar hit in July, Sakurai said. The dollar stood at 152.45 yen on Tuesday.”Governor Ueda emphasised his resolve to keep raising rates at last week’s news conference, which seems to reflect the BOJ’s desire to avoid triggering excessive yen falls,” Sakurai said.The dollar fell below 152 yen on Thursday when the BOJ kept rates steady, but signaled the chance of near-term action by dropping language that it can “afford to spend time” scrutinising the fallout from U.S.-related downside risks.The BOJ next meets for a policy meeting on Dec. 18-19, followed by another meeting on Jan. 23-24.The BOJ made a landmark exit from a decade-long stimulus programme in March and raised its short-term policy target to 0.25% in July on the view Japan was making progress towards sustainably hitting its 2% inflation target.Ueda has stressed the BOJ’s readiness to keep raising rates if the economy and prices move in line with its forecast.While most analysts expect the BOJ to hike again by the March end of the current fiscal year, they are split on whether the bank would act in December – or wait until January or March.The loss of a majority by Japan’s ruling coalition in an election on Oct. 27 has heightened concerns about policy paralysis with Prime Minister Shigeru Ishiba being forced to court opposition parties to stay in power.The political uncertainty, coupled with potential market turbulence after the U.S. presidential election, could prod the BOJ to stand pat in December, Sakurai said.Another key factor for the BOJ is whether wage hikes would broaden to smaller firms and underpin consumption, he added.After hiking rates again by March next year, the BOJ will probably aim to raise short-term rates once or twice a year from fiscal 2025 to 2027, to bring it to 1.5% or 2%, Sakurai said.”There’s too much uncertainty to predict the exact pace of further rate hikes. But the BOJ is probably hoping to hike rates to around 2% in the long-term horizon,” he added.Japan’s expected huge debt issuance and political calls for bigger fiscal spending, however, could constrain the BOJ’s plan to taper its bond purchases, Sakurai said.The BOJ announced in July a plan to halve its monthly JGB buying to 3 trillion yen ($19.7 billion) as of January-March 2026, which would reduce its huge balance sheet by up to 8%.The central bank will conduct a review of its existing quantitative tightening (QT) programme in June next year, to come up with a tapering plan from April 2026 onward.While the BOJ may prefer to further reduce its bond buying, it may find it hard to do so given expected increases in debt issuance to pay for roll-overs of maturing bonds and additional spending plans, Sakurai said.”The BOJ may be forced to keep buying roughly 3 trillion yen worth of bonds well beyond fiscal 2026,” he said. ($1 = 152.3900 yen) More