Economy

OTTAWA (Reuters) -Canada’s immigration reduction targets announced this week will likely have an impact on the central bank’s growth forecast, Governor Tiff Macklem said on Friday, but cautioned the bank was yet to analyze the numbers.Macklem said there was a lot of uncertainty on how quickly the immigration curbs would be implemented and that would impact how growth estimates change.This week, Prime Minister Justin Trudeau lowered the number of immigrants to be allowed into the country from next year.Trudeau’s poll numbers have sunk as a sharp increase of immigrants since the coronavirus pandemic has contributed to a spike in population and a rise in housing demand, prices and rents.”If population growth comes down faster than we have assumed, headline GDP growth will be lower,” Macklem said in response to a question on how the immigration curbs would impact the bank’s forecasts.If household spending recovers more quickly due to continued cut in interest rates, economic growth could also be higher, he said, while addressing reporters virtually from Washington.The BoC, in its monetary policy report released this week, projects that GDP next year would be 2.1% and 2.3% in 2026.The new forecasts were announced after the bank reduced its key overnight rate by 50 basis points.Economists doubt the bank’s growth estimates could be achieved as most of the growth was driven by an increased demand from arriving immigrants.The measures announced by the Trudeau government are expected to result in a population decline of 0.2% in both 2025 and 2026 before returning to growth in 2027, the government said.The bank will be updating its forecasts in its next monetary policy report in January.The impact on consumer prices, or its inflation forecasts, will not be major even though most predictions depend on how fast the government plans are implemented, the governor said.”If you go over the inflation forecast, there could be some timing effects, but they are pretty second order,” he said, adding lower population would impact both demand as well as supply. More

German Finance Minister Christian Lindner on Friday warned that if the U.S. kicked off a trade war with the European Union, there could be retaliation.
“Trade controversy sees never winners, only losers,” Lindner told CNBC’s Karen Tso on the sidelines of the International Monetary Fund’s annual meeting in Washington, D.C.
Trade is a key pillar of the German economy, and the U.S. is one of its most important trading partners.

Christian Lindner, Germany’s finance minister, during a meeting Janet Yellen, US treasury secretary, not pictured, at the annual meetings of the IMF and World Bank in Washington, DC, US, on Thursday, Oct. 24, 2024.
Ting Shen | Bloomberg | Getty Images

German Finance Minister Christian Lindner on Friday warned that if the U.S. kicked off a trade war with the European Union, there could be retaliation.
“Trade controversy sees never winners, only losers,” Lindner told CNBC’s Karen Tso on the sidelines of the International Monetary Fund’s annual meeting in Washington, D.C.

What U.S. trade policy could look like if Donald Trump were elected as president is a key issue, Lindner suggested. “In that case we need diplomatic efforts to convince whoever enters the White House that it’s not in the best interest of the U.S. to have a trade conflict with [the] European Union. We would have to consider retaliation,” he said. Lindner belongs to the pro-business Free Democratic Party which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.
The U.S.’ problem with trading lies with China rather than the EU, Lindner said, adding that the EU “should not become a negative side effect” of controversy between the U.S. and China.

Trump has floated the idea that, if he were elected, blanket tariffs of 10% to 20% could be imposed on almost all imports, no matter where they came from.
If such a 20% tariff were implemented by the U.S., the EU’s and Germany’s gross domestic product would fall in the coming years, Reuters reported Thursday citing a study by German economic institute IW. Trade is one of the main pillars of the German economy, suggesting heightened tensions, uncertainty and tariffs would hit the country harder than others.
Earlier this month, the German statistics office, Destatis, said that the U.S.’ importance as a trading partner for Germany has been growing. The agency said that since 2021, the U.S. had been the second-most important trade partner for Germany behind China, but in the first half of 2024, foreign trade turnover with the U.S. was higher than that with China. In 2023, around 9.9% of German exports went to the U.S., according to Destatis.

Trade tensions between the U.S. and China, and the EU and China, have been rising throughout the year. Both the U.S. and EU have implemented higher tariffs and on some goods imported from China, citing unfair trade practices.
China in turn has also announced higher temporary tariffs on some imports from the EU. Several probes and investigations into one another’s competition, subsidy, and other practices are also ongoing as the tit-for-tat measures continue.

After the EU voted to impose tariffs on Chinese-made electric vehicles, Germany’s Lindner urged the union not to start a trade war. Germany had previously advocated against higher duties, raising concerns about what they could mean for the country’s struggling carmakers.
Earlier in the week, Gita Gopinath, deputy managing director of the IMF, told CNBC that an escalation of trade and tariffs tensions between the U.S. and China would be “costly for everybody.” More

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Nabiullina spoke in Russian. The quotes below were translated into English by Reuters.NABIULLINA ON THE RATE DECISION”We considered three options today: to raise the rate to 20%, to 21% and above 21%. The option of holding the rate was not considered, no one suggested it, but we discussed the options of raising the rate to 20% and 21%.”The possibility of raising the rate with the same steps in the next (meeting) will depend on the data that we’ll receive: data on the development of the economy, inflation, inflation expectations, the rate of credit growth in general, but we allow for the possibility of an additional rate increase in December.”NABIULLINA ON THE MAIN PRO-INFLATIONARY FACTORS”The main factor is that we will continue to have an imbalance of supply and demand. This may be factors related to the budget, we always say that budget changes are an important factor that we take into account. It will also depend on the rate at which loans will grow, and loans in general…. An important factor is inflation expectations, which, unfortunately, are still high and have even increased.”NABIULLINA ON THE WEAKENING OF THE EXCHANGE RATE”We also take this into account, indeed, over the last few months there has been some weakening…we do not change the assessment of the carry-over effect – a 10% change in the exchange rate is about 0.5 times the carry-over into inflation.””But if we look at longer trends in the exchange rate, we have the exchange rate at about the same level as it was a year ago. But it has been volatile during the course of the year, and we take all this into account.”NABIULLINA ON THE INFLATIONARY TARGET”By the end of the year, current price growth will be near 4%…we will reach the target in 2026, in the first half of 2026.”NABIULLINA ON THE DANGERS OF SHOCK RATE INCREASES”We can’t push the rate higher now in order to bring it back to the target even faster…Yes, we can achieve a halt in inflation and even provoke deflation with a prohibitive level of the rate. But the result will not be a return of the economy to sustainable, balanced growth, but an excessive cooling of demand with excessive volatility in all parameters, in interest rates, in production, in employment, and a strong deviation of inflation downward from the target.”And such excessive volatility will have negative consequences for economic development, so we have no need for this kind of shock increase.”*NABIULLINA ON THE TIMING OF A RATE CUT”When inflation starts to fall steadily, and we see it falling in line with our forecast, this may indeed be a signal for the start of a rate cut. When that will happen, we can’t say right now.”*NABIULLINA ON THE INFLUENCE OF GOVERNMENT PROCUREMENT AND CORPORATE LENDING”We have seen that mortgage issuance in recent times was mainly under preferential programs – this has had a serious impact. I am referring to non-recourse concessionary mortgages. For corporate loans, the concessionary programs themselves are much smaller.””But the company’s inclination, let’s say, the company’s appetite to take loans depends not only on incentives, subsidies, interest rates, but also on government contracts, i.e. when there are government contracts that are not short, but long, companies are certainly more willing to take loans at high rates, but it is probably impossible to quantify this share.”*ZABOTKIN ON CORPORATE CREDIT”What’s important to realize is that it doesn’t matter whether corporate credit is growing in the purely market part of the economy or because companies are borrowing in order to operate to meet government demand. It’s the overall level of demand in the economy to which they are responding that matters.” More

(Reuters) -U.S. stock indexes were set to open slightly higher on Friday as Treasury yields eased and investors looked ahead to quarterly results from Wall Street’s biggest companies.The yield on the benchmark 10-year Treasury note dipped to 4.2% after rising as high as 4.26% earlier in the week.The three major stock indexes, however, looked set to snap their six-week winning streak, with equities unsettled by the rapid rise in yields as rate cut bets unraveled on expectations of a stronger economic outlook.”The upward move in yields has paused for a bit, allowing the stock market to catch its breath and focus on company earnings, which by and large have been pretty good,” said Ross Mayfield, investment strategist at Baird.Tesla (NASDAQ:TSLA)’s shares dipped 1.5% in premarket trading, following a nearly 22% surge in the previous session, as investors cheered the EV-maker’s strong sales forecast.Gains in the stock helped the S&P 500 register its first daily advance of the week.The week starting Oct. 28, the final stretch before the Nov. 5 U.S. presidential election, promises to be crucial for Wall Street, marked by results from megacap tech firms including Alphabet (NASDAQ:GOOGL) , Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) as well as the release of nonfarm payrolls data.Shares of Apple dipped 0.6% on a brokerage downgrade and after data showed a decline in iPhone sales in China. Meta Platforms (NASDAQ:META) rose 0.8%, Amazon.com (NASDAQ:AMZN) was up 0.7% and Nvidia (NASDAQ:NVDA) gained 0.4%.Dow E-minis were up 87 points, or 0.2%, U.S. S&P 500 E-minis were up 16.5 points, or 0.28% and Nasdaq 100 E-minis were up 74 points, or 0.36%.Capri Holdings (NYSE:CPRI) slumped 47.6% after a U.S. judge blocked a pending merger between the company and handbag maker Tapestry (NYSE:TPR). Shares of Tapestry rose 14.6%.Regional lender New York Community Bancorp (NYSE:NYCB) dropped 11% after reporting its fourth straight quarter of loss, primarily due to its commercial real estate loans.Memory-chip-maker Western Digital (NASDAQ:WDC)’s shares leapt 12% after it topped quarterly profit estimates on Thursday, while health insurer Centene (NYSE:CNC) advanced 12.2% after beating estimates for third-quarter profit.A mixed set of earnings across sectors and continued uncertainty around the U.S. election have also made investors cautious, though markets have started pricing in a second Donald Trump administration in recent weeks.”We’re so close to the election that it does feel like markets are in a bit of a holding pattern,” Mayfield said.Data showed September Durable Goods orders slipped 0.8%, less than the 1% forecast.The University of Michigan’s final Consumer Sentiment index is still on deck, while the Boston Fed’s Susan Collins is scheduled to speak on the day. [FED/DIARY]Investors are still pricing in another 25-basis-point rate cut at the Fed’s November meeting. They expect about two rate cuts by the end of the year, according to LSEG data. More

Per their estimates, these events likely reduced payrolls by about 50,000 positions.“Note that Governor Waller pointed to a larger drag of ~100k in recent comments,” BofA economists led by Aditya Bhave said in a Friday note. “The hurricane also likely lowered hours worked and, as a result, raised average hourly earnings growth.”“Meanwhile, the unemployment rate should move back up to 4.2%, partly due in part to hurricane distortions,” they added.BofA projects a 0.3% rise in nominal personal income for September, supported by job and wage growth, though partially offset by fewer hours worked.They expect nominal and real spending will climb by 0.5% and 0.3%, respectively, while the saving rate is expected to dip slightly to 4.7%.Core PCE inflation is forecasted to register at 0.27% month-over-month, with the annual rate easing by a tenth to 2.6%.“Although the y/y rate should fall a tenth to 2.6%, this wouldn’t be an ideal print for the Fed and would likely concern the hawks. But we look for softer figures in 4Q,” economists noted.Alongside the nonfarm payrolls data, the ISM manufacturing PMI will also be significant, with expectations of an increase from 47.2 to 47.6 in October.With the Fed shifting its focus more toward the jobs market than inflation, weaker payroll numbers could push the outlook back toward a more dovish stance. More