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    Asia shares dip as high yields test valuations

    SYDNEY (Reuters) – Asian shares edged lower on Monday as high Treasury yields challenged lofty Wall Street equity valuations while underpinning the U.S. dollar near multi-month peaks. Volumes were light with the New Year holiday looming and a rather bare data diary this week. China has the PMI factory surveys out on Tuesday, while the U.S. ISM survey for December is due on Friday.MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2%, but is still 16% higher for the year. Japan’s Nikkei eased 0.2%, but is sitting on gains of 20% for 2024.South Korea’s main index has not been so fortunate, having run into a storm of political uncertainty in recent weeks, and is saddled with losses of more than 9% for the year. It was last off 0.35%.S&P 500 futures and Nasdaq futures were both off 0.1%. Wall Street suffered a broad-based sell off on Friday with no obvious trigger, though volumes were just two-thirds of the daily average. .[.N]The S&P 500 is still up 25% for the year and the Nasdaq 31%, which is stretching valuations when compared to the risk-free return of Treasuries. Investors are counting on earnings per share growth of just over 10% in 2025, versus a 12.47% expected rise in 2024, according to LSEG data.Yet yields on 10-year Treasuries are near eight-month highs at 4.631% and ending the year around 75 basis points above where they started it, even though the Fed delivered 100 basis points of cuts to cash rates.”The continued rise in bond yields, driven by the reassessment of less restrictive monetary policy expectations, creates some concern,” said Quasar Elizundia, a research strategist at broker Pepperstone.”The possibility that the Fed may keep restrictive monetary policy for longer than expected could temper corporate earnings growth expectations for 2025, which could in turn influence investment decisions.” Bond investors may also be wary of burgeoning supply as President-elect Donald Trump is promising tax cuts with few concrete proposals for restraining the budget deficit. Trump is expected to release at least 25 executive orders when he takes office on Jan. 20, covering a range of issues from immigration to energy and crypto policy.Widening interest rate differentials have kept the U.S. dollar in demand, giving it gains of 6.5% for the year on a basket of major currencies.The euro has lost more than 5% on the dollar so far in 2024 to last stand at $1.0429, not far from its recent two-year trough of $1.0344.The dollar held near a five-month top on the yen at 157.71, with only the risk of Japanese intervention preventing another test of the 160.00 barrier.The strength of the dollar has been something of a burden for gold prices, though the metal is still 28% higher for the year so far at $2,624 an ounce. [GOL/]Oil has had a tougher year as concerns about demand, particularly from China, kept a lid on prices and forced OPEC+ to repeatedly extend a deal to limit supplies. [O/R]Brent fell 37 cents to $73.80 a barrel, while U.S. crude lost 17 cents to $70.43 per barrel. More

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    Trump attacks ‘dumbest’ 2023 debt limit extension

    Under the 2023 budget deal Congress suspended the debt ceiling until Jan. 1, 2025. The U.S. Treasury will be able to pay its bills for several months beyond that deadline, but Congress will have to address the issue, possibly around mid-year.In a post on Truth Social, Trump said, “The extension of the Debt Ceiling by a previous Speaker of the House, a good man and a friend of mine … will go down as one of the dumbest political decisions made in years.”He added, “The Democrats must be forced to take a vote on this treacherous issue NOW, during the Biden Administration, and not in June. They should be blamed for this potential disaster, not the Republicans!”Republicans, however, will control both chambers of Congress beginning on Jan. 3 and at least some of the party’s lawmakers would have to go along with a debt limit increase or elimination in order for it to become law.Without the 2023 debt limit increase, the United States would have seen a historic default on its debt payments that would have roiled financial markets worldwide.A debt default would also likely have brought a downgrade in the U.S. credit rating, raising borrowing costs for businesses and individuals.At the time, several far-right Republicans in the House of Representatives had pushed for deeper federal spending cuts as a condition for raising the debt limit than what had been negotiated.About a week ago, with U.S. government discretionary funding due to expire on Dec. 20, Trump, encouraged by billionaire Elon Musk, demanded the debt limit either be eliminated or extended, possibly to 2029 when his presidency would end.That idea was tacked onto an extension of government funding into March, but it was quickly voted down by a coalition of House Democrats and hard-right Republicans, many of whom represent districts in Trump-leaning states.A government-funding bill without a debt-limit provision was then enacted into law. Next (LON:NXT) month, Republicans in the newly-elected Congress are expected to insist on deep federal spending cuts as a condition for raising the country’s borrowing limit.Democrats earlier this month argued Trump’s call for an immediate increase or elimination of the debt limit was motivated by his desire to make room for a new round of tax cuts that likely would lower revenues and thus add more to the debt.The national debt currently stands at about $36.1 trillion due to federal spending levels and tax cuts that have been enacted into law over several decades. More

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    Jimmy Carter, former US president and Nobel Peace Prize recipient, dead at 100

    WASHINGTON (Reuters) -Jimmy Carter, the earnest Georgia peanut farmer who as U.S. president struggled with a bad economy and the Iran hostage crisis but brokered peace between Israel and Egypt and later received the Nobel Peace Prize for his humanitarian work, died at his home in Plains, Georgia, on Sunday, the Carter Center said. He was 100.“My father was a hero, not only to me but to everyone who believes in peace, human rights, and unselfish love,” said Chip Carter, the former president’s son. “My brothers, sister, and I shared him with the rest of the world through these common beliefs. The world is our family because of the way he brought people together, and we thank you for honoring his memory by continuing to live these shared beliefs.”The Carter Center said there will be public observances in Atlanta and Washington. These events will be followed by a private interment in Plains, it said.Final arrangements for the former president’s state funeral are still pending, according to the center.Jimmy Carter, a Democrat, served as president from January 1977 to January 1981 after defeating incumbent Republican President Gerald Ford (NYSE:F) in the 1976 U.S. election. Carter was swept from office four years later in an electoral landslide as voters embraced Republican challenger Ronald Reagan, the former actor and California governor.Carter lived longer after his term in office than any other U.S. president. Along the way, he earned a reputation as a better former president than he was a president – a status he readily acknowledged.His one-term presidency was marked by the highs of the 1978 Camp David accords between Israel and Egypt, bringing some stability to the Middle East. But it was dogged by an economy in recession, persistent unpopularity and the embarrassment of the Iran hostage crisis that consumed his final 444 days in office.In recent years, Carter had experienced several health issues including melanoma that spread to his liver and brain. Carter decided to receive hospice care in February 2023 instead of undergoing additional medical intervention. His wife, Rosalynn Carter, died on Nov. 19, 2023, at age 96. He looked frail when he attended her memorial service and funeral in a wheelchair. Carter left office profoundly unpopular but worked energetically for decades on humanitarian causes. He was awarded the Nobel Peace Prize in 2002 in recognition of his “untiring effort to find peaceful solutions to international conflicts, to advance democracy and human rights, and to promote economic and social development.”Carter had been a centrist as governor of Georgia with populist tendencies when he moved into the White House as the 39th U.S. president. He was a Washington outsider at a time when America was still reeling from the Watergate scandal that led Republican Richard Nixon to resign as president in 1974 and elevated Ford from vice president.”I’m Jimmy Carter and I’m running for president. I will never lie to you,” Carter promised with an ear-to-ear smile.Asked to assess his presidency, Carter said in a 1991 documentary: “The biggest failure we had was a political failure. I never was able to convince the American people that I was a forceful and strong leader.”Despite his difficulties in office, Carter had few rivals for accomplishments as a former president. He gained global acclaim as a tireless human rights advocate, a voice for the disenfranchised and a leader in the fight against hunger and poverty, winning the respect that eluded him in the White House.Carter won the Nobel Peace Prize in 2002 for his efforts to promote human rights and resolve conflicts around the world, from Ethiopia and Eritrea to Bosnia and Haiti. His Carter Center in Atlanta sent international election-monitoring delegations to polls around the world.A Southern Baptist Sunday school teacher since his teens, Carter brought a strong sense of morality to the presidency, speaking openly about his religious faith. He also sought to take some pomp out of an increasingly imperial presidency – walking, rather than riding in a limousine, in his 1977 inauguration parade.The Middle East was the focus of Carter’s (NYSE:CRI) foreign policy. The 1979 Egypt-Israel peace treaty, based on the 1978 Camp David accords, ended a state of war between the two neighbors.Carter brought Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin to the Camp David presidential retreat in Maryland for talks. Later, as the accords seemed to be unraveling, Carter saved the day by flying to Cairo and Jerusalem for personal shuttle diplomacy.The treaty provided for Israeli withdrawal from Egypt’s Sinai Peninsula and establishment of diplomatic relations. Begin and Sadat each won a Nobel Peace Prize in 1978.By the 1980 election, the overriding issues were double-digit inflation, interest rates that exceeded 20% and soaring gas prices, as well as the Iran hostage crisis that brought humiliation to America. These issues marred Carter’s presidency and undermined his chances of winning a second term.HOSTAGE CRISISOn Nov. 4, 1979, revolutionaries devoted to Iran’s Ayatollah Ruhollah Khomeini had stormed the U.S. Embassy in Tehran, seized the Americans present and demanded the return of the ousted shah Mohammad Reza Pahlavi, who was backed by the United States and was being treated in a U.S. hospital.The American public initially rallied behind Carter. But his support faded in April 1980 when a commando raid failed to rescue the hostages, with eight U.S. soldiers killed in an aircraft accident in the Iranian desert.Carter’s final ignominy was that Iran held the 52 hostages until minutes after Reagan took his oath of office on Jan. 20, 1981, to replace Carter, then released the planes carrying them to freedom.In another crisis, Carter protested the former Soviet Union’s 1979 invasion of Afghanistan by boycotting the 1980 Olympics in Moscow. He also asked the U.S. Senate to defer consideration of a major nuclear arms accord with Moscow.Unswayed, the Soviets remained in Afghanistan for a decade.Carter won narrow Senate approval in 1978 of a treaty to transfer the Panama Canal to the control of Panama despite critics who argued the waterway was vital to American security. He also completed negotiations on full U.S. ties with China.Carter created two new U.S. Cabinet departments – education and energy. Amid high gas prices, he said America’s “energy crisis” was “the moral equivalent of war” and urged the country to embrace conservation. “Ours is the most wasteful nation on earth,” he told Americans in 1977. In 1979, Carter delivered what became known as his “malaise” speech to the nation, although he never used that word.”After listening to the American people I have been reminded again that all the legislation in the world can’t fix what’s wrong with America,” he said in his televised address.”The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.”As president, the strait-laced Carter was embarrassed by the behavior of his hard-drinking younger brother, Billy Carter, who had boasted: “I got a red neck, white socks, and Blue Ribbon beer.” ‘THERE YOU GO AGAIN’Jimmy Carter withstood a challenge from Massachusetts Senator Edward Kennedy for the 1980 Democratic presidential nomination but was politically diminished heading into his general election battle against a vigorous Republican adversary.Reagan, the conservative who projected an image of strength, kept Carter off balance during their debates before the November 1980 election.Reagan dismissively told Carter, “There you go again,” when the Republican challenger felt the president had misrepresented Reagan’s views during one debate.Carter lost the 1980 election to Reagan, who won 44 of the 50 states and amassed an Electoral College landslide.James Earl Carter Jr. was born on Oct. 1, 1924, in Plains, Georgia, one of four children of a farmer and shopkeeper. He graduated from the U.S. Naval Academy in 1946, served in the nuclear submarine program and left to manage the family peanut farming business. He married his wife, Rosalynn, in 1946, a union he called “the most important thing in my life.” They had three sons and a daughter.Carter became a millionaire, a Georgia state legislator and Georgia’s governor from 1971 to 1975. He mounted an underdog bid for the 1976 Democratic presidential nomination, and out-hustled his rivals for the right to face Ford in the general election.With Walter Mondale as his vice presidential running mate, Carter was given a boost by a major Ford gaffe during one of their debates. Ford said that “there is no Soviet domination of Eastern Europe and there never will be under a Ford administration,” despite decades of just such domination.Carter edged Ford in the election, even though Ford actually won more states – 27 to Carter’s 23. Not all of Carter’s post-presidential work was appreciated. Former President George W. Bush and his father, former President George H.W. Bush, both Republicans, were said to have been displeased by Carter’s freelance diplomacy in Iraq and elsewhere.In 2004, Carter called the Iraq war launched in 2003 by the younger Bush one of the most “gross and damaging mistakes our nation ever made.” He called George W. Bush’s administration “the worst in history” and said Vice President Dick Cheney was “a disaster for our country.”In 2019, Carter questioned Republican Donald Trump’s legitimacy as president, saying “he was put into office because the Russians interfered on his behalf.” Trump responded by calling Carter “a terrible president.” Carter also made trips to communist North Korea. A 1994 visit defused a nuclear crisis, as President Kim Il Sung agreed to freeze his nuclear program in exchange for resumed dialogue with the United States. That led to a deal in which North Korea, in return for aid, promised not to restart its nuclear reactor or reprocess the plant’s spent fuel.But Carter irked Democratic President Bill Clinton’s administration by announcing the deal with North Korea’s leader without first checking with Washington.In 2010, Carter won the release of an American sentenced to eight years hard labor for illegally entering North Korea.Carter wrote more than two dozen books, ranging from a presidential memoir to a children’s book and poetry, as well as works about religious faith and diplomacy. His book “Faith: A Journey for All,” was published in 2018.(Reporting and writing by Will Dunham; Additional reporting by Jasper Ward; Editing by Bill Trott, Diane Craft and Lisa Shumaker) More

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    Global leadership to be tested in 2025

    $75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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    Trump’s first actions and job data to test market in January

    NEW YORK (Reuters) -After closing the books on a banner year for U.S. stocks, investors expect to ride seasonal momentum into mid-January when a slew of economic data and a transition of power in Washington could send markets moving.The S&P 500 rose roughly 25% in 2024 through Dec. 27, while the technology-heavy Nasdaq Composite index (IXIC), which surpassed 20,000 for the first time in December, is up over 31%.On Friday, however, stocks sold off amid some profit taking and questions about how markets could perform in January, according to analysts and traders.”There are concerns that maybe the first part of (next) year can involve some repositioning and reallocation of funds and those that are trading today and next week are probably just trying to get a little bit ahead of that,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.Stocks tend to do well in the last five trading days of December and into the first two days of January, a phenomenon dubbed the Santa Claus rally, which has driven S&P gains of an average of 1.3% since 1969, according to the Stock Trader’s Almanac.Despite the Friday selloff, for the last five trading sessions, the S&P rose 1.77%, while the Nasdaq was up 1.8%.Just how long upward momentum lasts will depend on several forces that could help drive markets in 2025.Monthly U.S. employment data on Jan. 10 should give investors a fresh view into the health and strength of the U.S. economy. Job growth rebounded in November following hurricane- and strike-related setbacks earlier in the year.The market’s strength will be tested again shortly after, when U.S. companies start reporting fourth-quarter earnings.Investors anticipate a 10.33% earnings per share growth in 2025, versus a 12.47% expected rise in 2024, according to LSEG data, although excitement over President-elect Donald Trump’s policies is expected to boost the outlook for some sectors like banks, energy and crypto.”There’s the hope that taxes and regulations will be lowered or reduced next year, that will help support corporate profits, which are what drive the market in the first place,” said Michael Rosen, chief investment officer at Angeles Investments.Trump’s inauguration on Jan. 20 could also throw the markets some curve balls. He is expected to release at least 25 executive orders in his first day on a range of issues from immigration to energy and crypto policy.Trump has also threatened tariffs on goods from China and levies on products from both Mexico and Canada, as well as to crack down on immigration, creating costs that companies could ultimately pass on to consumers.Helen Given, associate director of trading at Monex USA, said a new administration always brings with it a large degree of uncertainty. There is also a good chance the impact of the Trump administration’s expected trade policies is far from fully priced into global currency markets, she added.”We’re looking ahead to see which of those proposed policies actually are enacted, which might be further down the pipeline,” Given said, adding she expected a big impact on the euro, Mexican peso, the Canadian dollar, and the Chinese yuan.The conclusion of the Federal Reserve’s first monetary policy meeting of the year in late January could also present a challenge to the U.S. stocks rally.Stocks tumbled on Dec. 18 when the Fed implemented its third interest-rate cut for the year and signaled fewer cuts in 2025 because of an uncertain inflation outlook, disappointing investors who had expected lower rates to boost corporate profits and valuations.Still, that could be good for alternative assets like cryptocurrencies. The incoming crypto-friendly Trump administration is adding to a number of catalysts that are boosting crypto investors’ confidence, said Damon Polistina, head of research at investment platform Eaglebrook Advisors.Bitcoin surged above $107,000 this month on hopes of friendlier Trump policies.  More

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    Why Fed Chair Jerome Powell is walking an old tightrope into 2025

    Powell’s challenge lies in managing monetary policy without appearing to preemptively counter potential inflationary pressures from the incoming administration’s policies.The balancing act has been evident in recent months. Shortly after Trump’s election victory in November, Powell emphasized that the Fed wouldn’t speculate on how future policies might influence interest rates.“We don’t guess, we don’t speculate, and we don’t assume,” Powell said on Nov. 7. However, the Fed’s latest projections suggest some officials are already accounting for policy changes, signaling fewer rate cuts in 2025 due to inflation concerns.Last week, the Fed cut rates by a quarter point, completing a full percentage point reduction since September. Despite this, updated forecasts revealed a more cautious stance on easing.Most officials now anticipate only two cuts next year, down from four projected in September. Inflation is expected to remain at 2.5% in 2025, up from earlier forecasts of 2.2%. Notably, 15 of 19 Fed officials see a risk that inflation could exceed projections.Michael Gapen, chief U.S. economist at Morgan Stanley (NYSE:MS), noted the shift. The latest meeting “came out much more hawkish than we thought because they did what they said they weren’t going to do: They said they weren’t going to speculate on policies and then a month later they decided to speculate on policies,” he said.A key factor behind this caution is Trump’s proposed economic agenda, which includes tariffs and stricter immigration policies. Tariffs could drive prices higher, while tighter border controls might constrain labor supply, increasing wages. Powell has downplayed the direct impact of Trump’s election on inflation forecasts, attributing the shift to recent inflation data instead.Despite this, Powell has, according to the Wall Street Journal, privately advised colleagues to tread carefully in public remarks to avoid perceptions of political bias. This approach aligns with Powell’s efforts to maintain the Fed’s reputation for apolitical, data-driven decision-making.The stakes are high. Powell recalls the Fed’s experience during Trump’s first term when trade wars led to rate cuts. Yet the current environment differs. Inflation has been elevated, unlike the low-inflation backdrop of 2018. Powell highlighted this distinction at his Dec. 18 press conference, referencing past internal Fed analyses.“What the committee’s doing now is discussing pathways and understanding again the ways in which tariffs can affect inflation and the economy,” said Powell. “It puts us in position, when we finally do see what the actual policies are, to make a more careful, thoughtful assessment of what might be the appropriate policy response.”Trump’s advisors argue that deregulation and increased energy production could offset inflationary risks. Treasury secretary-designate Scott Bessent downplayed concerns.“Tariffs can’t be inflationary because if the price of one thing goes up, unless you give people more money, then they have less money to spend on the other thing, so there is no inflation,” he said on a radio program hosted by Larry Kudlow, a former Trump adviser.Still, analysts believe the Fed will respond cautiously if supply-side improvements reverse.“In this environment, you’re not coming from six years of below-target inflation. You’re coming from a few years of being well above target,” notes JPMorgan’s chief economist Michael Feroli.Other analysts suggest that the economic environment will significantly influence how much businesses pass rising costs to consumers.Economist Ray Farris believes that with full employment, cost increases are more likely to be passed through than during a downturn. He also highlights the uncertainty around how quickly companies adjust prices, explaining that gradual increases could make inflation appear more persistent to the public. More

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    Mexico left with 500mn-litre tequila lake after demand slows

    Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Mexico is sitting on more than half a billion litres of tequila in inventory, almost as much as its annual production, as the fast-growing industry reckons with slowing demand and the prospect of tariffs on exports to the US under Donald Trump.By the end of 2023, the industry had 525mn litres of tequila in inventory, either ageing in barrels or waiting to be bottled, according to data shared with the Financial Times by the Tequila Regulatory Council. Of the 599mn litres of tequila produced last year, about one-sixth remained in inventory, according to the figures. “Much more new spirit is being distilled than is being sold, and inventories are starting to accumulate,” said Bernstein analyst Trevor Stirling, attributing the build-up to falling demand and new distillery capacity that has recently begun operating in Mexico. “The tequila industry is set for a very turbulent 2025.”Consumers’ thirst for Mexico’s national drink grew rapidly over the past decade as the spirit went mainstream in the US, partly thanks to celebrity-backed brands such as George Clooney’s Casamigos.But demand has fallen back over the past 18 months as the pandemic spirits boom subsided and consumers cut back on their drinking in response to higher prices. The amount of spirits sold in the US in the first seven months of the year shrank 3 per cent compared with the same period last year, according to drinks data provider IWSR. Tequila consumption fell 1.1 per cent, compared with a 4 per cent rise in 2023 and a 17 per cent rise in 2021, the height of the tequila surge.Though some of the inventory is in the process of being aged, rather than just awaiting bottling, tequila evaporates rapidly compared with other ageing spirits — partly because of Mexico’s warm climate — meaning that most tequila is not left in barrels beyond three years. Demand has fallen back over the past 18 months as the pandemic spirits boom subsided More

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    Tunisia central bank keeps key rate at 8%

    TUNIS (Reuters) – Tunisian central bank said on Saturday it had left its benchmark interest rate unchanged at 8%, adding that borrowing costs were consistent with the inflation outlook. Inflation will average 7% this year before dropping to 6.2% in 2025, the bank said in a statement following its board meeting. More