Economy

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.After a brief respite, China is again caught in investors’ crosshairs. The economic data are coming in below expectations, hopes are fading that COVID-19 lockdown restrictions are about to be lifted and the exchange rate is back on the slide, along with sovereign bonds.This is the backdrop against which the central bank makes its latest interest rate decision at the weekend. The economy might warrant a cut to the one-year loan prime rate – currently 3.65% – but the exchange rate doesn’t.The yuan fell 0.9% on Thursday, its biggest fall since May and one of largest in recent years. Having rebounded from a recent 15-year low toward 7.00 per dollar, it is back under pressure.U.S. Treasury figures on Wednesday won’t have helped sentiment. They showed China’s holdings of U.S. Treasuries fell in September to an 11-year low of $933.6 billion. The month-on-month fall of $38 billion was the steepest in six years.Some of the nominal change from August was down to FX valuation effects, meaning Beijing did not sell $38 billion of Treasuries in the month. But it sold a chunk to slow the yuan’s depreciation against the dollar, which ended up being 3.2% in September. That’s among the four biggest monthly declines on record.The central bank said on Wednesday that China will continue to increase exchange rate flexibility while keeping the yuan stable at reasonable levels. Sounds a bit hopeful – increased flexibility makes new lows in the exchange rate more likely, requiring more dollar selling to minimize the volatility.Meanwhile, investors are dumping Chinese bonds at a rapid clip, pushing yields to their highest in months. An aggregate index of Chinese sovereign debt is down 0.8% this week, well on track for its biggest decline in more than two years.Sovereign bond buyers have been caught off-guard by the government easing some of its strict COVID-19 curbs and announcing steps to support the property sector. The spike in yields also runs counter to the central bank’s looser monetary policy stance, and the pace of selling has raised market liquidity concerns. Tricky times for Beijing. Three key developments that could provide more direction to markets on Friday: – Fed’s Powell speaks- Japan inflation (October)- China interest rate decision (Sunday) More

BERLIN (Reuters) -Germany’s top four carmakers and parts supplier Bosch knowingly broke rules when developing a type of emissions software, an environmentalist group said on Thursday, in a years-long legal battle that could open the door for a new wave of lawsuits.Audi, Volkswagen (ETR:VOWG_p), Daimler (OTC:DDAIF) – now Mercedes-Benz – and BMW commissioned Bosch to develop technology which they knew from the beginning violated regulatory compliance, Environmental Action Germany (DUH) said at a press conference, citing internal industry documents leaked to it this summer spanning 2006 to 2015.Spokespeople for Bosch and Volkswagen both said the companies were aware of the documents and had worked closely with investigators. A spokesperson for BMW rejected any allegations of wrongdoing, while Mercedes was not immediately available for comment.State prosecutors in Stuttgart, who received the documents from DUH, said they were already aware of their contents and would not carry out further investigations.But the NGO will also share the documents with an administrative court in Schleswig, northern Germany, which in February 2023 will hear a lawsuit brought by the DUH covering 119 diesel car models to determine whether temperature-based software is legal.”The European Court of Justice confirmed with pleasing clarity: it is not,” DUH chief Juergen Resch said, adding that he expected the German court to follow this ruling.The software was declared prohibited by a top EU court last week because it limits the use of emission-reduction technology outside a given temperature window.But Volkswagen maintains that the temperature windows used by its software are within the legal limits.The software, used by almost all diesel car manufacturers, can cause temporary reductions in the injection of urea, used to lower nitrogen oxide emissions. This can help improve engine performance and stretch the interval between refilling vehicles with urea.It is different from the software that triggered Volkswagen’s dieselgate scandal in 2015, which curbed harmful emissions in cars only in test scenarios but not on the road.The carmakers say temperature-based exhaust controls are covered by EU legislation since they can protect the engine from damage. But the DUH alleged their intentions went “beyond reasons for component protection” and said the internal documents showed Bosch repeatedly highlighted legal risks in the development of the software.”This opens up new possibilities for car owners to recover damages,” emissions expert Axel Friedrich told reporters, speaking alongside DUH. More

The request, approved on Nov. 15, concerns an 18-month Stand-By Arrangement and Arrangement Under the Standby Credit Facility (SBA/SCF). The SBA/SCF was approved in June 2021 with special drawing rights (SDR) access of 453 million.This was followed by an additional access of SDR 129.44 million approved in June 2022.”Completion of the reviews will enable the Senegalese authorities to have access to funds available under the SBA/SCF,” the Fund said.The extension was granted one day before an IMF staff mission to Senegal concluded that the West African country had made “significant progress” in implementing structural reforms despite these being slower than anticipated. More

(Reuters) – Mothers and children who receive benefits from a U.S. Department of Agriculture nutrition program would be able to spend more money on a wider range of groceries under proposed changes the USDA introduced on Thursday.The USDA proposed expanding the list of groceries participants in the Women, Infants, and Children (WIC) program can buy to include grains like quinoa and teff, a range of non-dairy milks and cheeses as well as canned fish and beans. The revisions would also make permanent an increase in fruit and vegetable benefits Congress passed in 2021 in response to the COVID-19 pandemic. The boost has increased child intake of produce, according to a report by the National WIC Association, a nonprofit. The agency had committed to updating the foods offered to WIC participants in the White House national hunger strategy released in September. The changes to the program – which serves more than 6 million people, according to USDA – are based on recommendations from the National Academies of Science, Engineering and Medicine and the Dietary Guidelines for Americans, said the agency’s Food and Nutrition Service in a release.”These proposed revisions have the potential to make positive, life-long impacts on health and well-being,” said Stacy Dean, USDA deputy undersecretary for food, nutrition and consumer services, in a statement. The proposed changes would result in a net increase to WIC spending of about $4.1 billion over five years, said Dean on a Thursday call with reporters.WIC serves low-income pregnant, postpartum and breastfeeding women, as well as infants and children up to age five. Participants must use their benefits on specific USDA-approved foods.The agency will be collecting comments on the proposed changes until Feb. 21, it said in the release. More

BENGALURU (Reuters) – New Zealand’s central bank will hike rates by 75 basis points for the first time ever on Wednesday to cool multi-decade high inflation, ramping up the speed of an already-aggressive monetary tightening campaign, a Reuters poll found.Inflation at 7.20% is well above the Reserve Bank of New Zealand’s (RBNZ) target range of 1-3%, which, along with a tight labour market, has prompted economists to predict a higher peak for the official cash rate (OCR), currently at 3.50%.The expected policy shift stands in contrast with the neighbouring Reserve Bank of Australia, which has already shifted down to quarter-point moves, partly on concerns about falling housing prices which could have a knock-on effect on consumer spending.New Zealand house prices rose more than 40% from the start of the pandemic to a peak in November last year but have since fallen more than 10%, and the RBNZ recently said a continued decline “remains desirable” for long-term financial stability.Over 60% of economists polled, 15 of 23, expected the RBNZ to raise the OCR by 75 bps to 4.25% at its meeting on Wednesday, following a succession of 50 bp hikes in the five previous meetings.The remaining eight economists polled over Nov. 14-17 forecast a sixth 50 bp increase to 4.00%.”To mash up the words of an American philosopher: when inflation’s out the band, Gov, hike it like it’s hot. Inflation pressures have appeared to heat up…to the point that we and most forecasters expect the RBNZ will step up the pace of hikes to a 75 bp move on Wednesday,” said Nick Tuffley, chief economist at ASB.Tuffley added part of the reason for stepping up the pace now is that the RBNZ’s next policy decision is not due for another three months.The largest banks in the country – ANZ, ASB, Kiwi Bank, Bank of New Zealand and Westpac – expect a 75 bp hike on Wednesday, matching the recent pace of the U.S. Federal Reserve. Interest rate futures are pricing a roughly 60% chance of that happening.A slim majority of economists, 13 of 23, now expect the OCR to reach 4.75% or higher by end-March, 75 bps above the last poll conducted in September.”The RBNZ has already proven that it’s not in the least afraid to go its own way, and the global tilt towards slower hikes is unlikely to play a significant part in the decision,” noted Sharon Zollner, chief economist at ANZ. “We are forecasting the OCR to peak at 5.0%, via another 75 bp hike in February on a ‘let’s just get it done’ basis. If data cools more rapidly than expected the RBNZ could well slow the pace at that point.”Rates were expected to peak at 4.75% and remain unchanged until the end of next year, according to the median view in the poll.According to the latest RBNZ survey, inflation is expected to ease only modestly over the coming year and will be higher than previously predicted. A separate Reuters poll predicted inflation to fall within the RBNZ’s target only by end-2023. (Reporting and polling by Devayani Sathyan; Editing by Vivek Mishra, Ross Finley, Kirsten Donovan) More

During their meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, Tai “also raised the status of the U.S.-Japan beef safeguard agreement and Japan’s ongoing review of its on-road ethanol use targets,” her office said in a statement. Japan’s government has warned that the electric vehicle tax credits in the Inflation Reduction Act could deter further investment by the Japanese in the United States. More

“I need to be convinced that inflation has at least stopped climbing, that we’re not falling further behind the curve, before I would advocate stopping the progression of future rate hikes,” he told the Minnesota Chamber of Commerce in an event webcast by the regional Fed bank. “We’re not there yet.”Recent data showing consumer and wholesale prices cooled in October provide “some evidence that inflation is at least plateauing,” he said, but “we cannot be overly persuaded by one month’s data.” The Fed has raised rates aggressively this year, and Kashkari reminded his audience Thursday that the full effects of those rate hikes could take a year before they are felt economy-wide. But inflation is running at more than three times the Fed’s 2% target, and Fed policymakers are committed to restraining demand through higher borrowing costs to bring demand into better alignment with the available supply of labor, goods and services.”It’s an open question of how far we are going to have to go with interest rates to bring that demand down in the balance,” he said. More

Thanksgiving dinner will cost a whopping 20% more in the US this year, according to the Farm Bureau’s 37th Annual Survey. The report provides a snapshot of the average cost of the traditional feast for 10 and is based on 224 surveys of stores across the US and online.The biggest bump is for stuffing mix, which is up 69% due to a flour shortage stemming from Russia’s invasion of Ukraine. By contrast, cranberry prices have dipped 14% as a result of overproduction. A significant driver of price increases has been escalating input costs for farmers, American Farm Bureau Federation Chief Economist Roger Cryan said during a conference call with reporters on Wednesday. “Fuel costs have roughly doubled and fertilizer prices in many cases tripled.” Although bird flu has played a role in turkey inflation, Cryan explained that production is down only 2% from a year ago, and that prices vary widely depending on when you buy them. Discounts are highest closer to the holiday, he said, adding that purchasing smaller birds — which are in greater supply this year — might be another way to save money.Other sources vary on how much prices have jumped. The October Consumer Price Index for turkey and other non-chicken poultry was up 17% over last year. For the entire meal, retail analytics firm IRI reported an increase of 13.5%, while the US Department of Agriculture reported a smaller rise of 1% to 6%.(Updates with additional estimates in last paragraph)©2022 Bloomberg L.P. More