Economy

SEOUL (Reuters) – South Korea’s central bank cut benchmark interest rates for a second straight meeting on Thursday in a surprise move as the economy stalled and inflation slowed more than policymakers predicted.The Bank of Korea (BOK) lowered its benchmark interest rate by a quarter percentage point to 3.00% at its monetary policy review, an outcome only four of 38 economists polled by Reuters foresaw. All others expected the bank to keep rates unchanged. It was the second straight cut of 25 basis points since early 2009 as policymakers sought to revive the economy now that inflation is under control.The BOK downgraded forecasts for both growth and inflation this year.It cut 2024 growth forecast to 2.2% from 2.4% previously. For next year it sees the economy expanding 1.9%, weaker than its 2.1% outlook before.It now sees consumer inflation at 2.3% for this year, slower than 2.5% seen previously.South Korea’s policy-sensitive three-year treasury bond futures rose as much as 0.23 points to 106.64 after the rate decision, while the won weakened. The BOK adopted a neutral-to-dovish stance towards policy in October, when it made its first interest rate cut in more than four years as demand softened.Governor Rhee Chang-yong holds a news conference at around 0210 GMT, which will be livestreamed via YouTube. More

The Bank of Korea lowered its benchmark interest rate by a quarter percentage point to 3.00% at its monetary policy review, where it was widely expected to leaves the rate unchanged to support the Korean won against a strong U.S. dollar.The rate cut comes as policymakers aim to bolster a sluggish economy that narrowly avoided a technical recession earlier this year. South Korea’s third-quarter gross domestic product expanded by only 0.1% quarter-on-quarter, weighed down by declining exports and tepid consumer spending. The central bank expects slower GDP growth in 2025 of 1.9%, compared to its August forecast of 2.1%. It also sees consumer price index inflation at 1.9% in 2025, down from its 2.1% prior estimate.The South Korean won weakened sharply on Thursday, with the USD/KRW pair up 0.5% after the BoK’s decision.The central bank had cut interest rates for the first time since mid-2020 in October, and said that there was room for further easing. Lower interest rates offer some relief to households that have faced the highest borrowing costs in 16 years. More

SYDNEY (Reuters) – Australia’s world-beating labour market is one of the main obstacles stopping the country’s central bank from joining global peers in reversing the most aggressive policy tightening cycle in decades.The Reserve Bank of Australia was relatively late in joining the worldwide race to rapidly tighten monetary policy back in 2022 and did not raise rates as much as other banks, arguing it needed to ensure efforts to hose down inflation didn’t push up unemployment.More than two years on, Australia’s benchmark rates – though still below those in the U.S. – may not see their first cut for half a year, according to market pricing, as a labour crunch keeps inflationary pressures elevated.Duncan McKimm, who runs an aged care facility in the town of Grafton, about 600 km north of Sydney, has struggled to hire nurses.”We’ve been running ads for two years or more to find those. So it’s not that we haven’t been trying,” said McKimm, CEO at Clarence Village. It currently employs seven nurses and needs another three or four to help care for 74 senior residents.”If we could, we’d employ these people but…there aren’t actually enough in Australia.”His inability to fill those vacancies means he is unable to meet new government requirements for care facilities to have a registered nurse present around the clock.Similar struggles are seen across Australia’s care industry, which accounted for a big share of employment gains over the past year.The healthcare and social assistance sector still has more than 60,000 vacancies open even though it already filled over 100,000 jobs last year, almost 30% of all the job gains, official data showed.That’s mostly good for workers, with more women entering the labour force, driving the participation rate to a record high and keeping the jobless rate at 4.1% for about six months or so. The most recent data shows Australian jobs grew 2.7% year-on-year, well above gains of 1.4% in the U.S. and 1% in the euro bloc.But that’s not so good for anyone waiting for the RBA’s first rate cut.While headline inflation was 2.8% in the September quarter, dipping into the RBA’s 2-3% target band for the first time since 2021, that was mostly driven by temporary government rebates.Financial markets and a growing number of economists have pushed back their forecast for a first rate cut to May from February.That timing would be inconvenient for Prime Minister Anthony Albanese’s centre-left government, which has promised to ease cost of living pressures and needs to call an election no later than May.In contrast, both the Federal Reserve and the European Central Bank have already chopped rates by 75 basis points.Australia now finds itself in a shrinking group of developed economies, such as Norway, that still boast strong job markets and are yet to loosen monetary policy.The surprising labour strength is the reason the National Australia Bank (OTC:NABZY) pushed out its call for a rate cut to May from February, warning that there is a real risk that policy rates stay on hold even deeper into 2025.Tapas Strickland, head of market economics at NAB, said while difficulties finding suitable workers had eased somewhat from the pandemic, the market was as tight as it had been during Australia’s mining boom around 2007.”If you’re a firm looking to increase output, instead of increasing hours for your existing workforce, you’re basically being forced to recruit new people,” Strickland said.STATE DEMANDPublic sector jobs – which are concentrated in healthcare, education and public administration – rose over 30% from a year ago as federal and state governments ramped up spending to cope with longer term needs such as an aging population.That was in part thanks to the National Disability Insurance Scheme, a A$44.3 billion ($28.77 billion) programme to pay carers to take care of disabled people, financed by back-to-back budget surpluses.The increased spending is one reason Australia has avoided outright recession even though the RBA has jacked up interest rates 425 basis points since May 2022 to a 12-year high of 4.35%. Jobs in the private sector, in contrast, have fallen 2.2%. Leon Goldfeld, head of multi-asset solutions at JPMorgan, said since the pandemic, governments around the world have resorted to fiscal policy to support growth, which translates into higher longer-term inflation. “Prior to COVID episode, the mindset was very much around fiscal austerity… We believe the role of fiscal policy, particularly in downturns, is going to be much more proactive than it has been,” said Goldfeld.In Australia, worker supply has not been able to catch up with demand, even though its labour force has expanded more than 10% from pre-pandemic levels, much faster than the U.S. and Canada.Data from SEEK, an employment site, showed job ads in October across sectors from construction, healthcare to education more than 20% to 50% higher than 2019 levels. A report from Jobs and Skills Australia, a government advisory body, showed 33% of occupations reporting labour shortages in 2024.All of that has only increased demand for more foreign workers.Most of McKimm’s staff are local but now he has to look overseas for the nurses.”It is something we’re moving towards, but it is also not a very quick process and it is quite expensive especially for small organisations like ours,” he said.($1 = 1.5396 Australian dollars) More

SINGAPORE (Reuters) – The euro clung to its sharpest rise in four months on Thursday following hawkish remarks from a central bank policymaker, while the yen powered toward its strongest week in three months on growing bets Japan could hike interest rates in December. The moves stalled the dollar’s resurgence ahead of what is likely to be thin trade through the rest of the week due to the U.S. Thanksgiving holiday.European Central Bank board member Isabel Schnabel told Bloomberg overnight that rate cuts should be gradual and move to neutral, not accommodative, territory, and investors pulled back on rate cut bets, sending the euro up 0.7% to $1.0560.It faces resistance around $1.06, which may be put to the test if inflation readings in Germany, due later in the session, turn in stronger than expected.The yen, meanwhile, has rallied sharply for two days, rising through its 200-day moving average to 151.50 per dollar. It was slightly weaker in morning trade in Asia, and hovered around 160 per euro.Rates pricing implies about a 60% chance of a 25-basis point rate hike in Japan next month, up from around 50% a week ago, and a majority of analysts polled by Reuters expect a hike.”Stronger than expected Japanese inflation readings and the risk that the Fed may cut rates again in December have added to the downside pressure on dollar/yen,” said Rabobank senior currency strategist Jane Foley in a note to clients.The moves, combined with what traders said was an ebbing in corporate dollar buying once they had satisfied month-end needs, sent the dollar broadly lower and the U.S. dollar index dropped by nearly 0.8% overnight to sit at 106.13.Overnight U.S. yields fell, adding to downward pressure on the dollar, after data showed U.S. personal consumption expenditure in line with expectations with a 0.2% monthly increase.Sterling climbed on the weaker greenback to $1.2675 and the New Zealand dollar logged a gain of more than 1% on Wednesday after a 50-basis point rate cut in Wellington was shallower than some market expectations for 75 basis points.The kiwi last sat at $0.5892, while the Aussie/kiwi cross fell 0.7% overnight to A$1.1020. The move, as well as softer-than-expected inflation, muted gains for the Australian dollar which rose only 0.4% overnight.An 0855 GMT speech from Reserve Bank of Australia governor Michele Bullock is expected to offer some guidance around the central bank’s sensitivity to inflation data.”We think that if policy is discussed, a similar ‘cautious’ message is likely to be repeated with the RBA on a different path to many of its counterparts,” said Corpay strategist Peter Dragicevich.In emerging markets, Brazil’s real collapsed to a record low and ten-year yields spiked 38.5 basis points on concern at the impact of tax cuts on a stretched budget. More

MEXICO CITY (Reuters) – Mexican President Claudia Sheinbaum said on Wednesday Mexico would retaliate if U.S. President-elect Donald Trump followed through with his proposed 25% across-the-board tariff, a move her government warned could kill 400,000 U.S. jobs and drive up prices for U.S. consumers.”If there are U.S. tariffs, Mexico would also raise tariffs,” Sheinbaum said during a press conference, in her clearest statement yet that the country was preparing possible retaliatory trade measures against its top trade partner.Mexican Economy Minister Marcelo Ebrard, speaking alongside Sheinbaum, called for more regional cooperation and integration instead of a war of retaliatory import taxes. “It’s a shot in the foot,” Ebrard said of Trump’s proposed tariffs, which appear to violate the USMCA trade deal between Mexico, Canada and the U.S.Ebrard warned the tariffs would lead to massive U.S. job losses, lower growth, and hit U.S. companies producing in Mexico by effectively doubling the taxes they paid. “The impact on companies is huge,” he said.The proposed tariffs would hit the automotive sector’s top cross-border exporters especially hard, Ebrard added, namely Ford (NYSE:F), General Motors (NYSE:GM) and Stellantis (NYSE:STLA).Ebrard noted that 88% of pickup trucks sold in the U.S. are made in Mexico and would see a price increase. These vehicles are popular in rural areas that overwhelmingly voted for Trump.“Our estimate is that the average price of these vehicles will increase by $3,000,” Ebrard said. Sheinbaum and Trump spoke by phone later on Wednesday, the Mexican president said on social media platform X, adding the two discussed “strengthening collaboration on security issues” and that the conversation was “excellent.”In a post on his Truth Social platform, Trump said Sheinbaum “agreed to stop migration through Mexico, and into the United States, effectively closing our Southern Border.” He described the conversation as “very productive”. Sheinbaum’s office did not immediately respond to a request for comment from Reuters. Trump has previously said the tariffs would remain in effect until the flow of drugs – particularly fentanyl – and migrants into the U.S. was controlled. Sheinbaum added migrant caravans are no longer arriving at the U.S.-Mexico border “because they are attended to” in Mexico.A caravan of several thousand migrants had been heading through southern Mexico but numbers have dwindled in recent days.Many analysts regard Trump’s tariff threats as more of a negotiating tactic than trade policy.”The lack of a clear link between this threat and questions related to trade suggests the new president plans to use tariffs as a negotiating strategy to achieve goals largely unrelated to trade,” said David Kohl, chief economist at Julius Baer (SIX:BAER).PROFIT WIPED OUTMexico’s automotive industry is the country’s most important manufacturing sector, exporting predominantly to the United States. It represents nearly 25% of all North American vehicle production.Analysts at Barclays (LON:BARC) said they estimate the proposed tariffs “could wipe out effectively all profits” from the Detroit Three automakers.”While it’s generally understood that a blanket 25% tariff on any vehicles or content from Mexico or Canada could be disruptive, investors under-appreciate how disruptive this could be,” they wrote in a note on Tuesday.Brian Hughes, a spokesperson for Trump’s transition team, said the tariffs would protect U.S. manufacturers and workers from “unfair practices of foreign companies and foreign markets.”Hughes said Trump would implement policies to make life affordable and more prosperous for his country.GM and Stellantis declined to comment. Ford did not comment on how the threatened tariffs would affect its business but said it manufactures more vehicles in the United States than most major automakers.Mexico’s automotive industry group AMIA said it would prepare for any possibility and wait to see what formal actions are taken. The Institute of International Finance, a trade group for the global financial services industry, warned Mexico-U.S. relations would be challenging going forward.”The imposition of tariffs, eventually leading to increased protectionism, and other policies affecting exchange rates and commodity prices could have significant implications for the region,” it said in a note. The USMCA is up for review in 2026.  Katia Goya, director of international economics at Grupo Financiero Banorte (BMV:GFNORTEO), said it was likely the three USMCA countries would seek wholesale renegotiation of the pact rather than just rubber-stamp it to continue in its current form.”The effect of a trade-conflict situation is that it will mean lower economic growth in the United States, higher unemployment and higher inflation,” Goya said.Ebrard said USMCA trade amounted to $1.78 trillion in the first nine months of this year.”We can fragment and divide with tariffs,” Ebrard said. “Mexico does not want conflicts and divisions, but to build a stronger region.” More

LONDON (Reuters) – Buying a new home in Britain became a little more affordable this year as average wages rose faster than house prices and mortgage costs, the country’s largest mortgage lender said on Thursday.Halifax, part of Lloyds Banking Group (LON:LLOY), said the average house in the third quarter of 2024 cost 6.55 times the mean annual full-time income, down from 6.62 in 2023 and a record high of 7.24 in mid-2022.The cost of servicing a new mortgage dropped to its lowest in just over two years at 29% of average income, down from 33% a year ago, based on a mortgage with a 30-year term, a five-year fixed interest rate and a 25% deposit.”While homes are becoming more affordable, the progress has been gradual,” Halifax’s head of mortgages, Amanda Bryden, said.”Buying a property remains a significant challenge for many, with prices still near record highs and interest rates likely to stay higher than we’ve been used to over the past decade,” Bryden said. The Bank of England raised interest rates to a 15-year high of 5.25% in August 2023 and started to cut them in August this year followed by a further reduction to 4.75% this month.Economists polled by Reuters last week expected the BoE to cut rates to 3.75% by the end of next year, while they predicted house prices would rise by 3.1% next year and 4% in 2026.Halifax said the average house price in the third quarter of 2024 was 292,508 pounds ($368,823), barely changed on two years ago, although prices vary widely across the United Kingdom (TADAWUL:4280) even after taking regional wage differences into account.Housing was least affordable in southeast England and in London – where new mortgages cost 39% and 36% of local salaries – and cheapest in northeast England at 19% and Scotland and Northern Ireland at 22% of local full-time earnings.($1 = 0.7931 pounds) More

The FTC would be looking into its software licensing, cloud computing businesses, and practices related to cybersecurity and artificial intelligence products, the source added. Here are some key cases against Big Tech:MICROSOFT The FTC’s antitrust probe was approved by Chair Lina Khan ahead of her likely departure in January and the expectation that incoming President Donald Trump would appoint a fellow Republican with a softer approach toward business.The antitrust investigation into Microsoft would also look into allegations that the software giant is potentially abusing its market power in productivity software by imposing punitive licensing terms to prevent customers from moving their data from its Azure cloud service to other competitive platforms, sources confirmed earlier this month.ALPHABET In Alphabet (NASDAQ:GOOGL)’s Google search case – where a federal judge ruled that the company broke the law with an illegal monopoly on online search – prosecutors argue that it should sell its Chrome browser, share data and search results and possibly even sell Android. In December, Google will have a chance to propose its own remedies, after which U.S. District Judge Amit Mehta will hold a two-week trial on what remedies are appropriate in the case.Separately, Google was in February hit with a 2.1 billion euro ($2.22 billion) lawsuit by 32 media groups, including Axel Springer and Schibsted, alleging that they had suffered losses due to the company’s practices in digital advertising. In the same month, Google asked a U.S. judge to throw out a jury verdict in a lawsuit by “Fortnite” maker Epic Games that found the technology giant had abused its market dominance in setting rules for its app store. Epic Games had prevailed in the high-profile antitrust trial that if it holds could upend the entire app store economy.APPLEIn March, the U.S. Department of Justice and 16 states sued Apple (NASDAQ:AAPL) alleging the iPhone maker monopolized the smartphone market, hurt smaller rivals, and drove up prices. The DOJ has been probing Apple since 2019.The California-based firm is also under regulatory scrutiny in Europe. It is set to be fined by the European Union’s antitrust regulators for breaching the bloc’s tech rules, Reuters reported earlier this month.The European Commission in June determined that App Store’s rules breach the Digital Markets Act – new rules for Big Tech firms. Earlier this year, Apple was hit with a 1.84 billion euro fine for thwarting competition from music streaming rivals through restrictions on its App Store. Apple is appealing the penalty.Other lawsuits include a class action filed in March in San Jose, California federal court accusing the company of monopolizing the market for cloud storage in its mobile devices.META PLATFORMSMeta must restrict the use of personal data harvested from Facebook (NASDAQ:META) for targeted advertising, Europe’s Court of Justice of the European Union court ruled in October. This came after privacy activist Max Schrems took his grievance to an Austrian court and said he had been targeted by advertisements as a result of Meta’s personalized advertising based on processing personal data.Earlier in June, the European Commission notified the company that its “pay or consent” advertising model, already the target of privacy regulators and activists’ ire, was in breach of the DMA.An appeals court ruled in March that Meta cannot stop the U.S. Federal Trade Commission from reopening a probe into its Facebook unit’s privacy practices for now. The company had objected, citing the $5 billion fine it paid and the range of safeguards it had agreed.In October last year, dozens of U.S. states sued Meta and its Instagram unit, accusing them of fueling a youth mental health crisis by making their social media platforms addictive.The company was hit with a record 1.2 billion euro fine by its lead European Union privacy regulator in May 2023 over its handling of user information and given five months to stop transferring users’ data to the U.S.AMAZON.COMThe FTC filed a long-awaited antitrust lawsuit against Amazon.com (NASDAQ:AMZN) in September, charging the company with harming consumers with higher prices.While some of the states that sued alongside the FTC had their claims dismissed, the case was to still go forward to pursue any claims the judge did not permanently dismiss, as of October.The FTC has also filed other lawsuits against the company, including one accusing the e-commerce giant of duping “millions of consumers” into purchasing subscriptions for Prime services. ($1 = 0.9469 euros) More

The downturn was sharpest in consumer services – where large employers will bear the brunt of a 25 billion pound ($32 billion) rise in payroll taxes – but the mood at business and professional services companies soured too, the CBI said.On Monday Reeves told the CBI’s annual conference that she would not raise taxes in the same way again, after the CBI’s chief executive said businesses had been caught off guard by the scale of the tax rises.Thursday’s survey showed that optimism among consumer services businesses sank to its lowest since August 2022 at -55 in November, down from -19 in August, while among business and professional services sentiment fell to -29 from +9.The index represents the difference between the percentages of businesses which say they are more optimistic and those who are more pessimistic.”Falling sentiment, weaker hiring intentions and firming cost pressures are all at least a partial response to the forthcoming rise in employer National Insurance Contributions,” CBI Deputy Chief Economist Alpesh Paleja said.Business and professional services firms said their profitability had fallen by the most since August 2020 and all types of services firm said they would invest less.British business investment is low by international standards and this is widely seen as one cause of Britain’s lower economic productivity than its major peers.The gloom in the CBI survey has also been reflected in other surveys. Last week the S&P Global purchasing managers’ index pointed to economic contraction for the first time in 13 months.The CBI survey was based on responses from 441 firms collected between Oct. 29 and Nov. 14.($1 = 0.7898 pounds) More