Economy

Allianz Chief Economic Adviser Mohamed El-Erian said he predicts headline inflation “will probably come down to about 8%,” but that core inflation “is still going up.”
El-Erian said an increase in core inflation means “we still have an inflation issue.”

Heidi Gutman | CNBC

Ahead of the release of the latest consumer price index reading this week, Allianz Chief Economic Adviser Mohamed El-Erian told CBS’ “Face The Nation” Sunday that he predicts headline inflation “will probably come down to about 8%,” but that core inflation “is still going up.”
Core inflation is what measures the drivers of inflation and how broad they are, so El-Erian said an increase in core inflation means “we still have an inflation issue.”

Even if core inflation is still on the rise, however, El-Erian said it will eventually come down.
“The question is, does it come down with a slowdown in the economy or a major recession?” he said on “Face the Nation.”
The oil producer group OPEC+ announced its largest supply cut since 2020 on Wednesday, and El-Erian said this decision “does hurt the U.S.,” as it risks causing inflation to increase again. But he said the cut did not come as a surprise since the group is looking to protect oil prices in the face of declining demand.
“That’s what they do,” he said. “But it’s certainly not good news for the U.S. economy.”

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SYDNEY (Reuters) – The dollar started the week firmly on Monday, with a strong U.S. labour market reinforcing bets on higher interest rates as traders braced for data expected to show stubbornly high inflation.U.S. unemployment unexpectedly fell last month, Friday figures showed, and inflation data due on Thursday is forecast to show headline inflation at a hot 8.1% year-on-year. Policymakers’ preferred core inflation is seen rising to 6.5%.Westpac strategist Sean Callow said the data and rising yields in response was a “robust combination for the dollar.””It’s further evidence that the U.S. economy is not cratering,” he said. “It just feeds into the notion that the Fed is going to spend the next three weeks saying the same thing about interest rates.”Climbing oil prices and geopolitical tension also provided plenty of reasons for nervousness about growth, weighing on energy-importer currencies in Europe and even on exporters such as the growth-sensitive Australian dollar.The Aussie fell 0.3% to a 2-1/2 year low of $0.6347 in early trade in Asia that was thinned by a holiday in Japan. Sterling fell 0.2% to $1.1071, while the yen was drifting into a zone on the weaker side of 145 per dollar that prompted authorities’ intervention to support it last month.The yen was last at 145.37 per dollar. The New Zealand dollar touched a two-week low of $0.5593.Futures pricing suggests traders see a nearly 90% chance of a 75 basis point rate hike in the United States next month and more than 150 bps of tightening by May. Ten-year Treasury yields rose for a tenth straight week last week. [US/]Benchmark Brent crude futures jumped more than 11% last week after the Saudi-led production cartel agreed to cut supply, while intensifying war in Ukraine is also a threat to Europe’s energy security as winter approaches.The euro fell below $0.98 on Friday and was last at $0.9733. The U.S. dollar index was steady at 112.83, off lows around 110 last week and creeping back toward last month’s 20-year high of 114.78.Markets were waiting to see how the Kremlin might respond to a blast that hit Russia’s only bridge to Crimea. Nuclear-armed North Korea made a seventh recent missile test over the weekend. Chinese markets reopen after a week-long holiday, and ahead of that the offshore yuan was steady at 7.1310 per dollar. The Communist Party’s 20th National Congress opens on Sunday and is expected to reaffirm Xi Jinping’s leadership.Services activity in China shrank for the first time since May in September, disappointing expectations.”The yuan will likely trade between 7.0 and 7.2 in the near term,” said Scotiabank strategist Qi Gao.========================================================Currency bid prices at 2304 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $0.9733 $0.9732 -0.02% -14.41% +0.9739 +0.9728 Dollar/Yen 145.3800 145.2700 +0.12% +0.00% +145.4150 +145.4400 Euro/Yen 141.50 141.62 -0.08% +0.00% +141.5700 +141.4700 Dollar/Swiss 0.9948 0.9949 +0.01% +9.08% +0.9949 +0.9950 Sterling/Dollar 1.1073 1.1093 -0.19% -18.13% +1.1095 +1.1065 Dollar/Canadian 1.3742 1.3739 +0.02% +8.69% +1.3754 +1.3725 Aussie/Dollar 0.6352 0.6366 -0.22% -12.62% +0.6375 +0.6343 NZ Dollar/Dollar 0.5597 0.5594 +0.06% -18.23% +0.5606 +0.5593 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More

The commission favors the state giving households and businesses a one-off payment worth one month’s gas bill this year, according to the paper. It is still working on a separate scheme for big gas consumers in the industrial sector.In a second phase, the state could subsidize 80% of projected gas consumption, with consumers having to pay the other 20% at market prices, incentiziving energy savings. The subsidized price could come in around 14 cents per kilowatt hour (kWh), according to the paper.If adopted, the scheme would be paid for by a 200 billion euro ($194 billion) relief package Chancellor Olaf Scholz’s government announced late last month to soften the impact of soaring energy prices on Europe’s largest economy. The commission will present an intermediate report at a news conference on Monday. The government is expected to take over its main findings. An economy ministry spokesperson said it did not have a finalized concept yet.Experts say the upside of a one-off payment is that it provides immediate relief. The downside is that it provides no incentives to save despite estimates that at least 20% of gas savings are needed to avoid shortages.The gas price break takes longer to implement. More

“An honour and a great privilege to be in His Majesty’s Government,” Hands said in a tweet following his appointment.Hands’ appointment comes after Conor Burns was sacked as a junior trade minister on Friday and suspended from the parliamentary Conservative Party following a “complaint of serious misconduct” at its annual conference last week.Hands was previously the minister of state at the Department for Business, Energy & Industrial Strategy, a role which he held for over a year. More

The dollar wrecking ball is swinging its way through world markets again, after a solid U.S. jobs report strengthened the view that the Fed will deliver a fourth consecutive 75 basis- point rate hike at its next meeting.Wall Street tanked on Friday and global markets will likely be reeling on Monday. Asian trade could be more volatile than usual as China reopens after the Golden Week holiday.China will be very much in focus this week. The Caixin services PMI over the weekend showed that activity contracted in September for the first time since May, and the economic data dump this week includes inflation, trade, and loan growth. Graphic: China services PMI – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoljnnvx/ChinaPMI.jpg The PBOC also sets interest rates sometime between Oct. 13 and Oct. 16. Does it raise its key one-year lending rate from 2.75% currently to support the yuan, or are policymakers more concerned with sluggish growth?All this comes ahead of the Communist Party’s 20th National Congress which opens on Oct. 16. On top of the country’s economic troubles, political, trade and military challenges are also mounting.Elsewhere in Asia this week the Monetary Authority of Singapore and Bank of Korea are set to raise rates. Analysts are split on how much the MAS will tighten, and expect the BOK to raise by 50 bps. The problem these central banks face is that failure to keep up with the Fed intensifies the pressure on their currencies. The BOK has already intervened to support the won, which last week hit a 13-1/2 year low, and the Singapore dollar is also close to a post-2009 low.Major data releases in Asia this week include Indian inflation, Korean unemployment and Singapore GDP, while the big one for global markets is U.S. inflation on Thursday.Key developments that could provide more direction to markets on Monday:IMF/World Bank meetings in WashingtonFed’s Brainard and Evans speak More

PARIS (Reuters) -TotalEnergies on Sunday offered to bring forward wage talks, in response to union demands, as it sought to end a strike that has disrupted supplies to almost a third of French petrol stations and led the government to tap strategic reserves. “Provided the blockades will end and all labour representatives agree, the company proposes to advance to October the start of mandatory annual wage talks,” it said in a statement. The talks were initially scheduled to start in mid-November. Union representatives earlier told Reuters the strikes staged by the CGT, historically one of France’s more militant unions, would continue. They have disrupted operations at two ExxonMobil (NYSE:XOM) sites as well as at two TotalEnergies sites. Over roughly two weeks of industrial action, France’s domestic fuel output has fallen by more than 60%, straining nerves across the country, as waiting lines grow and supplies have run dry. Almost a third of France’s petrol stations had problems getting deliveries of at least one fuel product on Sunday, up from 21% the day before, the office of the energy minister said. France has released strategic reserves and raised imports, Energy Minister Agnes Pannier-Runacher said in a statement, adding these should mean the supply situation improves on Monday.Speaking to BFM TV, she welcomed TotalEnergie’s offer and said she expected a move from ExxonMobil’s Esso France unit “so that the French people are not taken hostage by this social dispute and can go to work with confidence”. Esso France, ExxonMobil’s local unit, said it would hold a new round of wage talks with unions on Monday “with the aim of enabling the group’s refineries to resume operations as soon as possible.” WINDFALL PROFITSWage talks have been underway for weeks at ExxonMobil, while the CGT at TotalEnergies said it has been trying to get the management to the negotiation table earlier than formal talks scheduled next month.Workers at TotalEnergies are seeking a 10% pay rise starting this year after a surge in energy prices led to huge profits that allowed the company to pay out an estimated eight billion euros ($7.8 billion) in dividends and an additional special dividend to investors. The company’s CEO last week said “the time has come to reward” workers, but the company had refused to start negotiations. A CGT representative said the union would not make any official comment on TotalEnergie’s offer before internal discussions and informing workers. The CFDT union, France’s largest, which chose not to call for strikes despite demanding a similar pay rise, said in a statement it was prepared to start wage talks in October.Aurore Berge, the head of the governing Renaissance group in the lower house of parliament, said workers had a legitimate right to seek a share in exceptional profits that were made with their help, but not to hurt ordinary people.”It is not acceptable that workers stage preemptive walkouts which will hit whom? The French people who have no other choice (but to use their car),” she told BFM TV in an interview on Sunday.($1 = 1.0266 euros) More

Hello and welcome to the working week.As has been noted in this newsletter, 2022 is a year for significant votes. Some were expected, some were not. Some have more legitimacy than others. This week, there will be much analysis of this latter point.The most significant of these will be a process of installation rather than election. China’s Communist party begins its five-yearly congress on Sunday, the most notable item of which will be the handing of a historic third leadership term to president Xi Jinping. The prospects are not good — “a tragic error”, according to FT chief economics editor Martin Wolf. A pressing concern for Xi’s government is the crash in the housing market, which along with the zero-Covid policy and difficult economic conditions has stalled China’s run of strong growth, which will for the first time since the early 1990s fall behind the rest of Asia this year, according to the World Bank. Unleashing the Chinese consumer to spend more is the obvious way to restore growth. The problem for Xi and his senior lieutenants with this solution is that doing so will mean relinquishing some of their political power.Before all that comes another issue of tension for Beijing. Monday is the National Day public holiday in Taiwan and the country’s softly spoken president Tsai Ing-wen will be giving an address.China claims Taiwan as its territory. Nicola Sturgeon’s Scottish National party would like to no longer be considered the territory of the British government. Sturgeon will be making this clear in the closing speech to her party’s conference on Monday. A day later, the SNP’s risky plan for another referendum on the matter will be heard by the UK’s Supreme Court. The British government has refused to grant powers to hold another vote. The Supreme Court’s two-day hearing is due to conclude on Wednesday. If the court agrees with the UK government, it would not necessarily be the end of the SNP’s bid for a second referendum, but it would almost certainly scupper Sturgeon’s stated goal of holding a vote in October 2023 because she would have to pass legislation.Talking of second chances, but away from the discussion of votes, this Friday will see London’s landmark Battersea Power Station reopen in a new guise, as a retail, leisure and residential building.This feels like good news in disrupted times. Expectations are higher than the building’s four chimneys, one of which you will be able to ride up — for a fee — in a glass elevator. And the £9bn renovation, completed after numerous previous attempts failed, is so cool that Apple is taking a few floors for its British workforce. Whatever your view, the restoration of this iconic 1930s building is buoying the local housing market.Thank you to everyone who writes into The Week Ahead. Send your comments to [email protected] or hit reply to the newsletter email.Economic dataIt’s a quieter start to the week for the markets with the US closed for Columbus Day. However, we’ll make up for it as the week progresses.Inflation is a theme (will it ever not be?), led by data from the US and China. The Fed will also release the minutes from its September meeting, which will be watched for indications about its future intentions in monetary policy tightening to quell the rising cost of living.The IMF and World Bank annual meetings also begin in Washington on Monday, running all week.CompaniesThis week will be a mixed bag of results, but a couple of sectors will feature prominently as the reporting season cranks up.A buoyant jobs market is expected to have helped recruitment firms PageGroup and Robert Walters secure higher quarterly net fees. But their trading updates will be watched for signs of a slackening in demand as inflation and recessionary fears rise.The week will end with a rush of third-quarter results from Wall Street banks, likely to fuel concerns about a US recession. Citi, JPMorgan Chase, Wells Fargo and Morgan Stanley are all reporting on Friday — Bank of America and Goldman Sachs will follow next week — and analysts expect these six institutions to collectively set aside more than $4bn to cover potential losses from bad loans.On the plus side, third-quarter revenues at JPMorgan, BofA, Citi and Wells are expected to have risen year on year by around 4 per cent thanks to higher net interest income following the Fed’s rate rises, our US banking reporter notes. Goldman and Morgan Stanley, which derive a greater share of earnings from investment banking, are likely to report a drop in revenues given the drop off in dealmaking activity.Finally, a plug for an FT Live event in London (and online) this Wednesday. Join television presenter Trinny Woodall, English football player Ellen White and others at the Women at the Top Europe Summit at the Kimpton Fitzroy. As a newsletter subscriber, you can claim a 10 per cent discount to the in-person event using promo code Newsletters22. Register for your pass today.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayEgypt, monthly inflation figuresGermany, European Central Bank chief economist Philip Lane gives opening remarks at the ECB Conference on Monetary Policy in FrankfurtUS, IMF and World Bank Annual Meetings begin in WashingtonResults: Hollywood Bowl FY, Tata Consultancy Services Q2TuesdayMeta Platforms holds its annual Connect event showcasing new augmented and virtual reality products, including the much touted headset codenamed Project Cambria.IMF publishes its Global Financial Stability Report assessing the global financial system and marketsJapan, monthly trade balance dataUK, British Retail Consortium-KPMG retail sales monitor plus monthly labour market figures. Also, Institute for Fiscal Studies publishes its Green Budget, an assessment of the country’s public finances and growth prospectsResults: Givaudan Q3, LVMH Q3, Marston’s FY, Reach Q3 trading update, Robert Walters Q3 trading update, YouGov FYWednesdayG20 finance ministers and central bank governors meet as part of this week’s IMF and World Bank annual meetingsIndia, monthly industrial production and consumer price index (CPI) inflation dataJapan, machinery orders dataUK, GDP, industrial production and trade balance figuresUS, Federal Open Market Committee minutes from its last rate-setting meetingUS, September producer price index (PPI) inflation figuresResults: Barratt Developments trading update, Ikea FY, Kin + Carta FY, PageGroup Q3 trading update, Qinetiq Q2 trading updateThursdayArgentina, September CPI inflation rate dataEU, eurozone industrial production figuresGermany, September CPI inflation rate dataInternational Energy Agency publishes October oil market reportUK, RICS September residential property market surveyUS, September CPI inflation rate figures Results: easyJet FY trading update, Entain Q3 trading update, Fast Retailing FY, Hays Q1 trading update, Suedzucker H1, TSMC Q3FridayChina, September CPI and PPI inflation rate figures plus monthly trade dataEU, eurozone trade figuresFrance, CPI inflation rate dataUS, monthly retail sales figuresResults: Ashmore Group Q1 trading update, Citi Q3, JPMorgan Chase Q3, Morgan Stanley Q3, Wells Fargo Q3World eventsFinally, here is a rundown of other events and milestones this week. MondayCanada, Thanksgiving Day national holidayEstonia, European Commission president Ursula von der Leyen speaks at the Tallinn Digital SummitNorth Korea, 77th anniversary of the founding of the ruling Workers’ Party of KoreaSweden, Nobel Prize for economic sciences announcedTaiwan, National Day public holidayUK, Scottish National Party leader Nicola Sturgeon addresses her party on the closing day of its annual conference in AberdeenUS, Columbus Day federal public holidayTuesdayCzech Republic, informal meeting of EU energy ministers in PragueUK, Supreme Court due to begin hearing arguments for and against the Scottish National party’s plan to legislate for a referendum without the Westminster government’s permissionWednesdayAustralia, events to commemorate the 20th anniversary of the Bali bombings in which 202 people died, including 88 Australians and 38 IndonesiansBelgium, meeting of Nato defence ministers begins in Brussels, chaired by Nato secretary-general Jens StoltenbergSpain, National Day public holidayThursdayIceland, Arctic Circle Assembly begins in ReykjavikTaiwan due to end mandatory Covid-19 quarantine for arrivals. Instead they will be asked to undergo a seven-day period of self-initiated prevention measures.UK, winner announced for the RIBA Stirling Prize, one of the country’s most prestigious architecture awardsFridaySaudi Arabia, LIV Golf Invitational tees off at the Royal Greens Golf & Country Club in JeddahUK, London’s iconic Battersea Power Station reopens as a retail and leisure hubSaturdayJapan, first Parkour World Championships begin in TokyoSundayAustralia, Twenty20 World Cup cricket tournament begins in GeelongChina, the Chinese Communist party begins its five-yearly congress during which president Xi Jinping is due to secure a historic third leadership term More

In an interview aired on CBC Radio on Sunday, Macklem said the current inflation fight is the biggest test the central bank has faced since it started targeting inflation 30 years ago.But he assured Canadians that monetary policy is working and he expected inflation to return to the central bank’s 2% target by 2024. Canada’s headline inflation rate dropped to 7.0% in August, with core inflation running at about 5%.”We need to cool the economy, (but) we don’t want to over- cool the economy,” Macklem said.”When we look at the economy right now, there is an exceptionally high number of vacant jobs … that’s a clear signal that there is scope to slow the economy, without a lot of people put out of work,” he added.Canadian employers were actively looking to fill nearly 1 million jobs as of July, data released on Friday showed, while the job vacancy rate dropped to 5.4% in July, from a peak 6.0% in April 2022.The Bank of Canada has raised its benchmark interest rate by 300 basis points since March, one of its steepest and fastest tightening cycles ever. Economists and money markets are leaning toward a 50-basis-point increase on Oct. 26. Macklem said parts of the economy that are sensitive to interest rate increases are starting to slow. “Let me be clear, what we don’t want is … inflation and wages to become unmoored to our 2% objective, because if that happens, then we are actually going to need to slow the economy a lot more to get the inflation back to 2%. That’s what we have been what we call front-loading our interest rate increases,” Macklem added. More