Economy

SINGAPORE/GDANSK (Reuters) -The dollar fell on Friday but hovered near a two-year high and looked set to wrap up its third week of gains, while markets digested a raft of global central bank action and the looming risk of a U.S. government shutdown.The dollar was down 0.30% against a basket of six other currencies at 108.1, but earlier in the day rose to a two-year peak at 108.54.In the background, a government shutdown loomed over the U.S., after a spending bill backed by Trump failed in the House of Representatives on Thursday. Government funding is due to expire at midnight on Friday. If lawmakers fail to extend that deadline, the U.S. government will begin a partial shutdown that would interrupt funding for everything from border enforcement to national parks and cut off paychecks for more than 2 million federal workers.A shutdown would directly reduce GDP growth by around 0.15 percentage point for each week it lasts, according to Goldman Sachs, but growth would rise by the same amount after the shutdown was resolved.The euro also hit a one-month low of $1.03435 on Friday, after U.S. President-elect Donald Trump said the European Union must purchase U.S. oil and gas to make up for its “tremendous deficit” with the world’s largest economy, or face tariffs.The single currency quickly pared losses against the dollar and was last up 0.32% at $1.039. “It’s clear that markets aren’t too bothered about that just yet,” said Michael Brown, strategist at Pepperstone. “I think it’s just an opening salvo in what we all know is going to be a sort of a trade war take-two between the U.S. and Europe.” The yen initially weakened to a five-month low of 157.93 per dollar on Friday, as it continues to remain under pressure from the Bank of Japan’s reluctance to further raise rates.It later recouped some of those losses and last traded 0.5% higher at 156.64 per dollar after top Japanese finance officials said the government is “alarmed” by recent foreign exchange moves and is ready to intervene if speculative moves were deemed excessive.The BOJ kept interest rates unchanged on Thursday and its governor stayed vague on how soon it could push up borrowing costs, just a day after the Federal Reserve pointed to fewer U.S. rate cuts next year.The Swiss franc also strengthened with the dollar down 0.5% at 0.8942 francs. .”The JPY and the CHF are the top performers on the day, suggesting some demand for havens into the weekend,” said Scotiabank (TSX:BNS) analysts in a note. Sterling earlier slipped to a one-month trough of $1.2475 but was last up 0.1% at $1.2519.Bank of England (BoE) policymakers voted 6-3 to keep interest rates on hold on Thursday, a bigger split than economists had predicted, as officials disagreed over how to respond to a slowing economy that remains beset by inflation pressures.DOLLAR DOMINANCE The dollar was set to end the week with a 1% gain against a basket of currencies, underpinned by expectations that U.S. rates will stay higher for longer. Markets are now pricing in fewer than 40 bps of Fed rate cuts for 2025.Focus is now on the release of the core PCE price data – the Fed’s preferred measure of inflation – later on Friday, for further clues on the outlook for the U.S. economy.The Australian and New Zealand dollars were also grappling to stay off two-year lows on Friday, with the Aussie last flat at $0.6236.The kiwi was up 0.12% to $0.5638. Both Antipodean currencies were on track for a weekly fall of about 2%. More

Republican House of Representatives Speaker Mike Johnson was trying to plot a course that could pass both his chamber, with narrow Republican control, and the Democratic-majority Senate, as a midnight Friday (0500 GMT Saturday) funding deadline loomed.”We have a plan,” Johnson told reporters at the Capitol on Friday. “We’re expecting votes this morning.”Conservative Republicans on Thursday rejected Trump’s demand to lift the debt limit, which could add trillions more to the government’s $36 trillion in debt. Trump, who takes office in one month, overnight ratcheted up his rhetoric, calling for a five-year suspension of the U.S. debt ceiling even after members of his party’s right flank balked at an earlier two-year extension. “Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling. Without this, we should never make a deal,” Trump wrote in a post on his social media platform shortly after 1 a.m. An earlier bipartisan deal was scuttled after Trump and his ally Elon Musk, the world’s richest person, came out against it on Wednesday. A hastily revised alternative backed by Trump then failed by a vote of 174-235 Thursday night. That revised measure generally would keep the roughly $6.2 trillion federal budget running at its current level through March and provided $100 billion in disaster relief. But it dropped other measures included to appease Democrats, who still control the U.S. Senate and the White House for four more weeks. The White House has said President Joe Biden opposed the reworked bill.Previous fights over the debt ceiling have spooked financial markets, as a U.S. government default would send credit shocks around the world. The limit has been suspended under an agreement that technically expires on Jan. 1, though lawmakers likely would not have had to tackle the issue before the spring. More

Rato, who already spent two years in prison over a separate embezzlement case related to his tenure as chairman of Spanish lender Bankia, has denied any wrongdoing throughout the nine-year probe.Following a year-long trial, the court convicted Rato on three counts of offences against Spanish tax authorities, as well as money laundering and private-to-private corruption.As the decision can be appealed before the Supreme Court, Rato will not have to serve any prison time for now until there is a final ruling, a court spokesperson said.Rato, who chaired the IMF from 2004 to 2007 and Bankia between 2010 and 2012, previously spent two years in prison after being convicted in 2018 over the misuse of Bankia credit cards to buy jewels, holidays and expensive clothes. More

LONDON/COPENHAGEN(Reuters) -Novo Nordisk on Friday revealed disappointing results in a late-stage trial for its experimental next-generation obesity drug CagriSema, wiping as much as $125 billion off its market value.The lower-than-expected weight loss from the drug candidate deals a blow to the Danish company’s ambitions for a successor to its Wegovy weight-loss drug that is more powerful than Eli Lilly (NYSE:LLY)’s rival Zepbound, also known as Mounjaro.Investors and analysts had eagerly awaited this data as a test of Novo’s case that it has a strong pipeline of drugs to follow Wegovy in the fiercely competitive anti-obesity market.The CagriSema trial showed the drug helped patients cut their weight by 22.7%, below the 25% Novo Nordisk (NYSE:NVO) had expected.Novo’s share price fell as much as 27% after the results were announced, hitting their lowest since August 2023 in one of the biggest one-day wipe outs on record for a European company. They were down 18.8% at 1225 GMT.Shares in U.S. rival Lilly rose more than 7% in pre-market trade.’WORST CASE SCENARIO’ Novo said if all people adhered to treatment with CagriSema, patients overall achieved weight loss of 22.7% after 68 weeks, with 40.4% losing 25% or more.The results are a “worst case-scenario” for Novo, said Markus Manns, portfolio manager at mutual funds firm Union Investment, a Novo and Lilly shareholder.”CagrisSema is only as good as Zepbound, but more complex to manufacture,” he said.Lilly’s own obesity injection – sold as Zepbound in the United States – led to an average weight loss of nearly 23% in clinical trials.The data from Novo’s CagriSema Phase III trial was based on about 3,400 people with a body mass index (BMI) of 30 or above or people with a BMI of 27 and at least one weight-related comorbidity like hypertension or cardiovascular disease.Martin Holst Lange, Novo Nordisk’s executive vice president for development, said Novo was “encouraged” by the data. He said only 57% of patients in the trial reached the highest dose.The company did not immediately respond to a request for comment on why more patients did not reach the highest dose.Novo Nordisk plans to start a new trial in the first half of next year to further explore CagriSema’s additional weight-loss potential, a Novo Nordisk spokesperson said. It expects to submit the drug for regulatory approval towards the end of 2025.Novo said the drug had similar side effects compared with its GLP-1 drugs already on the market. The most common adverse events with CagriSema were gastrointestinal, and the vast majority were mild to moderate and diminished over time, consistent with the GLP-1 receptor agonist class, it said.WEEKLY INJECTIONCagriSema is a weekly injection which combines semaglutide, which is the active ingredient in Wegovy and mimics the gut hormone GLP-1, and a separate molecule called cagrilintide that mimics the pancreatic hormone amylin, into a weekly injection.The two hormones combined suppress hunger and help control patients’ blood glucose.Novo’s trial is the most advanced for an amylin drug candidate currently being tested in the market.The success of Wegovy helped make Novo Europe’s biggest company by market capitalisation, worth more than $460 billion.Its shares have been under pressure this year, however, significantly underperforming those of chief rival Lilly, due mainly to concerns Novo may be losing its first-mover advantage in the obesity drug race. More

According to LSEG Lipper data, investors divested a net $37.22 billion worth of global equity funds in the week, the largest amount for a single week since September 2009.The Fed cut rates as expected on Wednesday and signaled fewer rate cuts and projected higher inflation for next year, prompting a sell-off in global equities after Chair Jerome Powell emphasized the need for caution.The MSCI World index has declined more than 3% this week and is set for its sharpest weekly fall in three and a half months.Investors offloaded a robust $50.2 billion worth of U.S. equity funds, logging the biggest weekly net sales since September 2009. European and Asian funds, however, experienced $9.21 billion and $1.74 billion worth of net purchases.Meanwhile, global sectoral funds experienced their largest weekly outflow in 14 weeks, totaling $2.65 billion, with the tech and healthcare sectors facing net disposals of $1.37 billion and $737 million respectively.Global bond funds continued to attract investor interest for a 52nd consecutive week, securing about $2.36 billion in net purchases, albeit the lowest amount in eight months. Corporate and loan participation funds drew substantial inflows of $2.01 billion and $1.12 billion, respectively. Meanwhile, government bond funds experienced $594 million in outflows, marking a third consecutive week of net sales.Money market funds recorded about $51.02 billion in net sales, marking the fourth outflow in five weeks. In the commodities sector, gold and precious metal funds saw $1.67 billion withdrawn, the largest since July 2022, while energy funds experienced $215 million in outflows.According to data covering 29,603 funds, emerging market equities faced increased selling pressure, with equity funds recording their sharpest net outflow in about a year at $5.27 billion, and bond funds also seeing $710 million in net outflows. More

Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, remarks that showed policymakers are starting to reckon with the prospects for sweeping economic changes under a Trump administration.Here are the forecasts from major brokerages for 2025:Rate cut estimates (in bps) Brokerages Jan 2025 2025 Fed Funds Rate BofA Global No rate cut 50 3.75%-4.00% (end of Research June) Barclays (LON:BARC) No rate cut 50 3.75%-4.00% (end of 2025) Goldman Sachs No rate cut 75 (through 3.50%-3.75% (through September September 2025) 2025) J.P.Morgan No rate cut 75(through 3.75% (through September September 2025) 2025) 3.375% (Q4 2025) Morgan Stanley (NYSE:MS) No rate cut 50 (through June 2025) Nomura No rate cut 25 4.00%-4.25% (through end of 2025) *UBS Global No rate cut 125 3.00%-3.25% (through Research end of 2025) Deutsche Bank (ETR:DBKGn) No rate cut No Rate 4.25%-4.50% Cuts Societe No rate cut – 3.00%-3.25% (by Generale early 2026) ING No rate cut 75 3.75% – 4.00% Macquarie No rate cut 25 4.00%-4.25% UBS Global No rate cut 50 3.75%-4.00% (end of Wealth 2025) Management Peel Hunt No rate cut 50 3.50%-4.00% * UBS Global Research and UBS Global Wealth Management are distinct, independent divisions in UBS Group More

The Fed cut rates as expected on Wednesday but projected fewer-than-expected interest rate cuts and higher inflation next year, while Chair Jerome Powell explicitly referred a need for caution, prompting a sell-off in equity markets.Investors withdrew a hefty $20.93 billion from U.S. large-cap funds, halting a six-week-long streak of net purchases. They also shed small-cap, multi-cap and mid-cap funds to the tune of $5.41 billion, $3.91 billion and $2.85 billion, respectively.U.S. sectoral funds recorded net sales for the third consecutive week, totaling $1.53 billion, with the tech and healthcare sectors leading the outflows at $1.32 billion and $324 million, respectively. Meanwhile, the financial sector attracted $578 million in net purchases during the same period.For the first time in 29 weeks, U.S. debt funds experienced a drop in demand, with investors withdrawing a net $2.1 billion. Specifically, U.S. government bond funds faced the largest weekly outflow since October 2, amounting to $2.23 billion. General domestic taxable fixed income and loan participation funds received inflows of $2.08 billion and $1.01 billion, respectively.U.S. money market funds witnessed a fourth weekly outflow in five weeks, to the tune of $28.07 billion. More

(Reuters) -U.S. stock index futures dove on Friday as investors grappled with the possibility of a government shutdown and a higher interest rate path ahead of a key inflation report due on the day.Dozens of Republicans defied President-elect Donald Trump’s spending bill, leaving Congress with no clear plan before government funding expires at midnight. Failure to extend the deadline could disrupt holiday travel.Trump’s plans on tariffs, tax cuts and deregulation were among the factors that pushed the Federal Reserve to raise its 2025 forecast for inflation and halve the central bank’s projections of rate cuts that slammed Wall Street on Wednesday.”We doubt there will be a new agreement in time to avert a partial shutdown after December 20, but we expect a new spending bill around the end of the year,” Paul Christopher, head of global investment strategy at Wells Fargo (NYSE:WFC) Investment Institute, said in a note.”Even if a shutdown occurs, we believe there is likely to be little economic or financial-market impact.” Data-wise, investors will look to the Commerce Department’s personal consumption expenditure (PCE) report, due at 8:30 a.m. ET, for clues on how inflation will guide the Fed’s policy. The data is expected to show U.S. consumer spending rose 0.2% last month, the same pace as October.Traders currently expect fewer than two U.S. rate cuts by the end of next year after the central bank lowered rates by a quarter point as expected this week.Comments from San Francisco Fed President Mary Daly are also on the radar, ending the media blackout period Fed policymakers had entered ahead of Wednesday’s decision. At 6:52 a.m. ET, Dow E-minis were down 186 points, or 0.44%, S&P 500 E-minis were down 52 points, or 0.88% and Nasdaq 100 E-minis were down 305.25 points, or 1.43%. The Nasdaq was set to fall for the first time in five weeks and the S&P 500 was on pace for its worst week since September. The Dow was on track for its sharpest weekly fall since March 2023.Investors are expecting more gains for the stock market in 2025, fueled by a solid economy supporting corporate profits, moderating interest rates and pro-growth policies from incoming President Donald Trump.Elsewhere, European stocks dropped as Trump threatened to hit the European Union with tariffs if the bloc does not make large oil and gas trades.Most megacap and growth stocks were lower in premarket trading, with Tesla (NASDAQ:TSLA) down 5.2% and Nvidia (NASDAQ:NVDA) and Amazon.com (NASDAQ:AMZN) off 3.1% and 2.6% respectively. Nike (NYSE:NKE) dropped 4.4% after the sportswear seller forecast revenue would fall by low double-digits in the third quarter.FedEx (NYSE:FDX) jumped 9.5% after announcing the much-anticipated spinoff of its freight trucking division, as it restructures operations to focus on its core delivery business.Eli Lilly (NYSE:LLY) advanced 9.6% after Danish rival Novo Nordisk (NYSE:NVO)’s experimental next-generation obesity drug achieved lower-than-expected weight loss in a late-stage trial. Other weight-loss drug developers also gained, with Amgen (NASDAQ:AMGN) up 4.3% and Viking Therapeutics (NASDAQ:VKTX) soaring 16.9%. More