Economy

BENGALURU (Reuters) – Consumer price inflation in India climbed to a 14-month high of 5.81% in October primarily due to a spike in vegetable and edible oil prices, a Reuters poll of economists predicted, a shade below the central bank’s tolerance threshold of 6.0%. Food prices, which make up nearly half of the inflation basket, likely increased at a faster pace last month. Tomatoes, a key ingredient in every Indian kitchen, are expected to have surged by double digits in price as uneven rains disrupted production.The government’s decision to raise import taxes on edible oils by 20 percentage points in mid-September also likely helped to drive prices up faster, further straining household budgets.Annual retail inflation as measured by the consumer price index (CPI) likely rose a second straight month to 5.81% in October, the highest since August 2023, according to the median forecast from a Nov. 4-8 Reuters poll of 52 economists. It rose to 5.49% in September, higher than forecast.Estimates for the data, set to be released on Nov. 12 at 1030 GMT, ranged from 5.00% to 6.30%, with nearly a third predicting inflation to hit 6.00% – the upper boundary of the RBI’s 2%-6% target range – or above.”There is broad-based price pressure with a pronounced increase visible in tomatoes and edible oil. For the former, lower arrivals were primarily due to a lagged impact of unseasonal rains observed in September. For edible oils, a sharp increase is visible because of imported inflation,” Dipanwita Mazumdar, economist at Bank of Baroda (NS:BOB), said.”Going forward, rising intensity of climate risks, weaker currency against a stronger dollar and geopolitical risks might pose further upside risks to inflation,” she said.The rupee fell to its weakest ever on Thursday following Donald Trump’s victory in the U.S. presidential election. An overall strong dollar, with downward pressure on the rupee, may be one constraint preventing inflation from softening quickly. Core inflation, which excludes volatile items such as food and energy and is seen as a better gauge of domestic demand, was forecast to be 3.60% in October, according to the median estimate from a smaller sample of 21 surveyed.”Core would also be on the upside due to frontloading of festive demand and higher gold prices,” Mazumdar said. The Indian statistics agency does not publish core inflation data. Economists estimated it at 3.50% in September. Reserve Bank of India (NS:BOI) Governor Shaktikanta Das on Wednesday highlighted the upside risks to inflation, dampening immediate expectations for a rate cut. A slim majority in a separate Reuters poll expected the RBI to cut its key repo rate by 25 basis points to 6.25% in December.However, with inflation not expected to return to the 4% medium-term target until at least 2026, economists in the poll cautioned that rate cut could be delayed until early next year. “I don’t think it’s cast in stone what the rate cut cycle should look like … If you look at RBI’s forecast of growth, there is very little reason why support to growth is needed,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities. The RBI predicts economic growth of 7.2% economic growth this fiscal year, which some economists consider to be optimistic.Separately, wholesale price index-based inflation is expected to have surged to an annual 2.20% last month from 1.84% in September, the survey showed. More

LONDON (Reuters) -Global stock markets cruised towards their best week since August on Friday, with sentiment underpinned by Donald Trump’s decisive U.S. election victory, while China kicked off a fresh round of fiscal support for its flagging economy.A day after the U.S. Federal Reserve delivered a quarter-point rate cut, as anticipated, focus turned back to the fallout of Tuesday’s U.S. election as well as headlines out of Beijing. The offshore yuan weakened, while U.S.-listed shares of Chinese firms and China exposed-sectors in Europe fell in a sign of investor disappointment with China’s stimulus news.U.S. stock futures ticked lower,, Europe’s STOXX index eased 0.7%, while Japan’s Nikkei closed 0.3% higher. The modest moves masked what has been a generally strong week for stocks, led by Wall Street shares, as Trump’s election win stoked expectations of lighter regulation and tax cuts that could further boost the U.S. economy.The S&P 500 stock index is up over 4% this week and set for its best week in over a year, while MSCI’s world stock index is set for its best week since August with a gain of just over 3% and stands just shy of record highs.”What you are going to get because of the clean sweep – is a mandate to improve the U.S. economy. So, taxes will come down, bureaucracy will ease and regulation will become lighter,” said Guy Miller, chief markets strategist at Zurich Insurance Group (OTC:ZFSVF).”Between now and year-end, there is a tailwind for U.S. stocks. The U.S. market has potential.”Elsewhere, Germany’s DAX stock index fell a day after posting its best daily performance of 2024 so far, helped by expectations that Germany could scrap its debt brake.CHINA DISAPPOINTSChina unveiled a 10 trillion yuan ($1.40 trillion) debt package to ease local government financing strains and stabilise flagging economic growth.Finance Minister Lan Foan said more stimulus was coming, with some analysts saying Beijing may not want to fire all its financial weapons before Trump takes over officially in January. Mainland blue chips, which rose 3% on Thursday, fell 1% on Friday, as did Hong Kong’s Hang Seng, in a sign of some caution ahead of the announcement. The offshore Chinese yuan was 0.3% softer at 7.1730 per dollar. China-exposed European luxury and mining stocks each fell over 3%. “Unless there’s more to come later this evening, today’s fiscal announcement is another disappointment for those expecting substantial stimulus,” said Capital Economics chief Asia economist Mark Williams. FED CUTSU.S. Treasury yields were lower after Fed Chair Jerome Powell on Thursday signalled continued, patient policy easing. Its rate cut followed a quarter-point cut from the Bank of England and a large half-point cut by Sweden also on Thursday.Ten-year Treasury yields fell 3 basis points to 4.31%, having reversed sharp rises seen following the U.S. election result.Powell said Tuesday’s election result would have no “near-term” impact on U.S. monetary policy.”The Fed pointed to a more uncertain economic outlook and inflation remaining elevated,” said Mahmood Pradhan, head of global macroeconomics at the Amundi Investment Institute.”Together with a likely change in policy direction under the new administration, we expect a more uncertain and measured pace of easing next year.”The dollar index, which measures the currency against six major peers, dipped to 104.36, following a 0.7% drop on Thursday, its biggest since Aug. 23. On Wednesday, it soared 1.53%, the most in over two years, a sign of increased volatility as investors assess the impact of the new Trump administration’s policies.The euro and sterling were just a touch softer against the dollar, while the dollar slipped almost 0.5% to 152.31 yen.Bitcoin was a touch firmer just above $76,000, following a nearly 10% surge this week, hitting a record peak of $76,980 on Thursday. Trump has vowed to make the United States “the crypto capital of the planet”.And after a rollercoaster week, gold fell 0.6% to $2,691. It slumped more than 3% on Wednesday, but bounced 1.8% overnight. Last week it surged to an all-time high of $2,790.15.Brent crude oil futures trimmed falls during London trade and were last down 1% at $74.86, U.S. West Texas Intermediate crude fell 1.2% to $71.45. More

UNITED NATIONS (Reuters) – The United Nations has been planning for the possible return of Donald Trump and the cuts to U.S. funding and engagement with world body that are likely to come with his second term as president.There was a sense of “déjà vu and some trepidation” at the 193-member world body, said one senior Asian diplomat, as Republican Trump won Tuesday’s U.S. election over Democratic Vice President Kamala Harris. “There is also some hope that a transactional administration will engage the U.N. on some areas even if it were to defund some dossiers. After all, what bigger and better global stage is there than the United Nations?” said the diplomat, speaking on condition of anonymity. A U.S. retreat at the U.N. could open the door for China, which has been building its influence in global diplomacy. Trump has offered few specifics about foreign policy in his second term but supporters say the force of his personality and his “peace through strength” approach will help bend foreign leaders to his will. He has vowed to solve the war in Ukraine and is expected to give strong support to Israel in its conflicts with Hamas and Hezbollah in Gaza and southern Lebanon. Among the top concerns at the U.N. are whether the United States will decide to contribute less money to the world body and withdraw from key multinational institutions and agreements, including the world Heath Organization and the Paris climate agreement. U.S. funding is the immediate worry. Washington is the U.N.’s largest contributor – with China second – accounting for 22% of the core U.N. budget and 27% of the peacekeeping budget.A country can be up to two years in arrears before facing the possible repercussion of losing its General Assembly vote. ‘EXTREMELY HARD’Trump came to power last time proposing to cut about a third off U.S. diplomacy and aid budgets, which included steep reductions in funding for U.N. peacekeeping and international organizations. But Congress, which sets the federal U.S. government budget, pushed back on Trump’s proposal. A U.N. spokesperson said at the time the proposed cuts would have made it impossible to continue all essential work.”The U.N. secretariat has known that they could face a Trump comeback all year. There has been prudent planning behind the scenes on how to manage potential U.S. budget cuts,” said Richard Gowan, U.N. director at the International Crisis Group.”So (U.N. Secretary-General Antonio) Guterres and his team are not totally unprepared, but they know the next year will be extremely hard,” he said. Trump’s team did not immediately respond to a query about his policy toward the U.N. after he takes office in January.During his first term, Trump complained that the U.S. was shouldering an unfair burden of the cost of the U.N. and pushed for reforms. Washington is traditionally slow to pay and when Trump left office in 2021 the U.S. was in arrears about $600 million for the core budget and $2 billion for peacekeeping. According to U.N. figures, President Joe Biden’s administration currently owes $995 million for the core U.N. budget and $862 million for the peacekeeping budget.”I don’t want to pre-empt or speak about policies that may or may not happen, but we work with member states in the way we’ve always worked with member states,” Guterres’ spokesperson Stephane Dujarric told reporters on Wednesday. In 2026, the U.N. Security Council will choose Guterres’ successor, a decision in which the Trump administration will hold a veto power.’GREAT NEWS FOR CHINA’During Trump’s first term, he was critical of the United Nations and wary of multilateralism. He announced plans to quit the World Health Organization, and pulled out of the U.N. Human Rights Council, the U.N. cultural agency UNESCO, a global climate change accord and the Iran nuclear deal.When Biden succeeded him in 2021, he rescinded the U.S. decision to withdraw from the WHO and returned the U.S. to UNESCO and the climate agreement. Trump’s campaign has said he would quit the climate deal again if he won office. “It will survive. But, of course, it will probably survive severely undermined,” Guterres told Reuters in September of a second withdrawal from the climate pact by Trump. Ahead of the U.S. election, a senior European diplomat said a Trump win would be “great news for China,” recalling that during Trump’s first term “the Chinese influence in the U.N. increased a lot because it was an open bar for the Chinese.”The diplomat, speaking on condition of anonymity, said that if Trump again cuts U.N. funding and withdraws from international pacts “it will just give China the opportunity to present itself as the supporter number one of multilateralism.” U.S. funding for some other U.N. agencies is also in question. One of the first moves by the Trump administration in 2017 was to cut funding for U.N. Population Fund (UNFPA), the international body’s agency focused on family planning as well as maternal and child health in more than 150 countries.Trump’s administration said UNFPA “supports … a program of coercive abortion or involuntary sterilization.” The U.N. said that was an inaccurate perception. Biden restored U.S. funding for UNFPA.If Trump again cuts funding, UNFPA warned that “women will lose lifesaving services in some of the world’s most devastating crises” in places like Afghanistan, Sudan and Ukraine.Under Trump’s first presidency, the U.S. also opposed long-agreed international language on women’s sexual and reproductive rights and health in U.N. resolutions over concern that it would advance abortion rights.A senior African diplomat, speaking on condition of anonymity, summed up the impending return of Trump for multilateralism and the United Nations: “The heavens help us.” More

SHANGHAI/SINGAPORE (Reuters) – Investors hoping China would announce extra fiscal buffers for an economy girding for another Donald Trump presidency were disappointed on Friday.China’s top legislative body, the standing committee of the National People’s Congress (NPC), did as was expected, approving bills to allow local governments to allocate 10 trillion yuan ($1.40 trillion) towards reducing off-balance sheet, or “hidden”, debt.But investors had built their anticipation around the timing of the NPC and Trump’s win just a couple of days earlier, and hence expectations of something special to pre-empt another round of fractious Sino-U.S. tensions and trade barriers.”I think markets are on the disappointed side as there were rumours that the policy could be larger if Trump won the U.S. election,” said Lynn Song, ING’s chief economist for Greater China.Reuters had reported last week authorities were considering a more than 10 trillion yuan ($1.4 trillion) plan to boost growth and help local governments address debt risks.After confirming that on Friday, Finance Minister Lan Foan signalled that more stimulus would come.Analysts say China needs to do more to support consumers as the world’s second-largest economy tackles a property market downturn and weak confidence, and meet the Communist leadership’s 5% growth goal.Donald Trump’s return to the White House could bring fresh headwinds. Among other things, Trump has vowed to adopt blanket 60% tariffs on U.S. imports of Chinese goods. “It is going to disappoint the market because China needs more essentially,” said UBP’s Asia senior economist Carlos Casanova.Casanova said China needs a 23 trillion yuan package to resolve the local debt and property problems, which is about 15% of its economy, and is probably “going to hold back some of that fire power until they have a better idea of what President Trump is planning”.Beijing has been ramping up efforts to boost the fragile economy. Since late September, it has rolled out interest rate cuts and property measures and kicked off an unprecedented 800 billion yuan ($111.60 billion) rescue package for the stock market. Stock prices rallied sharply in late September but have since lost momentum. The blue-chip CSI 300 Index is still up 20% since then while the Hang Seng Index is down nearly 10% from an October peak.TURN TO TRUMP TRADE Investors who had been waiting to hear from the Standing Committee may also now move decisively to position for a second Trump presidency. So far, selling has been limited to exporters and even that has been relatively modest, with stock markets in Shanghai and Hong Kong logging their best week in a month on Friday. Trump’s threats of high tariffs seem so far to have been viewed as negotiable, and China’s economy is seen as more insulated to trade restrictions than it was eight years ago. “We do think that China is in a good position to navigate tariff risk going forward, whatever may be proposed,” said Robert St Clair, head of investment strategy at Fullerton Fund Management in Singapore, which is bullish on China’s outlook. “There is a tension, but there is also an interdependence between China and the U.S.,” he said. Some investors also see opportunity for China in a more inwardly focused U.S. administration. “Trump’s America First policy is not just targeting China, but also the EU, Japan, South Korea, Taiwan and other allies, which could help China make breakthroughs against Western curbs,” said Wan Chengshui, head of investment at Guangdong-based asset manager Golden Glede.($1 = 7.1685 Chinese yuan renminbi) More

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BEIJING (Reuters) -China unveiled a 10 trillion yuan ($1.40 trillion) debt package on Friday to ease local government financing strains and stabilise flagging economic growth, as it faces fresh pressure from the re-election of Donald Trump as U.S. president.The measures confirm last week’s Reuters report, and mark a departure from the all-out stimulus strategies to revive growth China has deployed in the past. They aim to repair municipal balance sheets as a longer-term objective, rather than directly inject money into the economy.Finance Minister Lan Foan said more stimulus was coming, with some analysts saying Beijing may not want to fire all its weapons before Trump takes over officially in January.In an apparent reaction to the U.S. election and the intensifying risks to trade, state media CCTV reported that China’s cabinet on Friday approved expanding coverage of export credit insurance and will step up support for trade firms.But for now, those investors who speculated on a fiscal bazooka may be disappointed.”I don’t see anything that exceeds expectations,” said Huang Xuefeng, research director at Shanghai Anfang Private Fund Co, in Shanghai. “It’s not huge if you look at the fiscal shortfalls.””The money is used to replace hidden debts, which means it doesn’t create new work flows, so the support to growth is not that direct.”Local governments, facing high debt and falling revenues, have been cutting civil servants’ pay and amassing debts with private sector companies, choking money flows to the real economy and fanning deflationary pressures.Their strains, stemming from a severe property crisis since 2021 which decimated revenues from residential land auctions to developers – a key source of funds for cities and provinces – had put China’s 2024 growth target of roughly 5% at risk.China’s longer-term outlook is further clouded by Trump’s threat of tariffs in excess of 60% on all Chinese goods, which has rattled Chinese manufacturers and accelerated factory relocation to Southeast Asia and other regions.Exporters say the tariffs will further shrink profits, hurting jobs, investment and growth in the process. They would also exacerbate China’s industrial overcapacity and the deflationary pressures it fuels, analysts said.The package, unveiled at the end of a week-long parliament meeting, included raising the local governments’ debt quota by 6 trillion yuan over the next three years, with the new funds to be used to repay “hidden debts”. It also gave municipalities the greenlight to use for the same purpose another 4 trillion over five years in issuance that Beijing had already approved. Beijing uses “hidden debt” to describe the loans, bonds and shadow credits of local government financing vehicles, or LGFVs.Lan said those debts stood at 14.3 trillion yuan at the end of 2023, which authorities planned to trim to 2.3 trillion yuan by 2028. The International Monetary Fund, however, estimates debts of LGVFs amounted to 60 trillion yuan at the end of 2023, or 47.6% of GDP.Swapping hidden for official debt is expected to save 600 billion yuan in interest for local governments over five years. Carlos Casanova, Asia senior economist at UBP, estimated China needed a debt package of 23 trillion yuan to reduce the inventory of unsold homes and repay maturing LGFV debt.The measures announced on Friday “are going to disappoint the market because China needs more essentially,” he said. MORE SUPPORT Lan also reiterated officials will issue policies to support state sector purchases of unsold apartments and reclaim undeveloped residential land from property developers, as well as replenish the capital of big state banks.He did not give details on the size or timing of those measures, which would represent a much more direct way of injecting fiscal oomph into the economy.”The lack of direct fiscal stimulus suggests that policymakers would leave policy room for the impact of Trump 2.0 later,” said Xing Zhaopeng, senior China strategist at ANZ.Also without detailing, Lan said Beijing will “intensify efforts” to support manufacturing equipment upgrades and expand a consumer subsidy scheme that targets purchases of appliances and other goods.Many economists have long argued for stronger consumer stimulus, especially as Beijing faces increasingly higher tariffs on its exports from Washington and other capitals in Europe and elsewhere.Low wages, high youth unemployment and a feeble social safety net leave China’s household spending below 40% of GDP, or about 20 percentage points behind the global average. “I don’t think that we will see direct fiscal stimulus aimed at consumption anytime soon,” UBP’s Casanova said. “I think you will need a lot more pain for that to materialize,” he said. “China is probably going to hold back some of that fire power until they have a better idea of what President Trump is planning.” ($1=7.1533 Chinese yuan renminbi) More

The measures include expanding coverage of export credit insurance, improving cross-border e-commerce development and facilitating personnel exchanges, state media CCTV said. China will also improve its trade shipping security capability and step up support for trade firms to secure jobs, CCTV said. More

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