Economy

The Bank of Korea may purchase government bonds and expand repo operations if needed, and the government is closely monitoring markets and will deploy measures according to contingency plans if needed, the Finance Ministry said in a statement. ($1 = 1,411.1300 won) More

BOGOTA (Reuters) -Colombian President Gustavo Petro said on Wednesday that finance vice minister Diego Guevara will step into that ministry’s top job, after previous minister Ricardo Bonilla resigned amid an ongoing corruption scandal.Petro had said earlier on Wednesday he was expecting Bonilla’s resignation, but that he does not think the former minister has committed any wrongdoing.The growing scandal, which is being investigated by the attorney general’s office and other entities, revolves around the alleged misdirection of resources from the national disaster management agency (UNGRD) and has been tied to various officials, including a former interior minister.”It will be Dr. Guevara, the current vice minister, a university professor, who knows the whole effort we have been fighting,” Petro told journalists after a meeting in Montevideo with outgoing Uruguayan President Luis Lacalle Pou, when asked about Bonilla’s replacement. Bonilla said in his resignation letter that he needed to “assume my defense as a citizen with my legal team, devoid of my public position, to concentrate on the process and avoid whatever damage from affecting the government’s public agenda.” Bonilla added he was highly confident he would convince investigators of his innocence. The scandal ignited earlier this year when two former UNGRD officials were accused of ties to suspicious purchases of water tankers for 46.8 billion pesos ($10.5 million), which were supposedly bought to supply remote areas of Colombia’s La Guajira province with water.The Supreme Court called on former Interior Minister Luis Fernando Velasco to testify in the probe, saying its investigation “begins with the hypothesis of the crimes of bribery and possible illicit enrichment.”UNGRD former deputy director Sneyder Pinilla, one of the two officials investigated, said former presidents of the senate and chamber of representatives, Ivan Name and Andres Calle, received huge sums of money to help push the president’s social and economic reforms through Congress.Both Name and Calle denied the accusations. “I expect his resignation, not because I believe him guilty, but because they want to tear him apart for being loyal to the government’s program and they want to unconstitutionally take down the government,” Petro said earlier in a long posting on X.Petro has repeatedly accused his political enemies of seeking to illegally remove him from office.Bonilla is the second finance minister to leave Petro’s government, which took power in August 2022. More

LONDON (Reuters) – British companies face a challenging 2025, the British Chambers of Commerce said on Wednesday with an increase in employment costs and potential tariffs on exports likely to hit their investment and trading prospects. The possibility of higher trade tariffs, as proposed by incoming U.S. president Donald Trump, and global conflicts are expected to weigh down on trade, on top of post-Brexit trade barriers with the European Union, the BCC said.Trump has floated blanket tariffs of 10% to 20% on nearly all imports when he returns to the White House in January. “With fears of a tariff war and continued trade barriers with the EU, international trade will be challenging for many firms,” the BCC’s head of research David Bharier, said.The BCC revised down its forecasts for net trade which it now expects to contract by 1.4% in 2025 and 1.5% in 2026.Earnings growth is expected to slow next year, mainly reflecting increased costs including the higher social security contributions that will be paid by employers and a 6.7% rise in the minimum wage, both of which come into effect in April.”The knock-on effect of rising business costs are likely to restrict wage growth in the short term and employment, as firms struggle to pass on costs and boost recruitment,” Bharier said.The Bank of England is closely watching wage growth as it considers further interest rate cuts which Bank Governor Andrew Bailey has said are likely to be gradual given the inflation pressures still in the British economy.Business investment is forecast to grow by just 0.9% next year, compared to a previous forecast of 1.4% growth. It is expected to grow by 2.1% in 2026.The downgrade was exacerbated by the rise in social security contributions paid by employers, the BCC said. Finance minister Rachel Reeves announced the increase in her budget in October. The BCC now expects Britain’s economy to grow 0.8% in 2024, a downgrade from a previous forecast of 1.1%. But growth was revised up for the coming two years – with expansions of 1.3% expected in 2025 and 1.5% in 2026, higher than previous estimates of 1.0% and 1.1% respectively, echoing upgrades by other forecasters after Reeves announced increases in public spending.The BCC said the social security rise would have a “small impact” on the growth forecasts. The Organisation for Economic Cooperation and Development on Wednesday trimmed its forecast for British economic growth this year to 0.9% from 1.1%, but raised its 2025 projection to 1.7% from 1.2% previously. More

WASHINGTON (Reuters) – U.S. President-elect Donald Trump on Wednesday nominated University of Maryland finance professor Michael Faulkender as deputy U.S. Treasury secretary, returning him to the department where he helped implement a pandemic relief program that kept paychecks flowing to workers idled by COVID-19.Faulkender served as Treasury’s assistant secretary of economic policy, where he advised then-Treasury Secretary Steven Mnuchin on economic policy issues. If confirmed as deputy secretary, this role would be expanded to a broad range of other areas, including sanctions policy, financial markets regulation, tax policy and the $28 trillion Treasury debt market.Trump earlier this month named prominent investor Scott Bessent as his choice for Treasury secretary, a decision that appeared to calm market concerns about Trump’s planned tariffs and tax cuts that could balloon budget deficits.”Mike is a distinguished Economist and Policy practitioner who will drive our America First Agenda,” Trump said in a post on Truth Social. “He will help Treasury Secretary Nominee Scott Bessent usher in a new Golden Age for the United States by delivering a Great Economic Boom for all Americans.”At the end of the first Trump administration Faulkender returned to the University of Maryland’s Robert H. Smith School of Business, where has been a finance professor since 2008.He also has served as the chief economist for two years at the America First Policy Institute, conservative think tank that has helped shape Trump’s policy agenda. Trump has drawn several nominees from the group’s ranks.During a hearing of Congress’ Joint Economic Committee in March, on the U.S. fiscal situation, Faulkender testified that by January 2021, the U.S. economy was already recovering from the COVID-19 pandemic as a result of Trump administration aid programs, including the $800 billion Paycheck Protection Program, which he helped sell to Congress in 2020.The program gave grants to small- and mid-sized companies that allowed them to continue paying employees that could not work during the pandemic.Faulkender said that an additional $2 trillion in COVID-19 aid from the Biden administration approved in 2021 helped fuel inflation and said spending cuts were needed. Debt growth and rising debt services costs “have the potential to create a bond market failure that would crush our economy and rupture our society,” he said in prepared testimony. “To solve this problem, we must greatly reduce spending and deregulate our economy to bring down inflation, thus bringing down the interest rate that must be paid on our outstanding debt.” More

(Reuters) -American Eagle Outfitters cut its target for annual comparable sales growth on Wednesday, in signs that apparel demand could be erratic during the critical holiday season, sending its shares down 14% in extended trade.Competition has heated up in the apparel space as companies vie for frugal, discerning shoppers with a focus on fresh styles and nifty marketing. Still, a holiday shopping season marked by high promotions has forced most retailers to be cautious about their expectations.”Key selling periods have seen a positive customer response, yet we remain cognizant of potential choppiness during non-peak periods,” said American Eagle (NYSE:AEO)’s CEO Jay Schottenstein.Retailer Target (NYSE:TGT) also said it was seeing an increased response to promotions this year, with consumers largely holding back purchases between big discount events.American Eagle now expects annual comparable sales growth of about 3%, down from its prior expectations for a roughly 4% rise, to reflect caution in the holiday quarter demand outlook.The Aerie parent’s targets come in contrast to some apparel companies, including Gap and Abercrombie & Fitch, who have benefited from demand for their casual wear styles.”AEO brands have been fairly successful in getting Gen-Z’s attention with seasonal campaigns and compelling promotions, but those same efforts are adding pressure to their margins that could prove unsustainable,” said EMarketer analyst Sky Canaves. Unusually warmer weather in the U.S. also hit apparel sales during the third quarter, while higher discounts weighed on margins for the company, which has tried to ramp up marketing in its activewear items.American Eagle reported quarterly revenue of $1.29 billion, compared with estimates of $1.30 billion, as per data compiled by LSEG.The company also recorded an $18 million impairment and restructuring charge as it looks to cut costs.Excluding items, American Eagle earned a profit of 48 cents per share, ahead of the 46 cents per share expected by analysts. More

NEW YORK (Reuters) -U.S. Federal Reserve Chair Jerome Powell on Wednesday said the economy is stronger now than the central bank had expected in September when it began reducing interest rates, and appeared to signal his support for a slower pace of interest-rate cuts ahead.“The U.S. economy is in very good shape and there’s no reason for that not to continue …the downside risks appear to be less in the labor market, growth is definitely stronger than we thought, and inflation has come in a little higher,” Powell said at a New York Times (NYSE:NYT) event. “So the good news is that we can afford to be a little more cautious as we try to find neutral.”His remarks during a wide-ranging half-hour interview that touched only lightly on monetary policy and the economy are likely his last before the Dec. 17-18 policy meeting, as the quiet period when Fed officials refrain from speaking about monetary policy ahead of a meeting starts on Saturday.In-depth comments by some of Powell’s key colleagues this week have pointed in the direction of a third straight interest-rate cut, with Governor Christopher Waller saying on Monday he was “leaning toward” a reduction even as others decline to pre-commit to that outcome.Powell’s own remarks on Wednesday appear to align him with that more cautious bloc of policymakers and largely echoed his last public appearance in mid-November, when he said the Fed could “carefully” deliberate over its rate cuts and need not be in a hurry.Inflation and jobs data since then, and Waller’s comments in particular, substantially pushed up market expectations of another quarter-point cut in the benchmark rate to a range of 4.25% to 4.50%. As economists at BMO summed it up, “Powell said little to alter the market’s view that the Fed will likely trim rates.” The Fed chair has pressed on the need for the central bank to keep its options open at a time of increased uncertainty about the shape of broader economic policy in the coming year, some concern that its progress on inflation has stalled, and evidence that a feared drop-off in the job market has been avoided.Powell on Wednesday said the Fed’s half-point interest-rate cut in September was meant to be “a strong signal that we were going to support the labor market if it continued to weaken.” At the time the unemployment rate had ticked up and payroll growth had slowed, and at least one Fed official worried publicly that the Fed’s next problem could be too-low inflation. “What happened instead was in the couple of months after that, we got some data revisions, which strongly suggests that the economy is even stronger than we thought,” Powell said. Fed officials will get fresh data on the labor market on Friday, and on inflation next week, that will help shape not just the decision at their final policy-setting meeting of the year but also their policy outlook for next year. As Powell spoke the Fed published a survey showing businesses across the country are optimistic about rising demand in coming months, though at the same time worried about the potential inflationary implications of tariffs promised by President-elect Donald Trump. With exact policies yet unknown, though, decisions the Fed will make today “are not about that; they are about what’s happening in the economy now,” Powell said on Wednesday. Earlier on Wednesday, two other Fed officials – the heads of the regional banks in Richmond and St. Louis – held their cards close.”I’m keeping all my options open,” St. Louis Fed President Alberto Musalem said at a Bloomberg monetary policy conference, adding he will look at incoming data before deciding whether rates need to come down again in two weeks. Richmond Fed President Thomas Barkin said at the CNBC CFO Council he believes both inflation and employment are heading in the right direction, but with more data to come before the meeting, he won’t prejudge the outcome.A key measure of inflation, the personal consumption expenditures price index excluding food and energy costs, has run sideways in a range of from 2.6% to 2.8% since May, well above the central bank’s 2% target. While Fed officials routinely say they feel price pressures are still set to ease, with housing costs in particular slowing in real time but not yet reflected in lagging government data, they also will want proof of that before cutting rates much further.Ahead of Powell’s appearance, a key business survey showed some cooling in the vast U.S. services sector and businesses fretting about the likelihood of a new round of tariffs on imports from the incoming Trump administration early next year, which they worry could mean higher prices ahead. At the same time, auto sales in November were the highest in more than three years, showing consumption remains healthy.It’s that ongoing mix of hot-and-cold data that is keeping Fed officials on guard and reluctant to offer much by way of concrete forward guidance, even as a few have noted that rates are still well above a level that would cease being a drag on the economy, and would still be even after another quarter-point reduction.Waller, for one, hedged his “leaning toward” a rate cut this month with a proviso that data ahead of the meeting could alter his posture. More

(Reuters) – A look at the day ahead in Asian markets. As a degree of calm descends on South Korean markets, for now at least, Asia is set for a positive open on Thursday as investors also draw encouragement from another record high on Wall Street and U.S. bond yields falling to the lowest in a month.Federal Reserve Chair Jerome Powell’s upbeat remarks on Wednesday – that the U.S. economy in “remarkably” good shape and he feels “very good” about where U.S. monetary policy is – will also support investor sentiment and risk appetite. The S&P 500 rose for a fourth day on Wednesday for its 55th record high this year, and has now fallen only once in the last 12 trading sessions. The Nasdaq registered its second 1% gain this week. U.S. bond yields declined across the curve, most notably at the short end where the two-year yield fell to 4.12%. That’s the lowest since the U.S. presidential election on Nov. 5, signaling that this particular leg of the so-called “Trump trade” has fizzled out. The fall in yields, partly fueled by surprisingly soft U.S. service sector data, was accompanied by a weaker dollar, offering a double dose of relief for Asian and emerging markets.Investors will also draw comfort from the apparent financial stability in South Korea, even though the political situation remains extremely tense and fluid. The won has recovered most of the losses that pushed it to a two-year low on Wednesday, and short-term implied won volatility has eased too. On the other hand, Kospi futures are still pointing to a fall of more than 1% for local stocks at Thursday’s open. Meanwhile, market signals from China are also pointing to relative calm in FX but weakness in stocks. The yuan rebounded from a 13-month low to clock its biggest rise in a month on the onshore spot market, while weak service sector data and trade tensions with the US pushed stocks into the red again.The Australian dollar remains on the back foot after GDP data on Wednesday showed that Australia’s economy expanded more slowly in the third quarter than was expected. That said, the central bank’s first rate cut is still not fully priced in until April, according to the interest rate swaps market. The calendar in Asia on Thursday sees the release of revised South Korean GDP data, inflation numbers from Taiwan and the Philippines, retail sales from Singapore and Australian trade. As political uncertainty swirls in Seoul, it’s worth noting that Asia’s fourth largest economy only narrowly avoided what would have been a rare recession, according to initial estimates, contracting 0.2% in Q2 and rebounding 0.1% in Q3.Here are key developments that could provide more direction to markets on Thursday:- Reaction to political developments in South Korea- Fallout from collapse of France’s government- Taiwan, Philippines inflation (November) More

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