Economy

(Reuters) -Global miner BHP beat first-quarter iron ore output estimates on Thursday, spurred by easing of bottlenecks at its Western Australia operations amid efforts by China to revive its grappling property market and faltering economic growth.The world’s largest listed miner over the last year has ramped up the South Flank mine to full production capacity and streamlined its port operations for its Western Australian iron ore business. The ramp-up comes at a time when mining rivals including Vale and Rio Tinto (NYSE:RIO) are moving to expand their supplies. Vale plans to further lift its production, while Rio’s Simandou mine will begin production next year. BHP, which is diversifying into potash, said the $10.5 billion Jansen Stage 1 project was 58% complete. The miner’s upbeat iron ore production update comes as China, the commodity’s largest purchaser, has been announcing a slew of stimulus measures to support its downbeat economic recovery. BHP said iron ore output from Western Australia on a 100% basis was 71.6 million metric tons in the three months to Sept. 30, beating a Visible Alpha consensus estimate of 70.7 Mt, according to a Macquarie note.”Upcoming stimulus (from China) is likely to focus on relieving local debt, stabilising the property market and bolstering business confidence,” said CEO Mike Henry. BHP, which has been aiming to expand its copper operations, recorded a 4% rise in the metal’s output for the quarter, reflecting improved performance at its Escondida mine in Chile. Analysts at Citi said Escondida output rose on higher grades and throughput at the Chilean mine. Earlier this year, BHP made a $49 billion bid for British copper major Anglo American (JO:AGLJ), which did not materialise. But BHP joined hands with Lundin Mining (OTC:LUNMF) to take over Filo Corp, gaining access to more copper assets. Copper, used widely across the globe, is an ideal conductor of electricity and easily malleable, qualities that have made it widely popular for use in wiring, engines, construction equipment, electronics and other devices.BHP’s shares were up 0.3% at A$43.67 in early trade. More

NEW YORK (Reuters) -Rent inflation will continue to put pressure on consumers for some time to come, the Federal Reserve Bank of Cleveland said in a report on Wednesday, in a finding that may point to ongoing challenges for the Fed to get overall inflation back to 2%. “Our baseline forecast implies that [Consumer Price Index]rent inflation will remain above its pre-pandemic norm of about 3.5% until mid-2026,” the Cleveland Fed economists said in their report. One of the key forces keeping rent inflation kicking is the gap that has been seen between new rents and those for existing leases. The analysts say it will take time for what have been outsized gains in new rentals to pass through to existing rents. The statement announcing the report notes this gap is “notably wider” than where it was before the pandemic started, when it stood at just above 1%.”Our estimated rent gap in September 2024 is just under 5.5%, suggesting that there remains a substantial amount of potential rent inflation to be passed through to continuing tenants,” it said.The possibility rent inflation will remain sticky could complicate the effort to get inflation down after its pandemic surge. Fed officials are broadly confident that inflation is retreating back to 2% and because of that they embarked last month on the start of a rate cut campaign that could run for some time, as officials work to normalize monetary policy. Central bankers and economists expect easier times in housing to help that process along. In a note on Oct. 10, Omair Sharif of research firm Inflation Insights said so far this year annualized rent growth through September stood at 4.6% versus 6.8% in 2023. “That is a solid pace of deceleration in rent growth,” he said. “Falling rent inflation should bring down the housing component of the overall price indexes over time,” St. Louis Fed leader Alberto Musalem said on Oct. 7. That led him to say he sees inflation hitting the 2% target as measured by the personal consumption expenditures index “over the next few quarters.”Speaking on Oct. 8, Boston Fed chief Susan Collins said the gain in shelter prices “is the stickiest component and remains above its pre-pandemic average.” But she added “there are good reasons to think that this stickiness in current shelter inflation reflects existing rents still catching up to new market rents,” noting slower new rent price increases point to an eventual slowing in increases for rental lease renewals. She also said slower new rent increases reflects a less frenzied job market. More

Last month, the U.S. central bank cut the overnight rate by half a percentage point, citing greater confidence that inflation will keep receding to its 2% annual target.The overnight rate, which guides how much interest banks pay each other and affects rates for consumers, is now at 4.75%-5.00%.Markets are currently pricing in a 94.1% chance for a cut of 25 bps at the Fed’s next meeting, with only a 5.9% chance the central bank will hold rates steady, according to CME’s Fedwatch Tool.Goldman Sachs also said it expects the European Central Bank to cut interest rates by 25 bps at its monetary policy meeting on Thursday, and noted it sees sequential 25-bps cuts until the policy rate reaches 2% in June 2025. More

The company posted an adjusted profit of $2.13 per share in the July-September quarter, compared with estimates of $2.15, according to data compiled by LSEG.WHY IT’S IMPORTANTU.S. new vehicle sales fell during the third quarter due to fewer selling days, weaker consumer spending and higher interest rates, which impacted demand for automotive coatings.Production at factories in the United States held steady at weaker levels in September, although new orders improved. CONTEXTThe Pittsburgh, Pennsylvania-based firm is a global supplier of paints, coatings and specialty materials. It is the largest coatings company in the world, followed by Sherwin-Williams (NYSE:SHW).At PPG’s automotive OEM coatings unit, which sells paints, coatings and adhesives to the auto industry, organic sales declined by double-digit percentage.However, performance coatings sales during the third-quarter rose compared to last year led by aerospace coatings. BY THE NUMBERSNet sales at PPG’s performance coatings segment rose to $2.92 billion in the third quarter, compared with $2.88 billion a year earlier.Meanwhile, sales at its industrial coatings segment fell 6% to $1.65 billion from the same quarter a year ago.KEY QUOTE”Automotive OEM coatings organic sales decreased more than initially forecasted…due to lower U.S. and European industry build rates, which deteriorated notably late in the quarter, partly offset by PPG growth in China and Mexico,” PPG said. More

The company recorded net interest income of $3.66 billion in the quarter, 10% higher than the year-ago quarter.Credit card firms’ interest incomes have benefited as the Federal Reserve raised its benchmark rates multiple times over the last four years to tame sticky inflation.The U.S. central bank cut its key interest rate last month and is expected to continue with its monetary easing policy.Meanwhile, Discover said it was working with the Securities and Exchange Commission to resolve its accounting approach to a card misclassification issue. In July 2023, Discover said it had overcharged merchants and their banks due to misclassifying some cards. It increased its liability to $1.2 billion to refund affected merchants.A resolution is not expected to impact historical earnings, it said on Wednesday. Meanwhile, the company’s proposed $35 billion acquisition by Capital One announced in February is facing lawsuits from consumers and tough scrutiny by some lawmakers. Riverwoods, Illinois-based Discover’s net income rose to $928 million, or $3.69 per share, from $647 million, or $2.59 per share, a year earlier.Discover’s provision for credit losses fell to $1.47 billion in the three months ended Sept. 30 from about $1.70 billion. More

FRANKFURT (Reuters) – The European Central Bank is likely to lower interest rates again on Thursday, arguing inflation in the euro zone is now increasingly under control and the economy is stagnating.The first back-to-back rate cut in 13 years would mark a shift in focus for the euro zone’s central bank from bringing down inflation to protecting economic growth, which has lagged far behind that of the United States for two years straight. The latest economic data is likely to have tilted the balance within the ECB in favour of a rate cut, with business activity and sentiment surveys as well as the inflation reading for September all coming in slightly lower than expected.In the wake of the releases, a number of ECB speakers including President Christine Lagarde have flagged that a fresh cut in borrowing costs is likely this month, leading investors to fully discount the move. “The trends in the real economy and inflation support the case for lower rates,” Holger Schmieding, an economist at Berenberg, said.A quarter-point cut on Thursday would lower the rate that the ECB pays on banks’ deposits to 3.25% and money markets almost fully price in three further reductions through March 2025.Lagarde and colleagues are unlikely to drop clear hints about future moves on Thursday, repeating their mantra that decisions will be made “meeting by meeting” based on incoming data.But most ECB watchers think the die is cast for cuts at every meeting.”The implicit signal is likely to be that another cut is very likely in December unless the data improve,” Paul Hollingsworth, an economist at BNP-Paribas, said. INFLATION AND GROWTHThe ECB can finally claim it has all but tamed the worst bout of inflation in a generation. Prices grew by just 1.8% last month. While inflation may edge above the ECB’s 2% target by the end of this year, it is expected to hover around that level or even slightly lower for the foreseeable future. Yet the economy has had to pay a high price for that.High interest rates have sapped investment and economic growth, which has struggled for nearly two years. The most recent data, including about industrial output and bank lending, is pointing to more of the same in the coming months. An exceptionally resilient labour market is also now starting to show some cracks, with the vacancy rate – or the proportion of vacant jobs as a share of the total – falling from record highs.This has fuelled calls inside the ECB for easing policy before it is too late.”Now we face a new risk: undershooting target inflation, which could stifle economic growth,” Portuguese central banker Mario Centeno said recently. “Fewer jobs and reduced investment would add to the sacrifice ratio already endured.”The issue is that some of that weakness is due to structural problems, such as the high energy costs and low competitiveness hobbling Europe’s industrial powerhouse, Germany. These cannot be fixed through lower interest rates alone although they can help at the margin by making capital cheaper.”We cannot ignore the headwinds to growth,” ECB board member Isabel Schnabel said. “At the same time, monetary policy cannot resolve structural issues.” More

HONG KONG (Reuters) -Hong Kong’s leader pledged on Wednesday to reform and revive the economy and financial markets including slashing liquor duties, while seeking to improve dire living conditions for the city’s poorest.John Lee, in his third annual policy address, highlighted the need to “deepen our reforms and explore new growth areas,” in line with China’s national priorities and recent calls from Beijing for all sectors to unite to promote development and economic growth. Hong Kong’s small and open economy has felt the ripple effects of a slowdown in the Chinese economy and political tensions including a years-long national security crackdown.It grew by 3.3% in the second quarter from a year earlier, and is forecast to grow 2.5%-3.5% for the year.Although tourism has rebounded since COVID, with 46 million visitors expected this year, consumption and retail spending remain sluggish, while stock listings have dried up and capital flight remains a challenge.Lee told Hong Kong’s legislature that duties on liquor would be slashed to 10% from 100% for drinks with more than 30% alcohol content, in a bid to stimulate the trade in spirits. The lower duties apply only to spirits priced over HK$200 ($26), and for the portion above that amount. The move would “promote liquor trade and boost development of high value added industries including logistics and storage, tourism as well as high end food and beverage consumption,” Lee said.He hoped the move would benefit Hong Kong in the way that it became an Asian wine trading hub after wine duties were abolished in 2008. China’s recent decision to provisionally impose sharp tariffs on French brandy in a tit-for-tat move to European Union tariffs on Chinese electric vehicles, might also benefit the city. Lee said procedures for companies seeking to list in Hong Kong would be streamlined, in a bid to lure more international company listings on its stock exchange. The value of Hong Kong IPOs in 2024 is the lowest in 21 years, according to Dealogic data, not taking into account China Resources Beverage and Horizon Robotics which this week launched deals to raise up to $1.34 billion. China’s Midea raised $4 billion in a secondary listing in the city in September.The government said it would try to develop Hong Kong into a gold trading hub with “world-class” gold storage facilities, create a commodity trading ecosystem and fuel bunkering centre, and try to tap opportunities in green shipping, aviation and tourism. “Amidst the increasingly complicated geopolitics, our city’s security and stability gives us a clear edge as an attractive place for physical gold storage … and potentially propelling Hong Kong into a gold trading centre,” he said.PIVOT TO ECONOMY FROM SECURITYLee’s speech was less focused on national security than the year before, though he also stressed a need to “stay vigilant” towards potential national security threats.There were also signs of further integration between Hong Kong and China with the launch of a new civil servant “exchange programme” with a number of Chinese cities. A “Northern Metropolis” project on the border with China would also see 60,000 housing units in a cluster of public housing estates be completed in the next five years.In a bid to revive the city’s ailing property sector, Lee said the ratio of mortgages would be eased to 70% of the value of a property for all buyers.Hong Kong’s benchmark stock index was up 0.3%, while the property sub-index rose more than 2%. On the livelihood front, the government proposed new laws to regulate the leasing of so-called “sub-divided flats”, tiny cubicles sometimes called “cage homes” which have been criticised as below acceptable living standards.The new system would ensure basic safety standards for the 110,000 households currently living in such units. ($1 = 7.7684 Hong Kong dollars) More

(Reuters) -Morgan Stanley’s profit surpassed estimates on a bumper third quarter for investment banking that had also buoyed rivals, sending its shares up more than 3.5% before the market open. A revival in corporate debt issuance, initial public offerings (IPOs) and mergers has bolstered profits for Wall Street banks this year. As markets hover near record highs and the U.S. Federal Reserve begins its policy-easing cycle, bankers expressed optimism that mergers and acquisitions will continue to recover after a two-year drought. Morgan Stanley benefited from a “constructive environment”, CEO Ted Pick said in a statement. “Institutional securities saw momentum in the markets and underwriting businesses on solid client engagement.” Its investment banking revenue jumped 56% in the third quarter. Competitors Goldman Sachs had posted a 20% surge in fees, while JPMorgan Chase (NYSE:JPM) saw a 31% gain. Morgan Stanley’s profit jumped to $1.88 per share, exceeding analyst views of $1.58, according to estimates compiled by LSEG. Across the industry, global investment banking revenue rose 21% in the first nine months of the year, led by a 31% surge in North America, according to data from Dealogic. Morgan Stanley earned the fourth highest fees globally over the same period, the data showed. It was a lead underwriter on big initial public offerings in the quarter, including by cold storage giant Lineage and airplane engine maintenance services provider StandardAero.”We are seeing a rise in equity capital markets activity led by financial sponsors, not only for IPOs in the U.S. but also in Europe”, Morgan Stanley CFO Sharon Yeshaya said in a phone interview. The institutional securities business, which houses investment banking and trading, generated revenue of $6.82 billion, compared with $5.67 billion a year ago. Equity trading revenue was another bright spot, jumping 21% as stocks rallied. Fixed-income revenue rose 3%. The investment bank’s profit climbed to $3.19 billion from $2.41 billion a year earlier. “The company is executing very well across all the segments… Ted Pick has quickly built a leadership presence and confidence from investors,” said Macrae Sykes, portfolio manager at Gabelli Funds.WEALTH BOOST Under former CEO James Gorman, who will serve as executive chairman until year-end, Morgan Stanley expanded into wealth management to generate stable revenue and even out volatility from trading and investment banking. “The company has been a leader in wealth technology implementation, which should lead to better advisor productivity and share gains in asset gathering,” said Sykes said.Wealth management revenue – a key area of focus – increased to $7.27 billion, compared with $6.40 billion, a year ago.The business added $64 billion in net new assets and total client assets reached $6 trillion. Considering the investment management division assets of $1.6 trillion, Morgan Stanley is closer to its goal of managing $10 trillion in client assets. “Total client assets have surpassed $7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows,” Pick said.Investment management revenue climbed to $1.5 billion compared with $1.3 billion a year ago, helped by higher asset management and related fees. More