Economy

HOUSTON (Reuters) – Exxon Mobil (NYSE:XOM) wants to preserve its right of first refusal in Hess Corp (NYSE:HES)’s sale of its Guyana oil production assets because of the work it has put into developing the country’s offshore fields, two of its top executives said on Wednesday. A three-person panel in May is to decide whether Hess’s deal to sell itself to Chevron (NYSE:CVX) can go ahead on its original terms. A challenge by Exxon and CNOOC (NYSE:CEO) Ltd has stalled the second-largest deal in a recent wave of oil megamergers. “We developed the value of that asset. We have the right to consider the value of that asset in this transaction, and then the right to take an option on it,” Exxon CEO Darren Woods told Wall Street analysts in his most significant comments on the arbitration case to date. “We have an opportunity, as does CNOOC, the other partner, to participate in that opportunity to have the right of first refusal.” Representatives for Hess and Chevron declined to comment.Analysts have put the value of Hess Guyana at between 60% to 80% of Chevron’s proposed $53 billion purchase of Hess. The joint venture has discovered more than 11 billion barrels of oil to date. The proposed sale ignores a joint venture agreement that grants the right of first refusal to any sale of a Guyana partner’s stake, Exxon and CNOOC maintain. The two companies previously have rejected the claim, arguing the deal is structured as a merger and Hess’s Guyana holdings remain intact. Hess has said if the Chevron deal is not concluded it would not separately sell its Guyana properties to Exxon or anyone else. Woods brushed off Hess’s view of a loss at arbitration souring a sale, saying “that’s their construct, not ours.” Exxon wants the three-person arbitration panel to consider the value of Hess Guyana as part of the deliberations. “We’ll look at the value and see if that value is in the best interest of the company, the corporation and the shareholders,” added Exxon Vice Chairman Neil Chapman. More

WASHINGTON (Reuters) -The U.S. Supreme Court agreed on Friday to hear a bid by an arm of a Catholic diocese in Wisconsin for a religious exemption from the state’s unemployment insurance tax in a case with potential implications for constitutional religious rights.The justices took up an appeal by the Catholic Charities Bureau, the social ministry arm of the Catholic diocese in the city of Superior, of a lower court’s decision rejecting its exemption bid. A Supreme Court ruling in favor of the bureau could require Wisconsin and states with similar tax programs to broaden their exemptions in order to comply the U.S. Constitution’s First Amendment religious protections.The Supreme Court is expected to hear arguments in the case and rule by the end of June.During the Great Depression, Wisconsin in 1932 became the first state to enact an unemployment compensation law, which operates by taxing employers and providing temporary payments to eligible unemployed people. Three years later, Congress established a cooperative federal-state unemployment insurance program that would eventually lead to all U.S. states enacting their own plans.Wisconsin is among 47 states that exempt certain religious entities – namely, those “operated primarily for religious purposes” – from having to pay into its unemployment insurance program, according to court records. The remaining three states use different eligibility criteria.The Catholic Charities Bureau since 1917, it said on its website, has provided “services to the poor, the disadvantaged, the disabled, the elderly and children with special needs as an expression of the social ministry of the Catholic Church in the Diocese of Superior.”Wisconsin state officials in 1972 determined that the group was subject to the state’s unemployment compensation law. But after a subsidiary of the Catholic Charities Bureau received a favorable court ruling in a similar case, the group and four of its other subsidiaries in 2016 sought religious exemptions from Wisconsin’s unemployment insurance tax.Among the subsidiary groups involved in the latest case are organizations that provide services to people with disabilities including job placements and training, as well as daily living services and home visitation, according to court papers.The Wisconsin Supreme Court in March 2024 ruled against the groups, determining that they were not “operated primarily for religious purposes,” and thus were ineligible for the tax exemption.The state’s top court found that the bureau’s activities were “primarily charitable and secular,” noting that the group does not “attempt to imbue program participants with the Catholic faith” and that its services “are open to all participants regardless of religion.”The ruling prompted the bureau and its subsidiaries to appeal to the Supreme Court.They argued in their filing that the Wisconsin Supreme Court’s ruling violates the First Amendment “by favoring some religions over others, entangling courts in religious questions, and interfering with church autonomy.” They also argued that the state court erred by imposing too high a legal bar – proof beyond a reasonable doubt – for proving First Amendment claims. More

NEW YORK (Reuters) – A banner year for U.S. stocks gets one of its last big tests with the coming week’s Federal Reserve meeting, as investors await the central bank’s guidance on interest rate cuts.The Nasdaq Composite index breached 20,000 for the first time ever in the past week, another milestone for equities in a year during which the tech-heavy index has gained 32% while the S&P 500 has risen about 27%.Expectations that the Fed will cut interest rates have supported those gains. But while the central bank is expected to lower borrowing costs by another 25 basis points next week, investors have moderated their bets on how aggressively policymakers will move next year due to robust economic growth and sticky inflation. Bond yields, which move inversely to Treasury prices, have risen in recent sessions as a result, taking the benchmark U.S. 10-year yield to a three-week high of 4.38% on Friday. While stocks have pushed higher despite the rise in yields, the 10-year is approaching the 4.5% level some investors have flagged as a potential trip-wire for broader market turbulence. “Anything that results in an expectation that maybe the Fed moves even more slowly from here than investors were expecting could create a little bit of downside for stocks,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors.The trajectory of monetary policy is closely monitored by investors, as the level of rates dictates borrowing costs and is a key input in determining stock valuations. Interest rate expectations also sway bond yields, which can dim the allure of equities when they rise because Treasuries are backed by the U.S. government and seen as virtually risk-free if held to term.Fed fund futures indicated a 96% chance the Fed will cut by 25 basis points when it gives its policy decision on Wednesday, according to CME FedWatch data as of Friday.But the path for rates next year is less certain. Fed fund futures are implying the rate will be at 3.8% by December of next year, down from the current level of 4.5%-4.75%, according to LSEG data. That is about 100 basis points higher than what was priced in September.The Fed’s summary of economic projections released at the meeting will provide one indication of where policymakers see rates heading. Officials penciled in a median rate of 3.4% for the end of next year when the summary was last released in September. One sign of potential support for a slower pace of cuts came from Fed Chair Jerome Powell, who this month said the economy is stronger now than the central bank had expected in September.Another factor that could make Fed officials more cautious about future cuts is the presidential election of Donald Trump, whose pro-growth economic policies and favoring of tariffs are causing concerns about stronger inflation next year.Analysts at BNP Paribas (OTC:BNPQY) said they expect a “hawkish cut,” with the central bank likely to “open the door for a pause in further cuts of undefined length.”Carol Schleif, chief market strategist at BMO Private Wealth, said markets “will be trying to read into how worried is the Fed about inflation.”November data released in the past week showed progress in lowering inflation toward the U.S. central bank’s 2% target has virtually stalled.Still, analysts say the market’s momentum favors more gains into year end, while sentiment among investors in surveys remains bullish – though some market technicals suggest the rally in stocks may have grown stretched. The percentage of Nasdaq constituents hitting 52-week highs has declined since the rally after the Nov 5 election, implying fewer stocks are supporting the advance, Adam Turnquist, chief technical strategist for LPL Financial (NASDAQ:LPLA), said in a note on Thursday.“History suggests the tech-heavy index could be due for a breather before longer-term momentum resumes,” Turnquist said. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldWe will soon find out whether Donald Trump has changed his tune on the dollar.In his first term, the comeback president had a clear preference for a weaker buck. On one notable occasion in 2019, when European Central Bank chief Mario Draghi was dropping hints of more monetary stimulus, the then-president responded with his trademark poise, tweeting that Draghi’s comments “immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” Trump’s foray in to dollar policy — traditionally the preserve of the Treasury secretary — prompted that immediate drop in the euro to reverse and left the market in no doubt what the leader of the free world wanted to see.Fast forward to the end of 2024, and we are invited to believe that Trump 2.0 is different. In October, the man who has gone on to become the nominee for the Treasury job — Scott Bessent — indicated that Trump is actually a free markets fan after all.“The reserve currency can go up and down based on the market. I believe that if you have good economic policies, you’re naturally going to have a strong dollar,” Bessent said.But Trump is a norm-breaker and a master of signalling policy shifts on social media. It’s not hard to imagine him requesting or demanding dollar-weakening measures from major trading partners of the US in return for lenience on tariffs, perhaps through a grand Mar-a-Lago Accord — an echo of the dollar-squashing Plaza Accord of 1985. Whether that would work is another question entirely, particularly given currency relations are a very delicate game of diplomatic chess, not Trump’s obvious strength.If Trump does still love a weak dollar then the past few weeks have not gone his way. The DXY dollar index, which tracks the buck’s value against a basket of other currencies, is up by close to 3 per cent since election day, carving out gains against precisely those currencies likely to be in the path of the trade tariffs bulldozer, such as the euro and Chinese renminbi.Figuring out where currencies are heading involves more than just comparing economic growth trajectories and interest rates, but honestly not much. (Just don’t tell the currency analysts or they will email me to complain.)Under that framework, the case for the dollar to keep on pushing higher is obvious. America is already on a higher growth trajectory than much of the rest of the world, even before further stimulus under the incoming president. If Trump does slap large tariffs on imports, that leaches growth away from those other countries and will probably mean interest rates there will drop in response.Already, US inflation is proving persistent, ticking up to 2.7 per cent on an annual basis in data released this week. That leaves December’s quarter-point rate cut from the Federal Reserve still in play, but undermines the case for a long series of further cuts in to next year. By contrast, investors expect the ECB to keep on hacking rates back in an effort to counteract the risk of recession, taking deposit rates potentially as low as 1.5 per cent, from 3 per cent now.“The US data is already pointing in a significantly more inflationary direction than just a few months ago,” Deutsche Bank analyst George Saravelos wrote this week. Meanwhile, the ECB could soon start to worry about inflation sinking below its 2 per cent target, he said. “Bottom line, even without Trump, there is more Fed/ECB repricing to go and pressures remain to the downside” for the euro against the dollar.For China and the renminbi, a similar story applies. The economy is stuck in a hole and likely to struggle further if Trump goes all-in on tariffs. This week, China’s leaders called for more fiscal and monetary stimulus. Deliberate efforts to weaken the renminbi by buying dollars are a well-trodden tactic for Chinese authorities and analysts say they would not be at all surprised to see evidence of that dotted throughout next year.So, as ever, the ball is in Trump’s court. Does he lash out at overseas stimulus measures as he did the last time he was in office? Does he decide that dollar strength is a price worth paying for his tariffs? Investors don’t know, but they do see a decent chance that this gets nasty. “This could turn in to currency wars,” said Salman Ahmed, a macro strategist at Fidelity International. “Right now, we’re seeing [the Fed and the ECB] focusing on different realities because of the political changes and fiscal divergence.”One moderating factor here could be that markets have already priced in a lot of Trump. The dollar index is already up 6 per cent since late October — roughly the time when investors grew more confident that Trump would win. This could suck some of the wind out of the dollar’s sails next year. If it does not, a period of currency diplomacy by social media lies ahead again.katie.martin@ft.com More

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LONDON (Reuters) -The dollar headed for its best weekly performance in a month on Friday, as investors priced in the possibility of the Federal Reserve cutting rates more slowly next year, while sterling fell after a surprise contraction in UK economic activity.The U.S. currency held firm against the euro and Swiss franc following rate cuts by those central banks a day earlier, and rose against the yen after reports that the Bank of Japan could forgo a rate hike at its meeting next week.The dollar index, which measures the currency against six others, was flat at 106.94, but still set for a weekly gain of nearly 1%, its biggest in a month.U.S. data on Thursday showed the job market is gradually cooling in line with expectations, while producer price inflation helped reinforce the market’s current scenario of a Fed cut on Dec. 18, but a slower pace of reductions in 2025.Markets fully expect a cut at the upcoming meeting, but only price a roughly 24% chance of another one in January, with March the most likely point for another move, according to CME’s FedWatch tool.”What is clear from recent Fed speakers and the data flow is that progress toward the inflation target has slowed down and the economy has continued to perform, therefore policymakers can afford to take a more cautious approach to easing over 2025,” said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY).San Francisco Fed President Mary Daly, for example, said this month that she was comfortable cutting rates in December, but advocated “a more thoughtful and cautious approach” on further reductions.The dollar rose 0.5% to 153.465 yen its highest since late November. The yen has been the worst performer this week against the dollar, which has gained 2% on the Japanese currency. Traders see just a 23% chance of a quarter-point hike by the BOJ on Dec. 19, following reports by Reuters and Bloomberg that pointed to officials forgoing tightening this time in order to wait for more evidence of wage growth and see how U.S. policy takes shape under incoming president Donald Trump. “While the outcome is uncertain, one thing is clear: a hike exceeding 15 bps would likely trigger a downside move in dollar/yen as the yen strengthens,” City Index market analyst David Scutt said.”On the other hand, if the BoJ keeps rates unchanged, there’s a solid chance of a kneejerk upside reaction.” Either way, the outlook is volatile for this currency pair and likely will be driven by the dollar, he added. EUROPE UNDER PRESSURE In Europe, the pound fell after data showed the UK economy shrank unexpectedly in October, adding to signs of a bigger-than-expected slowdown. The Office for National Statistics said the economy contracted 0.1% in October, compared with forecasts in a Reuters poll for growth of 0.1%.Sterling was last down 0.2% at $1.2647, around its weakest since the start of the month. Against the euro the pound was down 0.48% at 82.985 pence, but still not far off its strongest since June 2016, when the UK voted to leave the European Union.The euro pared earlier losses against the dollar and rose 0.26% to $1.0493. The European Central Bank on Thursday cut rates by 25 basis points and kept the door open to further easing.The Swiss franc remained under pressure after the central bank’s shock half-point rate reduction the day before. The dollar was last up 0.1% at 0.8935 francs, while the euro rose 0.4% to 0.9375 francs.Rate cuts and the threat of the U.S. imposing tariffs have Canada’s dollar pinned to a 4-1/2 year low. [CAD/]The Chinese yuan held at 7.2826 per dollar in the offshore market. Reuters reported this week China is considering allowing its currency to fall further to counter the impact from any U.S. trade war. Bitcoin nudged above $100,000, heading back towards Dec. 5’s all-time high of $103,649. More

He said Thursday’s decision to cut the ECB’s key rate by 0.25 percentage points to 3% was ‘fortunately absolutely consensual’.”In the future, the expectation is that the restrictiveness of interest rates will be reduced,” Centeno, who is also governor of the Bank of Portugal, told a briefing, adding that monetary policy should be normalised in a few quarters’ time, with rates close to 2%, if no new shocks materialise.The ECB cut the key deposit rate for the fourth time this year on Thursday, and kept the door open to more easing as the euro zone economy is dragged down by political instability at home and the threat of a fresh U.S. trade war. More