Economy

In recent interviews with potential candidates for leading these regulatory agencies, Trump advisers and officials from the newly established Department of Government Efficiency (DOGE) have inquired about the possibility of the president-elect abolishing the Federal Deposit Insurance Corp, the WSJ said, citing people familiar with the matter.Advisers have asked the nominees under consideration for the FDIC and the Office of the Comptroller of the Currency, if deposit insurance could then be absorbed into the Treasury Department, the report said. More

The new regulation, adopted over the banking industry’s vocal opposition, closes what the U.S. Consumer Financial Protection Bureau described as a 1960s “loophole” from the era when checks were still in widespread use and that banks had since turned into a profit center.Lael Brainard, President Joe Biden’s National Economic Council director, added in a statement that the new rule amounted to “real relief for families.””The CFPB’s new rule, which caps overdraft fees as low as $5, is expected to save many families as much as $225 a year,” she said.The American Bankers Association reacted negatively, saying the CFPB had exceeded its legal authorities in finalizing the rule and that the trade group was considering its options.Consumer Bankers Association President and CEO Lindsey Johnson said the “rule harms Americans who need it most – including the 26 million Americans who don’t have access to credit and thus stand to lose the most if overdraft services are restricted.”Under the rule adopted Thursday, banks with more than $10 billion in assets who lend depositors money to cover account overdrafts have three options, according to the CFPB.They may charge $5, a fee that covers no more than costs or losses or they may offer credit at a profit so long as this complies with laws governing credit cards and other lending.CFPB officials said in January that about 23 million households paid such fees, which generated $12.9 billion in 2019.Banks say they have sharply reduced or eliminated overdraft fees in recent years. However the ABA said in a statement on Thursday the rule could cause banks to cease offering overdraft loans altogether, depriving cash-strapped consumers of quick access to funds essential expenses.According to Americans for Financial Reform, a progressive advocacy organization, recent polling shows overwhelming bipartisan voter support for limits on overdraft charges.Unlike other banking regulators, the CFPB has persisted in rulemaking in the weeks before President-elect Donald Trump takes office, angering congressional Republicans. The agency has finalized rules on digital wallets and also proposed new regulations on data brokers.Other CFPB proposals awaiting finalization include rulemakings on medical debt and on fees for instantaneously declined charges.A Republican Congress may nullify the rules adopted late in Biden’s final year and trade groups have also shown little hesitation in bringing court challenges. But such efforts are not guaranteed success.In Senate testimony on Wednesday, Chopra told lawmakers he did not feel the agency should cease rulemaking activity.”I don’t think it makes sense for the CFPB to be a dead fish,” he said. More

ORLANDO, Florida (Reuters) -One of the many curiosities of 2024 has been how global stocks have surged so strongly even as central banks have drained liquidity from the system. The question for markets is, if draining liquidity wasn’t much of a headwind this year, will its likely reversal next year turn into a tailwind?Global growth is forecast to moderate, partly due to the heightened uncertainty surrounding U.S. trade policy, and key economies like China, Europe and Canada are expected to loosen monetary policy significantly. Meanwhile, the Federal Reserve is trimming interest rates and could wind down its quantitative tightening (QT) program which has shrunk its balance sheet by $2 trillion since mid-2022. In short, the liquidity drain is likely to end. But if tracking the level of liquidity coursing through financial markets and the global banking system is hard, accurately assessing its impact on asset prices is a near-impossible endeavor. Liquidity has often been measured, albeit crudely, by the size of central bank balance sheets, with the assumption being that bigger balance sheets – and especially higher levels of bank reserves – mean stronger equity markets. For example, analysts at Citi run a model which suggests every $100 billion change in bank reserves held at the Fed equates to a roughly 1% move in the S&P 500. That would mean Wall Street should have taken a 2% hit this year, all else equal, as reserves fell by around $200 billion. On a global level, the 12-month change in bank reserves is around $600 billion, implying a much bigger fall in world stocks. Of course, the S&P 500 is up nearly 30% this year and the MSCI World index is up 20%.Or consider that the combined size of the ‘G4’ central bank balance sheets fell by $2.2 trillion in both 2022 and 2023, yet world stocks fell 20% in one year, then rose 20% the next. All this suggests liquidity is only one of many factors impacting markets. Economic growth, geopolitics, technology, earnings, regulation, investor psychology and a host of other factors can sway markets from day to day. Does this mean investors can mostly disregard changes in liquidity? Not necessarily.COLOSSALWhen trying to assess the status of market liquidity implied by central bank balance sheets, it’s useful to zoom in on bank reserves. If they get too low, as appeared to happen in the U.S. in 2019, money market rates can spike, credit crunch fears can flare up and investors may begin dumping risk assets. New York Fed models and recent commentary from Fed officials have both indicated that current U.S. bank reserves of around $3.2 trillion are “abundant”. However, they would like them to be merely “ample”, which is what the Fed’s ongoing balance sheet reduction is seeking to achieve.Policymakers will be pleased that – at least thus far – this reduction has not seriously impacted financial markets. It has been “like watching paint dry,” as U.S. Treasury Secretary Janet Yellen once quipped.But early 2025 could be choppy for markets, prompting the Fed to call a halt to QT. President-elect Donald Trump returns to the White House, the U.S. debt ceiling issue could rear its head again, and cash at the Fed’s overnight repurchase facility (RRP) could hit zero, signaling the disappearance of what some Fed officials have deemed a rough proxy for “excess” liquidity.Analysts at Goldman Sachs reckon the Fed will end QT in the second quarter, and others say it could come earlier. And why not? The balance sheets of the Fed, European Central Bank and Bank of England are all the smallest they’ve been as a share of their respective GDPs since early 2020, before the pandemic.David Zervos, chief market strategist at Jefferies, at a conference in Miami in February predicted that QT will stop with the Fed’s balance sheet at $7 trillion, right where it is today.”That’s a colossal balance sheet … a huge stimulus. It lifts earnings, lifts nominal GDP, lifts profits and lifts valuations,” Zervos said. Even if there is no mechanical link between central bank liquidity and markets, a “colossal” Fed balance sheet sends a signal that policymakers want to keep liquidity at stimulative levels and have the market’s back. The perception of liquidity rising – or not falling – could be enough to fuel risk appetite, potentially giving an already hot market an added tailwind next year. (The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeeverEditing by Peter Graff) More

(Reuters) -Costco Wholesale beat first-quarter revenue and profit expectations on Thursday as its bulk and discounted offerings, appealing to budget-conscious American shoppers, drove early holiday-season sales growth for the membership-only retailer.The company’s shares, which are up 51% so far this year, rose nearly 1% in extended trading.The retail chain, which sells products in larger packs and has bulk offers on items such as bread and eggs for as low as $3, has seen picky consumers turn to its stores to shop for their holiday needs, including home furnishings and jewelry. “It seems like you saw more than just bulk food sales growing. So it looks like there was a little bit of an uptick in other goods, not necessarily big-ticket discretionary items… but you’re seeing some sales growth in some different aisles of the store,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which has a stake in Costco (NASDAQ:COST). The holiday shopping season is shorter in 2024 than previous years, with only 26 days between Thanksgiving and Christmas. The season saw retailers across the United States roll out discounts and promotions as early as October to beat competition and attract finicky customers.”Seasonal sell-through appears to be very strong… people are very basic buying this year, but good trends,” CFO Gary Millerchip said in a post-earnings call.Costco ran pre-Black Friday sales in early November, trying to dodge a hit to sales in the first quarter ended Nov. 24 this year, from the late Thanksgiving weekend, which extended into December.It has offered products at heavy discounts, such as an LG UltraGear Gaming Monitor for $179, $70 lower than its original price, and JBL headphones for a 30% discount, at $69.99.Bigger rival Walmart (NYSE:WMT), which has also been offering higher discounts and promotions, raised its annual sales and profit forecast in November for the third time this year, signaling strong consumer spending.Costco’s first-quarter revenue rose 7.5% to $62.15 billion, beating analysts’ estimate of $62.08 billion, according to data compiled by LSEG.Its profit came in at $4.04 per share in the reported quarter, handily topping an estimate of $3.79.The recent hike in its annual membership fee to $65 for Gold Star members and $130 for Executive members resulted in earnings from the fees rising 7.7% to $1.17 billion in the reported quarter. More

TOKYO (Reuters) -The Bank of Japan is leaning toward keeping interest rates steady next week as policymakers prefer to spend more time scrutinising overseas risks and clues on next year’s wage outlook, said five sources familiar with its thinking.Any such decision will heighten the chance of an interest rate hike at the central bank’s subsequent meeting in January or March, when there will be more information on the extent to which wage hikes will broaden next year.There is no consensus within the central bank on the final decision, with some in the board still believing Japan has met the conditions for raising rates in December, the sources said. The decision will depend on the conviction each board member holds on the likelihood of Japan achieving sustained, wage-driven price rises.There is also a slim chance the board may favour acting if upcoming events, such as the U.S. Federal Reserve’s rate-setting meeting that concludes hours before that of the BOJ, trigger a renewed yen plunge that heightens inflationary pressure.But overall, many BOJ policymakers appear in no rush to pull the trigger with little risk of inflation overshooting despite Japan’s still near-zero borrowing costs, they said.”Japan isn’t in a situation where imminent rate hikes are needed,” one of the sources said. “With inflation benign, it can afford to spend time scrutinising various data,” another source said, a view echoed by two more sources.The BOJ will hold its final policy meeting for the year on Dec. 18-19, when the nine-member board will deliberate whether to raise short-term interest rates from the current 0.25%.Just over a half of economists polled by Reuters last month expect the BOJ to raise rates in December. About 90% forecast the BOJ to have hiked rates to 0.5% by end-March.By contrast, markets are currently pricing in less than a 30% probability of a rate increase in December.TRUMP RISK LOOMSThe central bank has been guarded on the timing of the next rate hike, causing market expectations of a move to fluctuate between December and January.There is growing conviction within the BOJ that conditions for another hike are falling into place with the economy growing moderately, wages rising steadily and inflation exceeding its 2% target for well over two years, the sources said.In a sign of its confidence over the economic outlook, the central bank is likely to maintain its view that consumption is “increasing moderately as a trend,” they said.But there is no sense of urgency to hike as inflationary pressure from raw material imports has subsided due to the yen’s recent rebound. That contrasts with when the BOJ hiked rates to 0.25% in July, when the currency’s rapid fall pushed up import prices and heightened the risk of an inflation overshoot.While rising wages are prodding more firms to hike services prices, such moves have not heightened enough to cause an alarming wage-inflation spiral, the sources said.Acting in December, rather than January, could give markets the impression the BOJ is in a rush to push up rates to levels deemed neutral to the economy – something it wants to avoid.The government, which still considers Japan as remaining in economic stagnation, also prefers the BOJ to move cautiously.”It’s desirable for the BOJ to hold off on raising rates until the economy recovers a bit more,” a senior government official told Reuters, when asked about the December meeting.Unless a renewed, rapid yen fall heightens inflationary pressure, many BOJ policymakers likely prefer awaiting information on whether firms will keep offering bumper pay hikes in next year’s wage negotiations with unions, the sources said.Holding until the Jan. 23-24 meeting would allow the BOJ to scrutinise remarks from corporate executives on next year’s wage outlook, and its quarterly regional report that includes information on how smaller firms are setting prices and wages.Another incentive to hold fire is uncertainty over U.S. president-elect Donald Trump’s economic policies, which Governor Kazuo Ueda highlighted as a risk in a recent media interview.”The biggest risk for Japan’s economy comes from overseas,” as sluggish global demand could hurt corporate profits and dampen their appetite to hike pay, a third source said.The BOJ’s decision next week will come hours after that of the Fed, which is widely seen cutting rates.If the Fed surprises by holding rates and triggers a dollar surge, that could pressure the BOJ to hike rates to slow any sharp yen selloff, the sources said.The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signaled readiness to hike again if wages and prices move as projected, and heighten conviction Japan will durably hit 2% inflation. More

Other shareholders of FGP Topco Ltd, the parent company of Heathrow Airport Holdings, sold an additional 17.87% stake, taking Ardian and PIF’s purchase up to 4 billion euros for 37.62%, Ferrovial said.Later on Thursday, PIF also announced the completion of acquisition of approximately a 15% stake of the holding company of Heathrow Airport Holdings Ltd, saying that the investment is in line with the PIF strategy to empower important businesses through long-term partnerships.The final agreement to sell stakes was announced in June saying that Ardian and PIF would acquire 22.6% and 15% respectively of FGP Topco Ltd.Ferrovial, which builds and manages highways and airports, is focusing on its expansion in the United States, where it is building a new terminal at New York’s John F. Kennedy International Airport.($1 = 0.9538 euros) More

(Reuters) – A look at the day ahead in Asian markets. Asian markets are set to end the week on the defensive, pressured by rising U.S. bond yields and a firmer dollar, with investors ready to reduce risk exposure as they ponder the cross-currents sweeping through the emerging world.China’s latest pledges – to widen the budget deficit, issue more debt and loosen monetary policy – have generally been welcomed, but Brazil’s surprisingly aggressive interest rate hike and promise of more to come has had a more mixed impact.Chinese and Hong Kong stocks bounced strongly on Thursday, and barring a fall of 1.4% or more on Friday, blue chip Chinese stocks will register their third weekly rise in a row, a winning streak not seen since May. The yuan fell on the stimulus news, as expected, but not by much. Indeed, going into Friday’s session, the onshore yuan is set to break a remarkable run of 10 consecutive weekly declines. Even less surprising, perhaps, was another leg lower in Chinese bond yields. The 10-year yield is at record lows and is on course for its biggest weekly fall since 2020. Wall Street understandably took a breather on Thursday after the previous day’s somewhat surprising surge. The S&P 500 fell 0.5% and is poised for a modest fall on the week, and the Nasdaq backed off Wednesday’s record high above 20,000. It’s still on course for its fourth consecutive weekly rise though, and remarkably, it has declined in only two weeks out of the last 14. The AI-driven bull run in U.S. tech shows every sign of powering on into the year end with Hong Kong’s benchmark tech index is up 3% for the week. The wider policy and market sentiment thermometer is also sending mixed signals. The Swiss National Bank delivered a jumbo rate cut on Thursday, bringing the zero bound into view and floating the possibility of negative rates, if they are needed.The European Central Bank cut rates by a more modest 25 basis points, as expected, but was more cautious in its guidance. And hot U.S. producer price inflation pushed up Treasury yields, while punchy jobless claims data stoked concern about the labor market.All in all, a very mixed bag, and investors may well be relieved that the weekend is near.Asia’s economic calendar on Friday is light. The two main indicators are India’s wholesale inflation for November, which is expected to ease a bit to 2.2% on an annual basis from 2.36% in October, and Japan’s fourth quarter Tankan survey of business sentiment.The Australian dollar and Philippine peso could move on scheduled speeches from RBA Assistant Governor Sarah Hunter and Philippine central bank governor Eli Remolona, respectively. Here are key developments that could provide more direction to markets on Friday:- Japan Tankan survey (Q4)- India wholesale inflation (November)- New Zealand manufacturing PMI (November) More