Economy

BENGALURU (Reuters) – Australia’s central bank will hold its key interest rate at 4.35% on Tuesday and for the rest of the year, according to a Reuters poll of economists, as strong economic activity and sticky core inflation still warrant a cautious approach.Consumer price inflation fell to 2.8% last quarter, within the Reserve Bank of Australia’s 2-3% target for the first time in three years, but core inflation, stripped of volatile components, remained elevated.During its post-COVID tightening cycle, the RBA raised rates by 425 basis points from 0.10% to 4.35%, less than many of its peers despite the risk of prolonged higher inflation.That was partly to promote job creation, part of the central bank’s mandate. The jobless rate has held relatively steady between 4.0% and 4.2% since April. With the employment market still strong and a relatively lower peak in interest rates, the RBA is likely to be slower to ease policy than other central banks in developed nations, in line with its peers in Asia.All 30 economists in the Oct. 30-31 poll expected the RBA to hold its official cash rate at 4.35% at the end of its two-day policy meeting on Nov. 5.All but one also expected the central bank to leave rates unchanged at the December meeting.”We are not expecting the RBA to change the official cash rate. Aside from that, what we could see at the margin is a slight softening in their language from hawkish to a bit more balanced,” said Craig Vardy, head of fixed income at BlackRock (NYSE:BLK) Australasia.”We think the data was pretty much in line with the RBA’s thoughts about the path of core inflation. That is, it’s still too high for them to think about cutting the cash rate in 2024…early 2025 is probably a bit more realistic.” All the major local banks – ANZ, CBA, NAB, and Westpac – forecast no rate change this year. However, all four expected the RBA to cut rates at its first meeting of 2025 in February.Nearly 70% of respondents who had a view into next year, 20 of 29, expected a 25 basis point cut in February to 4.10%. Of the remaining nine, eight predicted no change while one saw a bigger cut to 3.75%.Markets are not pricing in a first cut until April.Median forecasts in the survey showed the RBA cutting rates by 75 basis points next year, to end 2025 at 3.60%, compared with a total of 225 bps of cuts expected from the U.S. Federal Reserve.”(Core) inflation is not going to get into the target band until the middle of the third quarter…So without a recession, (the RBA) are probably not going to be in a hurry to cut rates sharply,” said My Bui, economist at AMP (OTC:AMLTF), forecasting three rate cuts next year.”Cutting rates is basically bringing it back to a more normal level, which in our view is slightly above 3%.”With the Fed easing much more swiftly than the RBA, the Australian dollar will regain all of its year-to-date loss of 3.5% by end-January and then trade around $0.68, according to a separate Reuters poll of foreign exchange strategists.(Other stories from the November Reuters global economic poll) More

BENGALURU (Reuters) – The U.S. dollar will hold on to its recent strength over coming months on robust domestic economic data and continued scaling back of bets for Federal Reserve interest rate cuts, a Reuters poll found.Some analysts have attributed the dollar’s 4% October rally to speculation about the likely result of the Nov. 5 U.S. presidential election. Others say the move is primarily due to resilient economic activity in the United States, particularly strong consumer spending and labor data.The latest opinion polls show a near-deadlock between Democratic Vice President Kamala Harris and Republican candidate Donald Trump in the final stretch of a tightly-fought presidential contest.Meanwhile, persistent U.S. economic outperformance has pushed financial markets to price in a higher year-end Fed funds rate than thought even a month ago. A separate Reuters survey of economists predicts two more quarter-point reductions this year.Based on interest rate differentials, the dollar’s recent momentum seems unlikely to fade quickly anytime soon. Fed peers, such as the European Central Bank, appear more likely to be aggressive in the near-term with rate reductions. “In the U.S., we started getting better economic data, so we started pricing in a more hawkish Fed relative to what we had been and in Europe we started getting weaker data and so we started pricing in a more dovish ECB,” said Dan Tobon, head of G10 FX strategy at Citi.”We’re basically just looking for the dollar to rally into the election, reverse that slightly and then chop around sideways like it’s been doing now.”The euro will trade around its current $1.09 level by the end of November before edging up about 1% in three months to $1.10, according to median forecasts from over 70 forex strategists polled by Reuters from Oct. 28-31.Yet, an overwhelming 90% majority of respondents, 28 of 31, to an additional question predicted better dollar performance in the immediate aftermath of a Trump victory. The currency is forecast to gain an additional 1.5% under that scenario and lose 1% if Harris wins, according to median responses.”We’re seeing risks to the dollar as asymmetric to the upside in case of a Trump victory and a bit more status quo, slightly maybe to the downside, in a Harris victory,” said Alex Cohen, FX strategist at Bank of America.”That’s mainly due to trade and tariff policy in a Trump administration that could … have a disproportionate impact on the dollar, pushing it higher both from expected inflation as well as from a trade perspective.”While both Trump and Harris have proposed policies that could reignite price pressures, Trump’s policies would be more inflationary of the two, according to 39 of 42 economists in a separate Reuters survey.Yet, the euro was forecast to rise to $1.11 by the end of April and then to $1.12 in a year, poll medians showed.”Our medium-term view of the dollar is it should ultimately trade negative in a soft landing environment. But given how strong U.S. data has been recently, there are definite additional upside risks to that forecast,” BofA’s Cohen added. More

The trade pact would remove tariffs for 51% of New Zealand’s exports to the region from day one and deliver duty-free access for 99% of New Zealand’s exports over 10 years, New Zealand Trade Minister Todd McClay said in a statement late on Thursday. “Successfully concluding a trade agreement with the GCC has been a long-standing ambition for successive governments for almost two decades,” McClay said in Doha. The statement did not specify when the trade pact will become effective.The agreement with the Gulf states comes after New Zealand reached a trade deal with the United Arab Emirates in September. Trade between New Zealand and the GCC is worth more than NZ$3 billion ($1.79 billion) annually. The Pacific island nation exported NZ$2.6 billion to the Middle Eastern member countries in the year to June 2024, which included NZ$1.8 billion of dairy, official data showed.($1 = 1.6734 New Zealand dollars) More

Economists surveyed by Dow Jones expect the Bureau of Labor Statistics to report Friday that payrolls expanded by just 100,000 on the month, the lowest in nearly four years.
Whatever the results, markets may choose to look through the report, as multiple one-time hits including strikes and storms dampened hiring.
Indicators leading up to the much-watched jobs report show that hiring has continued apace and layoffs are low.

Hiring signs outside a Stewart’s gas station in Catskill, New York, US, on Wednesday, Oct. 2, 2024. 
Angus Mordant | Bloomberg | Getty Images

Powerful hurricanes and a major labor strike could take a chunk out of the nonfarm payrolls count for October, which is expected to be the slowest month for job creation in nearly four years.
Economists surveyed by Dow Jones expect the Bureau of Labor Statistics to report Friday that payrolls expanded by just 100,000 on the month, held back by hurricanes Helene and Milton as well as the strike at Boeing. If their prediction is accurate, it would be the lowest job total since December 2020 and a huge drop from September’s 254,000.

The report, which will be released at 8:30 a.m. ET, is also expected, however, to indicate that the unemployment rate will be unchanged at 4.1%.

“When we look through that [headline jobs number], the unemployment rate will remain low, and I think wages will grow faster than inflation, and both those things are going to underscore the health of the U.S. economy,” said Michael Arone, chief investment strategist at State Street Global Advisors.
On wages, average hourly earnings are projected to rise 0.3% for the month and 4% from a year ago, the annual figure being the same as September and furthering the narrative that inflation is sticky but not accelerating.

Whatever the results, markets may choose to look through the report, as so many one-time hits dampened hiring.
“The top-line numbers will be a little bit noisy, but I think there’ll be enough there to continue to determine that the soft landing is intact and that the U.S. economy remains in good shape,” Arone added.

The hurricanes caused what could be historic levels of monetary damage, while the Boeing strike has sidelined 33,000 workers.
Goldman Sachs estimates that Helene shaved as much as 50,000 off the payrolls count, though Hurricane Milton probably happened too late to affect the October count. The Boeing strike, meanwhile, could lower the total by 41,000, added Goldman, which is forecasting total payrolls growth of 95,000.

Data has been solid

Yet indicators leading up to the much-watched jobs report show that hiring has continued apace and layoffs are low, despite the damage done from the storms and the strikes.
Payrolls processing firm ADP reported this week that private companies hired 233,000 new workers in October, well above the forecast, while initial jobless claims fell to 216,000, equaling the lowest level since late April.
Still, the White House is estimating that the events cumulatively may hit the payrolls count by as many as 100,000. The “disruptions will make interpreting this month’s jobs report harder than usual,” Jared Bernstein, chair of the Council of Economic Advisers, said Wednesday.
Jobs numbers in general have been noisy in the post-Covid era.

Earlier this year, the BLS announced benchmark revisions that knocked off 818,000 from previous counts in the 12-month period through March 2024. Year to date through July, revisions have taken a net 310,000 off the initial estimates.
“This report will reinforce the big picture, which is that the labor market is still growing. But the fact is that it’s growing but slowing,” said Julia Pollak, chief economist at ZipRecruiter. “Growth is slowing and also becoming more narrowly concentrated in just a couple of sectors.”
Leading areas of job creation this year have been government, health care, and leisure and hospitality. Pollak said that continues to be the case, particularly for health care, while ZipRecruiter also has seen more interest in skilled trades along with finance and related businesses such as insurance.
However, she said the general picture is of a slowing market that will need some help from Federal Reserve interest rate cuts to stop the slide.
“For the last two quarters now, job growth has been below the pre-pandemic average, and job gains have been unusually narrowly distributed,” Pollak said. “That has real effects on job seekers and workers who felt their leverage erode, and many of them are struggling to find sort of acceptable jobs. So I do think the Fed’s attention should be firmly on the labor market.” More

Benchmark natural gas prices remained subdued during much of the quarter, hurt by high storage levels and tepid demand. The U.S. Energy Information Administration expects U.S. gas production to decline in 2024, the first time since 2020, as producers like Coterra have reduced their output after prices touched multi-decade lows. The company’s average sales price for natural gas, excluding hedges, fell to $1.30 per thousand cubic feet (mcf) from $1.80 per mcf a year earlier. Oil prices also fell 8.4% to $74.04 per barrel on demand woes. Total production fell marginally to 669,100 barrels of oil equivalent per day (boepd) from 670,300 boepd, as declines in natural gas output were mostly offset by a 22.2% rise in oil production. Coterra has reallocated resources to oil-heavy Permian and Anadarko basins from the country’s largest gas producing region, Marcellus shale, following the slump in natural gas prices this year. The company, however, raised 2024 production forecast to a range of 660,000 to 675,000 boepd, up 1% at midpoint compared to its earlier projections, primarily backed by strong oil production.Its shares rose 1.8% in after-market trade.The company also forecast oil production to grow at 5% annually for the next two years.But it said total equivalent production growth would be in the range of zero to 5% until 2026.Coterra’s third-quarter net income fell 22% to $252 million, compared to the year-ago quarter.Its adjusted profit of 32 cents per share came in below market estimate of 34 cents, according to data compiled by LSEG. More

(Reuters) – A look at the day ahead in Asian markets. Market sentiment in Asia will be fragile at best on Friday as high and rising bond yields sink their teeth into risky assets, and worries about escalating AI costs appear to slam the brakes on the megacap, Big Tech rally.There probably won’t be any positive spillover from Wall Street after the S&P and Nasdaq on Thursday posted their steepest one-day losses in two months.However, shares in Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) rose sharply in after-hours trading following their earnings reports on Thursday, but Apple shares (NASDAQ:AAPL) dipped. Traders will likely play it safe ahead of U.S. employment data on Friday and ahead of the weekend.There’s a sprinkling of potentially market-moving events in Asia on Friday, namely purchasing managers index reports from several countries including China, Indonesian inflation, and Japanese earnings from Mitsui, Nomura, Mitsubishi and others.Perhaps more importantly though, the so-called ‘bond vigilantes’ are flexing their muscles again, pushing up yields across the developed world – with the possible exception of Canada – in an attempt to enforce some degree of discipline on what they consider fiscally lax governments.A bearish narrative coalescing around three main facets – fiscal slippage, huge debt supply coming down the pike, and sticky inflation resulting from higher spending – is dominating bond market sentiment right now.Yields are on the rise, with UK gilts feeling the heat most in the last 24 hours following Chancellor Rachel Reeves’ debut budget on Wednesday. And on Thursday, the Bank of Japan kept rates on hold but left the door open to a near-term hike.For markets in Asia, U.S. bonds are what matter most. And only days away from the U.S. presidential election the signs are flashing amber, if not red – implied volatility and the ‘term premium’ are the highest in a year, and the 10-year yield has risen more after the first cut in this Fed easing cycle than any since 1989. If that wasn’t bad enough for Asian markets, the dollar just clocked its biggest monthly rise in two and a half years. Most Asian stock markets lost ground in October and the MSCI Asia/Pacific ex-Japan index fell 4.5%. Chinese stocks lost more than 3% in October, perhaps unsurprising given the previous month’s 21% rise, while the weak yen has helped Japan’s Nikkei 225 index post a monthly gain of around 3%.Given the nervous global backdrop, however, it would not be a surprise to see Japanese stocks retreat on Friday, regardless of the exchange rate. Asia’s main data point on Friday is China’s ‘unofficial’ manufacturing PMI. This follows the Bureau of Statistics PMI reports on Thursday that showed manufacturing activity crept back into expansion territory in October for the first time since April.Here are key developments that could provide more direction to markets on Friday:- Reaction to Apple, Amazon results- China PMI (October)- Indonesia inflation (October) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Parents who employ nannies could see their annual childcare bills jump by more than £1,000 from April under measures announced in this week’s Budget.The chancellor’s key tax-raising policy will see employers’ national insurance contributions increase from 13.5 per cent to 15 per cent next year, with the salary threshold at which employers pay contributions dropping from £9,100 to just £5,000.While this move was aimed at businesses, parents who employ nannies for their childcare arrangements will also be impacted.Jenni Bond, managing director of Nannytax, a payroll service for parents, said the extra NI charges would add more than £1,000 to the annual cost of hiring a nanny, based on the average salary of £46,228 for nannies in London.The additional costs could be higher still, said Bond, if the number of hours the nanny was working placed their hourly income below the level of April’s new national minimum wage.Although the chancellor extended protection to small businesses by boosting the employment allowance to enable them to offset higher payroll costs, employers of domestic staff including nannies, cleaners and gardeners are exempt from using it. The rules exclude workers who are being employed in a personal capacity to support the running of a household. “The cost of childcare is astronomical, and domestic employers should absolutely be included [in the employment allowance],” said Bond.Joeli Brearley, founder of the charity Pregnant Then Screwed which campaigns for more affordable childcare, said the NI increase would “hit working parents hard, particularly mothers, who still bear the brunt of childcare costs”. “For many, employing a nanny isn’t a luxury but a necessity to keep their careers going. With this added expense, we risk pushing more parents — especially single parents and mothers — out of the workforce.”Bond said that increases in the minimum wage, announced on Tuesday, would also pile “on top of those increases parents would have expected”. The national living wage for over-21s will rise from £11.44 to £12.21 in April 2025.199The number of children’s nurseries forced to close in the year to September 2024, according to the National Day Nurseries AssociationThe NI hit to parents with nannies comes as parents grapple with the costs of childcare after a surge in nursery closures and a push for workers to return to the office after the pandemic. The yearly salary for nannies outside London rose by 12 per cent year-on-year to £40,326 in 2023-24, according to Nannytax’s annual salary index report. In London, annual salaries for nannies rose by 8 per cent to £46,228.In the year to September 2024, 199 nurseries were forced to close, according to the National Day Nurseries Association, a charity representing nurseries across the UK.“A lot of this comes down to chronic underfunding, particularly for three and four-year-olds,” said Purnima Tanuku, chief executive of NDNA, in September.The Treasury declined to comment. More