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BRASILIA (Reuters) – Brazil’s Supreme Court on Sunday authorized the government to exempt spending on wildfires and droughts in the Amazon (NASDAQ:AMZN) and Pantanal regions from this year’s fiscal target as the country grapples with the economic impacts of its worst drought on record.The decision by Justice Flavio Dino effectively clears the way for the government to take action if it submits an executive order to Congress requesting extraordinary measures to address the situation.According to the National Center for Monitoring and Early Warning of Natural Disasters (Cemaden), the current drought is the most intense and widespread in Brazil since records began in 1950, exacerbated by a weak rainy season in the north-central region, rising atmospheric temperatures, and land-use changes, with forest areas being replaced by pastures.Record wildfires have swept through the Amazon and Pantanal regions, as well as other parts of the country, while the severe drought has hindered navigation along the Amazon’s waterways, with low water levels isolating some communities and disrupting soybean and corn shipments from central-western states like Mato Grosso, Brazil’s top grain-producing area.Justice Dino also authorized the government to bypass a legally mandated waiting period for hiring temporary firefighters and ordered a federal police fund to allocate resources to prioritize investigations into wildfires.Earlier this year, the government had already exempted spending on unprecedented floods that hit the southern state of Rio Grande do Sul in May, highlighting the growing burden of climate events on public finances.Spending on Rio Grande do Sul has so far totaled 27 billion reais ($4.85 billion) and will not be considered when assessing the government’s target to eliminate this year’s primary deficit.While Dino’s ruling allows potential expenses to bypass a spending cap established by new fiscal rules and exempts them from the fiscal target calculation, they would still contribute to the growth of Brazil’s public debt, which is already considered high compared to other emerging markets.($1 = 5.5625 reais) More
Trading in Asia was slow, with markets in Japan, China and South Korea closed for holidays. The dollar was flat at 140.86 yen, near where it finished last week and close to the 140.285 end-December low it struck on Friday. It fell 1.3% on the yen last week.The Fed’s Sept. 17-18 meeting is the highlight of a busy week that also has the Bank of England and Bank of Japan announcing policy decisions on Thursday and Friday. Treasury yields have been falling in the run-up to the highly anticipated meeting, particularly as odds stack up for the Fed to get aggressive with a half-point rate cut. Benchmark 10-year yields were last at 3.65%, unchanged from Friday. Those yields are down 30 basis points in about two weeks. Two-year yields, more closely linked to monetary policy expectations, were at 3.57% and are down from roughly 3.94% two weeks ago.Selling the dollar for yen has been the cleanest trade for investors looking to play the drop in Treasury yields, said Chris Weston, head of research at Australian online broker Pepperstone.”While speculators are short and riding this lower, this trend is clearly one to align with,” and the December lows for the dollar-yen pair is one to watch, he said.A quarter-point reduction by the Fed as it kicks off its rate cuts is still seen as the slightly more likely outcome, but only marginally so. Fed speakers and data releases over the past month have had markets shifting the odds around the size of this week’s rate cut, debating whether the Fed will head off weakness in the labor market with aggressive cuts or take a slower wait-and-see approach.Fed fund futures reflect traders are pricing in a 52% chance of a 50-basis point cut at the September meeting, according to CME FedWatch. Futures price a total of 125 basis points in rate cuts in 2024. Investors are also looking to the Bank of Japan’s interest rate decision on Friday, when it is expected to keep its short-term policy rate target steady at 0.25%. BOJ board members have indicated they are keen to see rates higher, and the narrowing gap between rates in Japan and other major currencies has spurred the yen higher and caused billions of dollars worth yen-funded carry trades to be unwound.Japan is also due to see a change in political leadership, as the ruling Liberal Democratic Party is set to hold an election on Sept. 27 to pick a leader to replace Prime Minister Fumio Kishida. Sanae Takaichi, one of the leading contenders to replace Kishida, said on Friday the Bank of Japan should hold off on further interest rate hikes, to keep the country’s economic recovery intact.Sterling edged slightly higher by 0.05% to $1.3132, still weaker than its one-week highs struck on Friday. The euro was up 0.11% at $1.1088. The dollar index was 0.1% lower at 101. The European Central Bank cut interest rates by 25 bps last week, but ECB President Christine Lagarde dampened expectations for another reduction in borrowing costs next month. ECB chief economist Philip R. Lane and Vice President Luis de Guindos speak at events on Monday. The Bank of England is expected to hold its key interest rate at 5% next week, after kicking off its easing with a 25-bp reduction in August.Bank of Canada Governor Tiff Macklem meanwhile opened the door to stepping up the pace of interest rate cuts, the Financial Times reported on Sunday. The BoC, after keeping its key policy rate at 5%, a more than two-decade high, for a year, has trimmed it by a quarter point three times in a row since June. More
BEIJING (Reuters) -Beijing, as a vote on EU duties on China-made electric vehicles looms, employed a carrot-and-stick approach to deal with the 27-strong bloc, threatening trade retaliation while cajoling key EU states into one-on-one talks on deals and investments. The potential blow of counter-tariffs on EU goods will fall mostly on states such as Spain, France and Italy that have voiced support for the EV duties, with pork, dairy and brandy exports to the world’s second-biggest economy at stake. European Union members such as Germany, Finland and Sweden that have not pushed for the tariffs would feel less impact, with little exposure to the export items singled out by China. China’s tactics appear to be working. Spanish Prime Minister Pedro Sanchez wrapped up a China visit this week by sitting in a Chinese EV and saying it was an “honour”. He then unexpectedly urged the EU to reconsider its position. According to a Spanish government source, Sanchez’s delegation came away feeling “Spain is more important now”, and that an agreement over tariffs on its pork products was close. As a sweetener, a Chinese company agreed to build a $1 billion plant in Spain to make machinery used for hydrogen production, in apparent backing for Spain’s green ambitions. With pork and dairy, China maximises the “domestic political cost” to the countries voting to impose EV tariffs, said Beijing-based economist Mei Xinyu, with the agricultural sector often playing a role in EU politics. “These products count on China as one of their top export markets,” he said. Pork, dairy and brandy exports from the EU to China totalled about $10 billion in 2023, although not all products in those categories would be subject to tariffs. The bloc’s exports to China last year totalled over $280 billion. CRUNCH TIME Still feeling the pinch of U.S. tariffs imposed during the Trump era, China does not want a trade war with the EU. But Beijing has made it clear it would fight if Brussels imposes additional EV tariffs of up to 35.3%. China-made EVs exported to Europe rose 38% in 2023 to 656,000 units, including shipments non-EU countries. Europe accounted for more than 40% of EVs shipped out of China last year, according to Reuters calculations based on data from the China Passenger Car Association. Chinese Commerce Minister Wang Wentao will visit Europe next week and hold talks with EU trade chief, Valdis Dombrovskis. Wang will also visit Italy, which supports the EV tariffs while also seeking Chinese investment to build EV production capacity. China needs at least 15 EU members representing 65% of the EU population to oppose the tariffs at a vote in October. But positions within the EU remain diverse. Some smaller states are keeping their heads down. Others are prioritising ties closer to home. “Ireland’s exports to China are only a small fraction (of its exports), so Ireland will prioritise the EU market and relationship over China,” said an Irish trade representative in China, speaking on condition of anonymity. “China is still important, but business with China is hard and not growing as well as expected.” Ireland is the fifth most exposed EU producer in China’s dairy investigation and sixth worst off in its pork probe. ‘SHOCK AND AWE’ In contrast, China appears to allow no room for negotiations or concessions with Canada, hitting it on Monday with a probe into its rapeseed exports after Ottawa introduced a 100% tariff on Chinese EVs in August, accusing Beijing of unfair competition.Unlike with Brussels, Beijing gave Ottawa no public prior warning of how it might hit back, signals often conveyed in Chinese state media such as Global Times. He Yongqian, a Chinese commerce ministry spokesperson, said “evidence” showed Canada’s rapeseed exports to China had been dumped and had damaged domestic industry, when asked to explain the difference in approach. Canadian rapeseed producers play by a rules-based global trading order, a spokesperson for Global Affairs Canada told Reuters.”We are following this closely,” said the spokesperson.On the contrary, Beijing has clearly been open to negotiation with the EU, said Even Pay, an analyst at Beijing-based Trivium China who specialises in agriculture. “With Canada, they went straight for shock and awe,” Pay said. More
LONDON (Reuters) – Britain’s housing market recovered momentum in September, as the Bank of England’s first interest rate cut in more than three years and greater political certainty after July 4’s election boosted activity, property website Rightmove (OTC:RTMVY) said on Monday. Rightmove said average asking prices for homes increased by 0.8% after a sharp 1.5% drop in August. September’s rise was double the average for the time of year in the series and the biggest for the month since 2016.Compared with a year earlier, asking prices were 1.2% higher at 370,759 pounds ($487,140).Tim Bannister, Rightmove’s director of property science, said the housing market was invigorated by a new government and the first rate cut from the BoE since 2020. But Rightmove said there were “still uncertainties ahead, including the timing of a second Bank Rate cut, and which segments of the market could be affected by announcements in October’s Autumn Statement.” The BoE is expected to hold interest rate at 5% on Sept. 19 – although markets last week saw a 30% chance of an early cut – and cooling wage growth is likely to keep the central bank on track to cut at least once more by the end of the year. Prime Minister Keir Starmer’s Labour government has promised to reform Britain’s planning system and has set mandatory targets to speed up housebuilding, but the shortage of home supply is likely to remain a factor driving prices for the medium term.Britain’s finance minister Rachel Reeves is set to deliver her first annual budget on Oct. 30.Rightmove’s monthly survey also showed the number of sales agreed between buyers and sellers rose 27% from a year ago as buyer demand improved on the back of lower borrowing costs.The average five-year fixed mortgage rate last week was 4.67%, Rightmove said, down from 6.11% in July 2023.Other measures of Britain’s housing sector have also shown improvement in sentiment after a recent fall in interest rates.A closely-watched Royal Institution of Chartered Surveyors report last week showed a sharp jump in sales expectations in the coming months.($1 = 0.7611 pounds) More
NEW YORK (Reuters) – U.S. stock futures and the dollar were little changed on Sunday after Republican presidential candidate Donald Trump was safe following what the FBI said appeared to be an assassination attempt outside Trump’s golf course in West Palm Beach, Florida.Secret Service agents engaged a gunman in some bushes near the property line of the golf course and fired at least four rounds of ammunition, law enforcement officials said during an afternoon press conference.S&P 500 e-minis were down 0.04%. The Dollar Index, which measures the U.S. currency’s strength against six major peers, was down 0.03% to 101.07.Bitcoin was 0.7% lower on the day at $59,445. Trump has positioned himself as a pro-cryptocurrency candidate.While there was little market reaction to the news, analysts said the incident had the potential to spur volatility.”Foreign exchange rates could experience turbulence in the coming hours as news of a second assassination attempt lands amid thin trading volumes,” said Karl Schamotta, chief market strategist at payments company Corpay in Toronto.Asset classes and sectors seen benefiting from a second Trump term received a boost earlier this year after Trump survived in an assassination attempt in Pennsylvania on July 13. The so-called “Trump trade,” however, came under pressure last week after a closely watched debate between Trump and Vice President Kamala Harris left betting markets pegging a stronger likelihood of a Harris win in November.”Perhaps we may see some look to get back into the ‘Trump Trade’ if this sees Trump receive a boost in the polls like we saw after the earlier assassination attempt – boosting both equities, and the dollar,” said Michael Brown, senior research strategist at online broker Pepperstone, in London. “That said, with the FOMC looming large on Wednesday, conviction among market participants will likely be lacking until we hear from Powell & Co,” he said.Betting markets logged little reaction to the incident on Sunday, with Harris’ odds in PredictIt’s 2024 presidential general election market at 56 cents, while Trump’s odds were at 47 cents.The Federal Reserve is in focus as uncertainty swirls over how much the U.S. central bank will cut interest rates at its -Sept. 17-18 monetary policy meeting and the pace at which it will reduce borrowing costs in coming months.”The dollar could yet climb on a modest recovery in the ‘Trump trade,’ but any effect should be relatively modest in scale,” Corpay’s Schamotta said. More
(Reuters) – A look at the day ahead in Asian markets.Asia kicks off the trading week on Monday with investors likely to give a big thumbs down to yet another batch of uniformly disappointing economic indicators from China, while at the same time cheering one of Wall Street’s best weeks of the year.Fueled by growing hopes that the Federal Reserve will kick off its interest rate-cutting cycle with a 50-basis-point cut rather than a quarter-point move later this week, U.S. stocks rose solidly on Friday, which could provide a good springboard for Asia on Monday.The S&P 500 got to within 1% of its July 15 all-time high and the Nasdaq ended the week up 6%, its best week since October. Volatility across asset classes fell – the ‘MOVE’ index of implied Treasury market volatility is at its lowest since late July.That’s the backdrop to the start of a hugely important week for markets around the world with the highlight being the Fed’s rate decision and revised economic forecasts on Wednesday, but maybe even more so for Asian markets.Japan and Hong Kong release inflation data, and there are monetary policy decisions from Indonesia, Taiwan, China and the Bank of Japan later in the week. The local focus on Monday will be China and yet another wave of worrying economic data.There are those in the more speculative corners of the investment community with a higher tolerance for risk, like hedge funds, who are bound to be looking at China right now as an attractive bet.Stocks have fallen 15% in a couple of months and are flirting with the lowest levels in nearly six years, deflation hangs heavily over the economy, the growth outlook is darkening, and authorities appear unable or unwilling to unleash the stimulus required to turn all that around.Capital inflows are drying up and outflows are picking up, forcing the central bank to act more vigorously to protect the exchange rate. Indeed, the yuan has strengthened notably in recent weeks.But the data released on Saturday gave no indication that a broader and more lasting turnaround is in sight. If anything, they suggest such a scenario is as far away as ever. Official figures on Saturday showed that new home prices fell at their fastest pace in nine years, industrial output growth slowed to a five-month low, foreign direct investment is down 31.5% and retail sales weakened further. And on Friday, meanwhile, the Biden administration locked in steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles. Beijing said it would take “necessary measures to resolutely defend the interests of Chinese companies.” Here are key developments that could provide more direction to Asian markets on Monday:- Germany wholesale price inflation (August)- New York Fed manufacturing index (September)- U.S. 3-month, 6-month T-bill auctions More
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