Economy

BRASILIA (Reuters) – Brazil’s government forecast economic growth of 2.6% and inflation of 3.3% for 2025 in its draft budget proposal for the coming year, which was submitted to Congress late Friday. The proposal projects that the central government — comprising the Treasury, central bank, and social security— will end next year with a zero primary deficit, in line with the official goal of a result equivalent to 0% of gross domestic product (GDP). More

WASHINGTON (Reuters) -The SpaceX Falcon 9 vehicle may return to flight operations while the overall investigation of the anomaly during a recent Starlink mission remains open, the U.S. Federal Aviation Administration said on Friday.SpaceX made the return to flight request for the workhorse vehicle on Thursday and the FAA gave approval on Friday. The agency said flights may resume “provided all other license requirements are met.”On Wednesday, the FAA grounded the Falcon 9 after failing an attempt to land back on Earth during a routine Starlink mission, forcing the company’s second grounding this year.SpaceX’s Falcon 9 successfully launched a batch of Starlink internet satellites into orbit early Wednesday from Florida. The rocket’s reusable first stage booster returned to Earth and attempted to land on a sea-faring barge as usual, but toppled into the ocean after a fiery touchdown.Groundings of Falcon 9, a rocket that much of the Western world relies on to put satellites and humans in space, are rare. The rocket was previously grounded in July for the first time since 2016, following a second-stage failure in space that doomed a batch of Starlink satellites.After the July grounding, SpaceX returned Falcon 9 to flight 15 days later, after the FAA granted the company’s request for an expedited return to flight.Falcon 9 is also due to launch two NASA astronauts in late September on a Crew Dragon spacecraft that will bring home next year the two astronauts who have been stuck on the International Space Station after riding Boeing (NYSE:BA)’s troubled Starliner spacecraft.SpaceX has built a sizable fleet of reusable Falcon boosters since the rocket’s first launch in 2010 that has allowed the company to vastly outpace its rivals in launch frequency.Another Starlink mission was poised for launch shortly after Wednesday’s flight, from SpaceX’s other launch site in southern California, but the company called that mission off after the landing failure. More

NEW YORK/LONDON (Reuters) -Global stocks edged higher in choppy trading on Friday, making it the fourth consecutive month of gains despite a bout of heavy selling in early August, buoyed by U.S. economic data that has helped the dollar snap a weeks-long losing streak.The U.S. personal consumption expenditures (PCE) price index – which is the Federal Reserve’s preferred inflation measure – rose 0.2% in July, according to Commerce Department data released on Friday. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month, the report showed. The data sets the stage for the Fed to likely begin easing monetary policy from September.The Dow Jones Industrial Average finished up 0.55% to 41,563.08, reaching the second consecutive record high close. Benchmark S&P 500 gained 1.01% to 5,648.40 and the Nasdaq Composite gained 1.13% to 17,713.62. For the month, the Dow finished up 1.8%, S&P 500 added 2.3%, and the Nasdaq gained 0.6%.Europe’s Stoxx index closed up 0.09% after touching a record intraday high while Britain’s FTSE 100 eased 0.04%. MSCI’s world share index rose 0.77%, making it a 2.40% monthly gain.The stunning recovery from an early August sell-off reminiscent of October 1987’s “Black Monday” came as traders priced a so-called Goldilocks scenario, in which the U.S. economy keeps growing but not so much as to prevent interest rate cuts. Money markets are confidently pricing the Fed’s first 25 basis point cut of this cycle at its September meeting, with a 33% chance of a jumbo 50 bp reduction. The U.S. economy grew faster than initially thought in the second quarter of this year because of strong consumer spending, and corporate profits, a report on Thursday showed.”The last few days we’ve started out a little stronger and then drifted during the day and in many cases closed either break even or slightly positive or slightly negative,” said Tom Plumb, chief executive and portfolio manager at Plumb Funds.”I think that is a sign of a cycle where you start to see people transition to a different environment and it’s not positive for the past leaders,” he added, referring to the so-called “Magnificent 7″ tech stocks that were at the forefront of this year’s stock market rally. Government bonds rallied in early August after a weaker-than-expected U.S. jobs report and a surprise Bank of Japan rate hike wreaked chaos in currency carry trades and drove heavy selling of risky assets. The yield on benchmark U.S. 10-year notes, which moves inversely to prices, rose 4.2 basis points on Friday to 3.909%. The 2-year note yield, which typically moves in step with interest rate expectations, rose 2.4 basis points to 3.9165%.”As we’re starting to lay out what our expectations are for an environment with lower interest rates, at least lower short term rates… we’re already starting to see a change in the shape of the yield curve, which impacts the bond market but also the stock market,” Plumb added.EURO FLATThe dollar steadied near a one-week high versus a basket of other major currencies, on track to snap a five-week losing streak although still heading for around a 2.5% monthly loss. Against the yen, the dollar stood at 146.14, set to lose more than 2.5% for the month, as pressure eased on the Japanese currency on the prospect of narrowing interest rate differentials.Core inflation in Japan’s capital Tokyo accelerated for a fourth straight month in August, data showed on Friday, with the 2.4% price increase signalling further BoJ rate hikes ahead. The euro was down 0.2% at $1.105, having declined on Thursday after softer-than-expected German inflation data increased bets on further European Central Bank rate cuts. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.48% and ended the month 2% higher. Japan’s Nikkei, following its early August collapse, was down 1.16% for the month after rising 0.74% on Friday. Oil prices fell. Brent crude futures for October delivery, which expire on Friday, settled 1.43% at $78.80 a barrel, marking a decline of 0.3% for the week and 2.4% for the month. U.S. West Texas Intermediate crude futures settled down 3.11% to $73.55, a drop of 1.7% in the week and a 3.6% decline in August.Gold prices weakened but looking at a 2.8% monthly gain. Spot gold lost 0.74% to $2,502.44 an ounce. U.S. gold futures settled 1.3% lower at $2,527.6 [GOL/] More

NEW YORK (Reuters) – A broadening rally in U.S. stocks is offering an encouraging signal to investors worried about concentration in technology shares, as markets await key jobs data and the Federal Reserve’s expected rate cuts in September.As the market’s fortunes keep rising and falling with big tech stocks such as Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL), investors are also putting money in less-loved value stocks and small caps, which are expected to benefit from lower interest rates. The Fed is expected to kick off a rate-cutting cycle at its monetary policy meeting on Sept. 17-18.Many investors view the broadening trend, which picked up steam last month before faltering during an early August sell-off, as a healthy development in a market rally led by a cluster of giant tech names. Chipmaker Nvidia, which has benefited from bets on artificial intelligence, alone has accounted for roughly a quarter of the S&P 500’s year-to-date gain of 18.4%.”No matter how you slice and dice it you have seen a pretty meaningful broadening out and I think that has legs,” said Liz Ann Sonders, chief investment officer at Charles Schwab (NYSE:SCHW).Value stocks are those of companies trading at a discount on metrics like book value or price-to-earnings and include sectors such as financials and industrials. Some investors believe rallies in these sectors and small caps could go further if the Fed cuts borrowing costs while the economy stays healthy. The market’s rotation has recently accelerated, with 61% of stocks in the S&P 500 outperforming the index in the past month, compared to 14% outperforming over the past year, Charles Schwab data showed.Meanwhile, the so-called Magnificent Seven group of tech giants – which includes Nvidia, Tesla (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT) – have underperformed the other 493 stocks in the S&P 500 by 14 percentage points since the release of a weaker-than-expected U.S. inflation report on July 11, according to an analysis by BofA Global Research. Stocks have also held up after an Nvidia forecast failed to meet lofty investor expectations earlier this week, another sign that investors may be looking beyond tech. The equal weight S&P 500 index, a proxy for the average stock, hit a fresh record this week and is up around 10.5% year-to-date, narrowing its performance gap with the S&P 500.”When market breadth is improving, the message is that an increasing number of stocks are rallying on expectations that economic conditions will support earnings growth and profitability,” analysts at Ned David Research wrote.Value stocks that have performed well this year include General Electric (NYSE:GE) and midstream energy company Targa Resources (NYSE:TRGP), which are up 70% and 68%, respectively. The small-cap focused Russell 2000 index, meanwhile, is up 8.5% from its lows of the month, though it has not breached its July peak. Next Friday’s non-farm payrolls report could help bolster the case for a broader market rally if it shows the labor market is cooling at a steady, though not alarming pace, said David Lefkowitz, head of U.S. Equities for UBS Global Wealth Management.The jobs report “tends to be one of the more market moving releases in general, and right now it’s going to get even more attention than normal.”Investors are unlikely to turn their back on tech stocks, particularly if volatility gives them a chance to buy on the cheap, said Jason Alonzo, a portfolio manager with Harbor Capital.Technology stocks are expected to post above-market earnings growth over every quarter through 2025, with third-quarter earnings coming in at 15.3% compared with a 7.5% gain for the S&P 500 as a whole, according to LSEG data. “People will sometimes take a deep breath after a nice run and look at other opportunities, but technology is still the clearest driver of growth, particularly the AI theme which is innocent until proven guilty,” Alonzo said. More

“We expect a report largely similar to July will confirm that weaker July data was not a one-off but rather reflects a genuine softening in the labor market that will have officials lowering rates by 50bp to start the cutting cycle,” Citi said.As a September rate cut is now widely expected, the size of the cut has sparked hot debate. The odds of a 50bp cut vs 25bp have swung widely this month.Following the soft July jobs report, many were convinced that the Fed would have to cut 50bp to stave off recession, with some even calling for an emergency cut. But as the economic updates poured in including positive jobless claims data, the initial worries about a recession were cast aside and bets on 25bp cut took center stage.  It wouldn’t take much to tip the Fed-rate cut scales toward a larger 50bp, Citi says, forecasting a modest increase of 125,000 jobs in August, with the unemployment rate holding steady at 4.3%.This would still align with the Citi economists’ view that labor demand is genuinely weakening, rather than being affected by temporary factors.Even if the unemployment dips slightly, signaling a slight, one-month improvement in the labor market, this may not be “enough to convince Fed officials that the risks of further softening have abated,” Citi added.Incoming data suggest that July’s weaker nonfarm payrolls wasn’t transitory, Citi says, highlighting ongoing weakness across various sectors, including construction, government, and manufacturing, that will likely make a dent in the August jobs report. As the August jobs report, due Sept. 6, will arrive just ahead of the Fed’s September blackout period, the data, Citi expects, “will heavily influence whether the Fed opts for a 25 or 50 basis point cut to kick off its easing cycle.”  More

BENGALURU (Reuters) – U.S. home prices will rise relatively modestly this year and next despite tight supply and expected U.S. Federal Reserve interest rate cuts, according to housing analysts polled by Reuters who said purchasing affordability will improve but would remain strained.Forecasts for U.S. house prices have barely changed since the previous survey three months ago, despite more aggressive expectations in financial markets for interest rate cuts, suggesting this upswing will be more subdued than in the recent past. Average property prices in the world’s largest economy fell only about 7% since the central bank raised rates by 525 basis points to the current 5.25%-5.50% range, and are still more than 50% higher than pre-pandemic levels. Much of that price appreciation has to do with homeowners who have locked in low 30-year mortgage rates – most under 5% and some even below 3% – and who are unwilling to part ways with their homes on such cheap deals.That, coupled with expectations the Fed will start cutting rates in September and by a total of 75 bps by year-end, will help underpin a market already constrained by a lack of adequate supply.U.S. home prices based on the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas are expected to rise a median 5.4% in 2024, according to an Aug. 19-29 Reuters poll of nearly 30 property analysts. They are expected to climb 3.3% next year and 3.4% in 2026, slightly faster than economists’ average consumer price inflation forecasts of 2.3% and 2.2% for those periods.”Housing starts and existing home sales are really weak. The only thing that’s been fairly healthy, and surprisingly so, are prices still hitting record highs because of limited supply – a lot of people just don’t want to sell their homes,” said Sal Guatieri, senior economist at BMO Capital Markets.”For the next few months, the U.S. housing market will continue to stabilize now mortgage rates are starting to decline in anticipation of Fed rate cuts … but if prices continue to rise, it’s going to be tough to see a material improvement in affordability.”ACUTE SHORTAGEThe 30-year mortgage rate, which averaged nearly 7% through 2023, fell to a 16-month low of 6.44% last week. It is forecast to average 6.7% in 2024, before declining to 6.0% next year and 5.9% in 2026, survey medians showed.That was in part why all 26 respondents to an additional survey question said purchasing affordability for first-time homebuyers would improve over the coming year.Yet an acute shortage of previously-owned homes, with inventory levels still roughly 33% below pre-pandemic averages according to a recent Zillow (NASDAQ:ZG) report, will likely still keep affordability stretched.According to the poll, existing home sales, comprising more than 90% of total sales, are expected to improve only slightly to a 4.15 million unit annualized rate next quarter, considerably lower than 6.6 million units in early 2021. That was a downgrade from the previous survey. That rate is expected to pick up to only 4.24 and 4.40 million units in the following two quarters.”Although lower interest rates will cause an improvement in housing demand over the next year, affordability will remain very strained for quite some time. By some metrics, it’s already close to its worst levels in four decades,” Guatieri added.Relief from lower interest rates will, however, likely dampen sticky rental inflation in coming months, analysts in the survey said. Average urban home rents are expected to lag home prices over the coming year and rise by 2-4%, slower than the current rate, according to medians from a smaller sample of poll respondents.(Other stories from the Q3 global Reuters housing poll) More

The government’s goal this year is to eliminate the primary deficit, which excludes interest payments, with a tolerance band of 0.25% of GDP, either up or down. This means that the primary deficit could be close to 29 billion reais ($5.13 billion).Central bank data released on Friday showed that the central government posted a primary deficit of 8.6 billion reais in July and a deficit of 269 billion reais over the past 12 months.Haddad, speaking at an event in Sao Paulo, said that the July figure was in line with the year’s target.Government members have stressed that fiscal results in the second half of the year will be better than in the first, which saw the anticipation of significant expenditures, including court-ordered payments. Haddad noted that if the government had approved 100% of what was proposed last year, it would be on track for a zero primary deficit this year, making it sustainable.The minister assessed that the labor market is overheated, and now is the time to adjust social programs.He also said that Latin America’s largest economy is expanding by a rate of 3%, and given its potential, it should not settle for growth below the global average.($1 = 5.6489 reais) More

Inflation remained cool in July, based on the Personal Consumption Expenditures index, keeping the Federal Reserve on track for rate cuts.Inflation held steady in July on a yearly basis and consumer spending was robust, fresh data released on Friday showed, the latest sign that progress toward cooler price increases remains firmly intact even as the economy holds up.The release of the Federal Reserve’s favorite inflation number, the Personal Consumption Expenditures index, showed that yearly inflation was 2.5 percent. That was in line with both the previous month and with economist forecasts.After stripping out food and fuel prices, both of which jump around, a “core” index was up 2.6 percent from a year earlier. That figure gives economists a clearer grasp on the underlying trend in inflation.This month, Fed officials and Wall Street analysts are likely to look closely at the monthly inflation numbers. Because inflation climbed slowly last summer, the annual numbers are being measured against cool readings from last year. When comparing July’s prices to June’s, inflation climbed slightly: 0.2 percent in both the headline and the core measures.The likely takeaway for Fed officials is that inflation continues to gradually moderate — keeping them on track to begin lowering interest rates next month. While the yearly number remains above the Fed’s 2 percent goal, it is down substantially from a peak of more than 7 percent in 2022.This is the last P.C.E. report the Fed will receive before its Sept. 17-18 policy meeting, although officials will get a Consumer Price Index report on Sept. 11. That inflation measure comes out earlier in the month than the personal consumption measure and feeds into the P.C.E. report.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More