Economy

BENGALURU (Reuters) – The Bank of England will cut its Bank Rate by a quarter-point on Nov. 7 to 4.75%, according to all 72 economists polled by Reuters, but a near-two-thirds majority expect no move in December, suggesting the BoE will stick to a cautious approach.British inflation plunged to a three-year low of 1.7% in September from 2.2%, below the BoE’s 2% target. That leaves room for the Monetary Policy Committee (MPC) to cut rates next week after pausing in September following a narrow vote to start easing in August. The British economy is still performing relatively well, with the prospect of an increase in investment from British finance minister Rachel Reeves’ budget due this week. BoE Governor Andrew Bailey and MPC member Megan Greene welcomed the recent decline in inflation but downplayed its significance.Another MPC member, Catherine Mann, said the cooling of price growth has “a long way to go”, suggesting a succession of cuts at each meeting may not yet be on the cards.”Favourable inflation data in the interim between meetings has likely strengthened confidence among committee members that inflation is on a sustainable trajectory to target,” said Ellie Henderson, economist at Investec.”We don’t think it will mean that the MPC will call victory on inflation just yet though… there are still some upside risks.”All 72 economists in the poll taken Oct. 22-28 expected the BoE to cut the Bank Rate to 4.75% on Nov. 7.Around two-thirds, 46 of 72, predicted no change at the next meeting in December. The rest expected another 25 basis point cut.Among 16 Gilt-Edged Market Makers, a majority of 11 expected the MPC to hold rates in December, while five expected a cut. Interest rate futures are pricing in reductions in both November and December.Even if the BoE opts to cut twice more this year, it would still be moving slower than its peers.The U.S. Federal Reserve and the European Central Bank have cut interest rates by 50 and 75 basis points, respectively, and are both expected to have delivered a total of 100 basis points of cuts by year-end, compared with only 50 basis points from the BoE. Median forecasts showed the Bank Rate at 3.50% by the end of 2025, slightly lower than the September survey. Views ranged between 4.25% and 2.75%, with no majority. Asked about the greater risk to their end-2025 Bank Rate forecast, nearly 70%, 16 of 23, said it would be lower than they currently expect. The rest said higher.MINIMAL INFLATION IMPACT FROM UK BUDGETReeves will present her first budget on Oct. 30 and is expected to increase spending to improve services and upgrade Britain’s infrastructure.The budget will not have much impact on UK inflation in the near-term said half the respondents, nine of 18, to an additional question. Seven said it might push inflation a bit higher and the remaining two said a bit lower.”Chancellor Reeves’ announcements will probably outline a strategy to raise taxes for increased day-to-day spending and borrow more for investment…This approach initially boosts demand and subsequently may increase supply, resulting in a looser fiscal stance,” said Stefan Koopman, senior market economist at Rabobank. “That said, I think the Bank of England will indicate that the Budget will have a minimal net impact on the demand-supply balance, allowing them simply to remain on their path of gradual easing.” Inflation was forecast to average 2.6% this year, 2.3% in 2025 and 2.0% in 2026. The UK economy was forecast to grow 1% this year, 1.3% next and 1.5% in 2026.Those forecasts were broadly unchanged from the previous poll. (Other stories from the Reuters global economic poll) More

(Reuters) -Ford Motor said on Monday it expects to hit the lower end of its full-year profit guidance, dropping the company’s shares 5% in after-hours trading, as a price war hits the U.S. automaker’s bottom line. Ford (NYSE:F) expects to earn about $10 billion in earnings before interest and taxes this year, down from its prior range of $10 billion to $12 billion.”No doubt, there’s a global price war, and it’s fueled by over-capacity, a flood of new EV nameplates and massive compliance pressure,” CEO Jim Farley said on a call with analysts.Rival General Motors (NYSE:GM) beat Wall Street’s expectations when it reported third-quarter results last week and said profit next year looks similar to this year.Ford has also been weighed down this year by high warranty costs and problems with its supply chain, worsened by recent hurricanes, Chief Financial Officer John Lawler said.Third-quarter profit fell less than expected, however.The company reported third-quarter net income of $900 million, or 22 cents per share, down from 30 cents a year ago. Results were hurt by a $1-billion charge it took on cancelling production of a three-row electric SUV in August.”Ford and other domestic automakers are facing headwinds from still-elevated interest rates and well-above-average inventory levels, which is leading to an increase in incentives and other measures, which should eat into margins,” said CFRA Research analyst Garrett Nelson. On an adjusted basis, Ford reported quarterly profit of 49 cents per share, compared to analysts’ average estimate of 47 cents, according to data compiled by LSEG.Ford’s commercial and gas-engine divisions posted combined EBIT of about $3.4 billion, fueling the company’s profits amid steep EV losses. The company’s inventory was higher than its target range, as it ended the quarter with 91 days of gross stock and 68 days of dealer stock, Farley said.Farley has made tough decisions about the company’s electric-vehicle lineup as competition from Tesla (NASDAQ:TSLA) and Chinese automakers has intensified over the past year. Ford canceled the highly-anticipated three-row EV, which it dubbed a “personal bullet train,” saying the vehicle could no longer be profitable in the timeline required. Company executives have said that new vehicles need to be profitable within 12 months of launch to make its battery-powered business sustainable.Ford’s stock is down about 6% this year, falling less than Jeep-maker Stellantis (NYSE:STLA)’ 40% decline as the latter struggles with slowing sales and profits in North America and announces management shuffling. The strongest of the Big Three this year has been GM. Its shares are up about 47% this year on consistently increased guidance. EV LOSSES Ford, one of the only legacy automakers to report its EV results separately, is facing around a $5-billion loss on its electric vehicles this year. It recorded a loss of $1.2 billion in EBIT in the third quarter on its EVs, bringing its losses on the segment for the first three quarters of 2024 to $3.7 billion.The company said it made nearly $1 billion worth of cost improvements year-over-year, but these gains were largely offset by industry-wide pricing pressure.Lawler said pricing pressure on EVs will remain intense at least until 2026 as automakers flood the market with new models.  “It’s going to be a very competitive market and that’s what we need to be prepared for,” Lawler said on a call with reporters. Ford maintained its expectation to cut $2 billion of annual cost by year-end from materials, manufacturing and freight, as the automaker works to offset higher labor costs following a new agreement with the United Auto Workers union last year.  More

(Reuters) – A look at the day ahead in Asian markets. Investors in Asia could be forgiven for going into Tuesday’s session with a high degree of trepidation, as markets get pulled by a plethora of local and global forces in all sorts of directions.Rare political instability continues to weigh on Japan’s markets after Sunday’s inconclusive general election, while Chinese markets digest yet another push from the People’s Bank of China to inject liquidity into the financial system.The global backdrop is looking unnerving too. Optimism around the U.S. megacap tech earnings this week and oil’s 6% slide on Monday are boosting risk appetite, but the relentless rise in U.S. bond yields and looming U.S. election warrant caution. Something may have to give: Do the Treasury market bears and equity bulls retreat, or not? And if they do, what will the catalyst be? It’s not clear.What is clear is that the rise in U.S. bond yields shows no sign of slowing, much less reversing. Not yet, anyway. Yields hit new multi-month highs on Monday, with the $139 billion sale of two- and five-year debt also putting downward pressure on prices.The 10-year yield touched 4.30% and is now up 64 basis points since the Fed cut rates on Sept. 18. According to Jim Bianco at Bianco Research, that is the biggest rise following the first cut in a Fed easing cycle since 1989. Despite that, Wall Street rose on Monday, providing bulls in Asia with some encouragement. Tuesday’s Asian calendar includes unemployment data from Japan and Singapore, and minutes of the Bank of Korea’s policy meeting this month, when it cut rates for the first time in over four years. Thailand’s finance minister and central bank governor will discuss next year’s inflation target.In Japan, swaps market pricing shows ‘no change’ from the Bank of Japan on Thursday is a near certainty. Six basis points of rate hikes are priced in for December’s meeting, and only 35 bps in total by the end of next year.That would be a very gradual tightening cycle. Set against a more hawkish Fed in a U.S. ‘soft’ or ‘no landing’ scenario, the yen’s upside may be limited.  U.S. rates traders continue to pare back Fed expectations – only 120 bps of easing now priced in by the end of next year, down 15 bps in the last few days. Little wonder the dollar is on course for its best month since April 2022.Officials in China, meanwhile, will be hoping investors warm to the PBOC’s new lending tool, which could inject liquidity into the market ahead of the expiration of nearly 3 trillion yuan, or $406 billion, in loans at the end of the year.Here are key developments that could provide more direction to markets on Tuesday:- Japan unemployment (September)- South Korea central bank minutes – Thai finance minister and central bank chief speak More

WASHINGTON (Reuters) – The Biden administration said on Monday it is finalizing rules that will limit U.S. investments in artificial intelligence and other technology sectors in China that could threaten U.S. national security.The rules, which were proposed in June by the U.S. Treasury, were directed by an executive order signed by President Joe Biden in August 2023 covering three key sectors: semiconductors and microelectronics, quantum information technologies and certain AI systems.The new rules are effective Jan. 2 and will be overseen by Treasury’s newly created Office of Global Transactions.Treasury said the “narrow set of technologies is core to the next generation of military, cybersecurity, surveillance, and intelligence applications.”The rule covers technologies like “cutting-edge code-breaking computer systems or next-generation fighter jets,” added Paul Rosen, a senior Treasury official.He added that “U.S. investments, including the intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities.”The rule is part of a broader push to prevent U.S. know-how from helping the Chinese to develop sophisticated technology and dominate global markets.Commerce Secretary Gina Raimondo said earlier this year the rules were crucial to prevent China’s developing military-related technologies.The new rules contain a carve out allowing U.S. investment in publicly traded securities, but the officials said the U.S. already has authorities under previous executive order barring buying and selling of securities of certain designated Chinese companies. The House select committee on China has criticized major American index providers for directing billions of dollars from U.S. investors into stocks of Chinese companies that the U.S. believes are facilitating the development of China’s military. More

The carmaker and the Tokyo-headquartered telecommunications major are planning to develop automotive software which will use AI to anticipate accidents and take control of the vehicle, the report said.The firms are currently looking to have a working system ready by 2028 and provide it to other automakers.The deal comes at a time when Japanese automakers are looking to tap into the booming advanced autonomous driving market, which is primarily dominated by Tesla (NASDAQ:TSLA) and other Chinese firms. Toyota ‘s Mirai fuel-cell vehicle has been equipped with a hands-free driving function since 2021.The two firms had joined hands back in 2017 to develop technology for 5G-connected cars and a capital tie-up as part of a smart city project in 2020.Toyota Motor (NYSE:TM) and NTT did not immediately respond to Reuters requests for comment. ($1 = 153.2300 yen) More

The New York Fed has started to publish a Reserve Demand Elasticity (RDE) estimate — measuring the impact, or the elasticity, of the central bank’s reserves to changes in rates —  showing the RDE is statistically indistinguishable from zero and points to reserve abundance, JPMorgan said in a recent note.”We think reserve demand elasticity should remain close to zero at least through this year and that the Fed can continue balance sheet reduction through Q2 2025,” it added.Fed members also remain willing to cut the size of the central bank’s balance sheet unless there is unexpected weakening in the labor market.San Francisco Fed President Mary Daly recently said that there are no indications suggesting a need to alter the current runoff strategy, which has reduced the balance sheet to $4.2T from from a peak of nearly $9 trillion seen at the start of 2020. “Liquidity remains more than ample,” Dallas Fed President Lorie Logan recently remarked. The Fed’s commitment to balance sheet reduction reflects a complex balancing act aimed at maintaining liquidity while supporting economic growth, which continues to hold up, supported by labor market strength. But that could change if the labor market shows signs of significant weakening as the central bank may signal an earlier end to its balance sheet reduction efforts. More

Unlock the US Election Countdown newsletter for freeThe stories that matter on money and politics in the race for the White HouseLast week, one of Wall Street’s top commodities analysts was asked how he thought the outcome of the US election might affect the energy sector. “I’m just going to point out this,” the Carlyle private equity group’s Jeff Currie told an FT energy conference in London. “Under the Trump administration, the world got a lot greener and under the Biden administration it got a lot browner.”By this, Currie meant that global events and other dynamics can shape energy markets more than any White House occupant. This is true, up to a point. Greenhouse gases plunged in 2020, when Trump was in office and Covid lockdowns battered the global economy. But emissions roared back after Biden took office in 2021 and economies began to rebound.Likewise, more onshore wind farm power was added during Trump’s term than under Biden up until August this year, in part because renewables developers were among those hit by Biden-era interest rate jumps. US oil production also continued to soar to fresh highs under Biden, as an ever more efficient drilling industry pumped more crude from new wells.Still, it is impossible to downplay the importance of next Tuesday’s US presidential election. The outcome will reverberate well beyond the shores of the US, not least when it comes to climate change. One candidate, Kamala Harris, wants to hasten the energy transition away from fossil fuels while the other, Donald Trump, wants to slow or stop it. Consider Trump’s vow to gut what he calls Biden’s “mammoth socialist” Inflation Reduction Act. This sweeping 2022 climate legislation is already funnelling billions of dollars in tax credits towards electric cars, solar panels, batteries and other technologies central to a speedy transition — as well as carbon capture and hydrogen that oil and gas companies support.Beyond the US, it has spurred the EU, India and other economies to launch programmes to build up their own clean energy sectors, and stop climate-friendly businesses heading to the US. A global green energy race is very much needed at a time when greenhouse gas emissions are reaching new highs. The race could falter under Trump, who has also vowed to rip up a slew of other Biden energy measures such as a pause on approving new liquefied natural gas export terminals and transport decarbonisation. His vice-presidential running mate, JD Vance, has pushed to replace the Inflation Reduction Act’s electric vehicle tax credits with $7,500 “America First” credits for US-made gasoline and diesel cars. Trump could also take tougher steps to stymie global decarbonisation efforts than he managed the first time around. His campaign has told reporters he would again pull the US out of the Paris climate agreement, as he eventually did in November 2020. Biden swiftly reversed that move on taking office in 2021.However, the 900-plus-page Project 2025 policy blueprint that Trump loyalists have drawn up contains a plan that some legal experts think could make it far harder for another Democratic president to overturn a second Trump pullout. The document says the next conservative administration should withdraw from both the 2015 Paris agreement and its 1992 parent treaty, the UN Framework Convention on Climate Change. Some experts think a future Democratic president would need Senate approval to rejoin the convention, which could be difficult to attain.When I asked a number of legal scholars what they thought, some said the Senate may not need to approve the re-entry of a treaty it had already okayed. But others said rejoining could require a two-thirds majority vote.Either way, the prospect of another four years of a Trump White House is unnerving climate policy advocates across the world, who fear it will embolden other leaders to take their feet off the energy transition pedal.Those fears will be on display just days after Tuesday’s election in Azerbaijan’s capital of Baku, where this year’s annual UN climate COP conference begins on November 11. Envoys are due to negotiate a raft of measures, including a new global climate finance goal, and build on past commitments to shift away from fossil fuels. Securing agreement for such efforts among nearly 200 countries is hard enough at the best of times. The threat of the world’s biggest historic emitter and richest nation standing on the sidelines for years to come would cast a pall over Baku. But the effect of a Trump victory on the global energy transition could be felt for decades.pilita.clark@ft.com More