Economy

BUENOS AIRES (Reuters) – Argentina’s libertarian President Javier Milei laid out a bleak vision in his maiden speech a year ago amid an economic crisis. He warned there was “no money”, pledged shock therapy for the economy and said things would get worse before they got better.The crowd in front of Congress cheered his every word.A year later Milei has managed to pull off a gravity-defying feat: keeping that fervor burning and avoiding tipping the country into fiery protest even as he rolls out severe spending cuts that have crimped the economy and pushed up poverty.The bombastic and shaggy-haired economist, who marks one year in office this week, has seen his star rise globally. He has become a poster child for free markets and the political right, with public backing from Tesla (NASDAQ:TSLA) billionaire Elon Musk and U.S. President-elect Donald Trump.At home he is leading a bold – if risky – experiment, turning Latin America’s third largest economy and a key producer of grains, gas and lithium, into a rare live test case of libertarian free-market economics and deregulation.So far, he is defying the odds.Milei’s polling numbers are high and rising, monthly inflation has come down from 25% to 3%, markets are soaring and distortions in the currency markets have eased.That is despite the real economy being in reverse, hit by his spending cuts. Central bank dollar reserves have improved but remain in the red and half of Argentina’s 45 million people live in poverty.”Milei has made huge cuts, which has generated a major recession,” said political analyst Facundo Nejamkis from consultancy Opina Argentina. “And yet, the people who voted for him continue to back him. This is what marks Milei out.”Part of the explanation is what came before.Argentines voted Milei into power last year in a shock election driven by anger at the traditional political parties that have overseen years of recessions, fiscal deficits, debt defaults, currency controls and soaring inflation.That has given Milei more leeway – and time.”We are on the right path … We came from a difficult situation, the country was in decline,” said José Bosch (NS:BOSH), a 40-year-old lawyer in Buenos Aires, adding that prices were beginning to stabilize and salaries regain lost ground.While life was tough, Bosch was willing to wait for growth to pick up.”In my personal situation I can endure this, though I don’t know for how long,” he said. “What we Argentines are always urgently thinking about is the economy.”CHAINSAW AUSTERITYMilei’s rise from acid-tongued economic pundit to president has shaken Argentina and rippled overseas. His austerity, plans to slash back the state and anti-woke rhetoric have made him a darling of the conservative right and free markets.Trump-backing U.S. Republican Kari Lake recently called Milei a “heavily caffeinated version of Donald Trump” at a conservative summit in Buenos Aires. Milei’s backers sometimes wear adapted “MAGA” hats: Make Argentina Great Again.If Milei succeeds longer-term it could redraw Argentina’s political fault lines after years of big government. He could gain more seats in Congress in mid-term elections next year that would boost his ability to push through reforms.His government, however, faces a tough new phase: reviving the stalled economy, ending currency controls that have proved hard to undo, and keeping a lid on popular anger at the high cost of living and cuts hitting pensioners and state workers.”They’ve taken away medicines from retired people, they’ve fired over 45,000 government workers and they keep making budget cuts to the lower classes,” said Claudio Arevalo, a State Workers Association union official at a protest last week.”We will stay on the street until this government decides to change its political and economic path.”Brenda Corbalán, 38, said she and her partner, who work in an orthopedics shop and earn some 800,000 pesos ($790) a month, were having to support her retired in-laws, tightening their belts by taking cheaper bus routes and canceling holidays.”Things have got worse, at least how we see it,” she said.PRAGMATIC STREAKArgentina, the top global processed soy exporter, a key shale producer and No. 4 for battery metal lithium, has seen a series of would-be saviors fall flat after initial promise. And Milei remains a self-confessed political outsider.However, analysts pointed to a pragmatic streak helping Milei survive. He has won allies from the mainstream conservatives that have let him navigate Congress despite having few seats, put moderates into his Cabinet and softened attacks on trade partners like China despite ideological differences.”He’s ended up being much more pragmatic in how he’s running things,” said Marina Dal Poggetto, Buenos Aires-based executive director of economic consultancy Eco Go.A straight-talking style and brash showmanship have also kept him in the spotlight. With big sideburns and shaggy locks, he has performed rock music and dated local celebrities. He still appears with a “chainsaw” to represent his cutbacks, now gold-hued with “Forces of Heaven” written on it. That has helped mask, for now, the hardship many Argentines face, and Milei’s big win has been convincing them that austerity is the tough medicine the resource-rich country needs to turn its fortunes around – and see it in a positive light.”We are coming out of a very bad time, tragic for the country,” Juan Agustin told Reuters on the streets of Buenos Aires, adding that despite the economic drop he felt optimistic. “Now we are facing a moment that gives us real hope.” More

BEIJING (Reuters) -China will adopt an “appropriately loose” monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo was quoted as saying on Monday.China will step up “unconventional” counter-cyclical adjustments, focusing on expanding domestic demand and boosting consumption, state media Xinhua reported, citing a readout of a meeting of top Communist Party officials, the Politburo.The remarks came ahead of the annual Central Economic Work Conference in the coming days to set key targets and policy intentions for next year. Stocks jumped and China’s government bonds rallied following the Politburo meeting readout, with Hong Kong’s Hang Seng index climbing 2.8% to its highest in a month.In 2025, authorities must adhere to “the principle of pursuing progress while maintaining stability,” Xinhua said. “A more proactive fiscal policy and an appropriately loose monetary policy should be implemented, enhancing and refining the policy toolkit, strengthening extraordinary counter-cyclical adjustments,” the readout said. The housing market and stock market must be stabilised, the Politburo added, without giving details. POLICY STANCE BEING EASEDThe new wording for monetary policy marks the first easing of the stance since late 2010, according to official announcements on the Politburo meetings. “We think it points to strong fiscal stimulus, big rate cut and asset buying in 2025,” said Xing Zhaopeng, ANZ’s senior China strategist. “The policy tone shows strong confidence against Trump threats” of tariffs.China’s economy has struggled this year, prompting policymakers to act in September, with the central bank unveiling its most aggressive monetary easing since the pandemic, cutting interest rates and injecting 1 trillion yuan ($140 billion) into the financial system, among other steps.China may just be able to reach its growth target of around 5% this year, but maintaining that pace in 2025 – as U.S. President-elect Donald Trump returns to the White House having threatened tariffs of 60% or more on Chinese imports – would be a difficult task.The central bank has outlined five policy stances – “loose”, “appropriately loose”, “prudent”, “appropriately tight” and “tight” – with flexibility on either side of each. China adopted an “appropriately loose” monetary policy after the 2008 global financial crisis, before switching to “prudent” in late 2010. In November, China unveiled a 10 trillion yuan ($1.40 trillion) debt package to ease local government financing strains and stabilise flagging economic growth. But the debt measures aim to repair municipal balance sheets as a longer-term objective, rather than directly inject money into the economy.President Xi Jinping, at a symposium on Dec. 6, urged full preparation to achieve 2025 economic targets, and said the country’s current development faces many challenges, state media Xinhua reported on Monday.TRUMP TARIFFS LOOMChina’s economy has shown an over-reliance on manufacturing and exports this year, with household demand disappointing as a severe property market crisis erodes consumer wealth and most government stimulus goes to producers and infrastructure.Government advisers are recommending Beijing keeps its growth target unchanged next year, but also called for more forceful fiscal stimulus to mitigate the impact of expected U.S. tariffs and fend off deflationary pressures.Trump’s tariff threats have rattled China’s industrial complex, which sells goods worth more than $400 billion annually to the United States. Finance Minister Lan Foan has said more stimulus measures were in the pipeline, without giving details.Economists have urged Beijing to be more consumer-focused in its policies and offer stronger financial support for low-income residents, while pushing ahead with promised tax, welfare and other policy changes to address structural imbalances.So far, however, authorities have focused on upgrading the export-reliant manufacturing sector instead, with remarkable success in electric vehicles, solar energy and batteries that has spurred pushback from key trade partners. More

Welker pressed Trump on Powell’s recent comments that he would not leave his position, even if asked. Trump replied, “No, I don’t think so. I don’t see it,” but added, “I think if I told him to, he would. But if I asked him to, he probably wouldn’t. But if I told him to, he would.”When asked again if he had immediate plans to replace Powell, Trump reaffirmed, “No, I don’t.”Powell, a Republican and former private equity executive, was first appointed as Fed chair by Trump in February 2018. The relationship between the two was marked by frequent disputes over interest rate policies during Trump’s first term, with Trump even threatening Powell’s removal on multiple occasions. In 2022, President Joe Biden reappointed Powell to a second term.Powell has firmly dismissed the notion of leaving his role early, explaining that the president cannot legally fire him. “Not permitted under the law,” Powell remarked during a postelection press conference.The relationship between Trump and Powell is expected to draw significant attention as Trump assumes office. Trump has recently advocated for greater presidential influence over the Fed’s interest rate decisions, though he clarified to Bloomberg News in October that he doesn’t believe he should “order it” but feels he has “the right to put in comments” on rate changes.Trump has previously criticized Powell’s position as Fed chair, jokingly describing it as “the greatest job in government” and quipping, “you show up to the office once a month, and you say, ‘Let’s see, flip a coin.’” More

The readout flagged achievements in strengthening economic resilience, advancing technological innovation, deepening reforms, and safeguarding people’s livelihoods. These efforts have contributed to maintaining stability and reinforcing China’s economic and comprehensive national strength.Going forward, the CPC Central Committee stressed the need to prioritize stability while fostering progress, focusing on areas such as boosting domestic demand, enhancing innovation, and accelerating the green transformation of the economy. Proactive fiscal measures, supported by prudent monetary policies, will play a central role in stimulating consumption, improving investment efficiency, and driving industrial modernization. The leadership also underscored the importance of counter-cyclical adjustments and policy coordination to mitigate risks and ensure macroeconomic stability.The meeting called for expanded high-level opening-up, stabilization of foreign trade and investment, and measures to address vulnerabilities in the property and stock markets. In addition, regional strategies and urban-rural integration will be reinforced to stimulate balanced development, while carbon reduction and environmental goals will remain integral to the country’s economic transformation.Alongside economic priorities, the meeting reviewed efforts in building a clean governance framework and combating corruption. Discipline inspection and supervision agencies were urged to maintain high vigilance against corruption, strengthen oversight, and foster an environment of accountability and integrity. Xi Jinping emphasized the importance of aligning these anti-corruption efforts with broader reforms to ensure their effectiveness in promoting sustainable growth and modernization.The meeting concluded with a decision to convene the fourth plenary session of the 20th Central Commission for Discipline Inspection from January 6 to 8, 2025, where further strategies for comprehensive governance will be discussed. More

The US Federal Reserve is widely expected to cut interest rates next week, as the November nonfarm payrolls report showed underlying weakness in the labor market, even as jobs growth rebounded from an October reading that was depressed due to strikes and hurricanes.Financial markets currently see a over 80% chance of a 25 basis points rate cut at the US central bank’s Dec. 17-18 policy meeting.The one data point that could seriously upset this thinking is the November consumer price inflation release, due on Wednesday, amid signs Inflation has started ticking up lately.The Fed’s preferred inflation measure, the core PCE index moved up to 2.8% in October, while President-elect Donald Trump’s plans to raise tariffs on imports have also raised inflationary concerns. It also looks likely that Jerome Powell will continue to drive the US central bank’s policy thinking, after Trump said in an interview aired on Sunday he will not try to replace the Federal Reserve Chair Jerome Powell upon taking office in January.”No, I don’t think so. I don’t see it,” Trump said on NBC News’ “Meet the Press with Kristen Welker” when asked if he would seek to remove Powell, whose term ends in 2026.Trump named Powell to the Fed chair in early 2018 to replace Janet Yellen, but the relationship quickly soured, with Trump frequently attacking the Fed and its chief during his first term in office. US stock futures have started the new week in a relatively muted fashion, as investors await the release of key inflation data. By 03:55 ET (08:55 GMT), the Dow futures contract was down 55 points, or 0.1%, while S&P 500 futures climbed 2 points, or 0.1%, and Nasdaq 100 futures rose by 40 points, or 0.2%.The S&P 500 and Nasdaq Composite closed at fresh records Friday, rising around 1% and over 3% for the week, respectively. The Dow Jones Industrial Average underperformed, closing the week down 0.6%.The economic data slate is relatively empty Monday, and all eyes will be on the release of the latest consumer inflation data on Wednesday [see above], as investors seek confirmation that the Fed will cut interest rates next week.On the corporate side, the quarterly earnings season is gradually drawing to a close, but investors will still be able to study Oracle’s (NYSE:ORCL) results after the close.It’s not only the Fed that is expected to cut interest rates in the near future.The European Central Bank meets on Thursday, its final policy meeting of the year, with economists overwhelmingly expecting another 25-bps rate cut – which would be the fourth such cut this year.Eurozone inflation ticked higher in November, but still appears to be heading towards the ECB’s 2% target, with some signs that wage pressures are easing.The ECB is also to publish updated growth and inflation forecasts, which are likely to be revised lower for next year.Since the ECB’s last meeting in October tariff risks for Europe have risen after Trump’s election win; France and Germany are grappling with political turmoil; business activity has slowed sharply, and the euro has weakened.Elsewhere, the Bank of Canada could cut this week by the larger 50 bps, while the Swiss National Bank could also ease by 50 bps given how much it has been spending to restrain the Swiss franc. Chinese consumer inflation shrank more than expected in November, falling to a five-month low as a swathe of recent stimulus measures did little to offset a stubborn deflationary trend. November CPI slumped 0.6% month-on-month in November, government data showed on Monday. The reading was softer than expectations for a drop of 0.4% and weakened from the 0.3% contraction seen in the prior month.CPI grew 0.2% year-on-year, less than expectations of 0.5% and weakening from the 0.3% growth seen in the prior month. The reading indicated that while some facets of China’s economy had picked up amid aggressive stimulus measures from Beijing, consumer spending remained fragile. This lent more credence to growing investor calls for more targeted, fiscal measures aimed at shoring up private consumption.China’s leaders on Monday pledged “more proactive” fiscal measures and “moderately” looser monetary policy next year to boost domestic consumption, according to an official readout of a key policy meeting that outlined upcoming economic priorities.Fitch Ratings revised down its 2025 Chinese GDP growth forecast to 4.3% from 4.5%, earlier Monday. The credit rating agency also adjusted its 2026 growth projections to 4.0%, down from 4.3% in September.Crude prices rose Monday, as the overthrow of the Bashar al-Assad regime in Syria introduced greater uncertainty to the oil-rich Middle East, although concerns over weakening demand persisted. By 03:55 ET, the US crude futures (WTI) climbed 1.3% to $68.08 a barrel, while the Brent contract rose 1.1% to $71.90 a barrel.Syrian rebels announced on state television on Sunday they had ousted President al-Assad, raising fears of a new wave of instability in a region already gripped by war.However, gains have been tempered by weak Chinese inflation figures [see above] raising more concerns about economic growth in the world’s largest crude importer.Additionally, Saudi Aramco (TADAWUL:2222), the world’s biggest crude oil exporter, has reduced its January 2025 prices for Asian buyers to the lowest level since early 2021, it said on Sunday, as it struggles for demand. More

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New regulations on human rights are forcing global companies to address concerns about modern slavery and tackle problems in their supply chains.In Europe, a landmark human rights rule was adopted by the EU in July 2024. The Corporate Sustainability Due Diligence Directive (CSDDD) requires European companies — and some businesses abroad but with significant turnover in the EU — to identify and prevent possible human rights abuses. This applies to product manufacturing supply, raw materials, and other aspects of companies’ supply chains. The CSDDD builds on human rights due diligence legislation that is already in force in France, Germany, and the Netherlands. And, although the CSDDD does not come into effect more widely until 2027, big global companies in the UK, US and elsewhere have added language to their regulatory filings warning investors about the looming regulation. The law has been hailed by activists as one of the most significant advances in years. It “should send a message to all companies everywhere that they must respect human rights”, Amnesty International said this year. The rule also addresses the concerns of some large Dutch pension funds that have raised the alarm about slavery in corporate supply chains.As a result, the CSDDD will become an important issue for investors, because companies that fail to take modern slavery seriously will face increasing legal risks, according to the Minderoo Foundation, an Australian philanthropic organisation. “Investors play a crucial role in driving ethical business practices and ensuring companies respect human rights in their operations,” Minderoo said in an October report.Europe’s new rule joins the US’s 2021 Uyghur Forced Labor Prevention Act. While the CSDDD applies globally, the US law targets allegations of forced labour in the Xinjiang region of China, home to the Muslim Uyghur people. Imported Xinjiang goods are prohibited, although there can be exceptions. Up to June 2024, the Uyghur US Customs and Border Protection had stopped more than 4,000 shipments of goods valued at more than $3.6bn for enforcement review, according to the agency.These US regulations are already posing problems for businesses and investors. In May, the US Senate published a report alleging that BMW and Jaguar Land Rover cars and components imported to the US included a part made by a company linked to Uyghur forced labour. The senators had investigated eight carmakers to find out if their supply chains included one component made using forced labour from China’s north-western Xinjiang region. BMW was found to have imported about 8,000 Mini Cooper cars containing components made by a Chinese company that had been put on the US forced-labour ban list. The report also noted that JLR continued to import components even after being informed. Both companies said they were taking action to fix their compliance issues.While these EU and US laws are new, human rights due diligence regulations have a long history. The 2010 Dodd-Frank law to reform Wall Street forced thousands of companies to identify any “conflict minerals” from the Democratic Republic of Congo and nearby countries. Earlier efforts to shed light on human rights concerns in the minerals industry had included the Kimberley Process — a global effort started in 2003 to increase transparency in the diamond supply chain after diamonds were used to fund a series of brutal civil wars in Africa in the 1990s.With the CSDDD still a few years from coming into force, “many [companies] are paying no attention to the new rules”, says David Birchall, a senior lecturer at Macquarie University in Australia. But others are already on their way towards compliance thanks to local laws, he adds. Volkswagen, for example, has staffers to ensure it complies with the German human rights due diligence law. “The key thing for multinationals is to know which laws they are covered by, as well as to begin preparing for the broader and often more stringent CSDDD,” Birchall says. “For US firms, this depends on where they do business, their sector, [and] their size,” he adds. “It is complicated.”It is so far unclear whether Donald Trump’s incoming administration might try to exempt US companies from CSDDD or other European human rights requirements. The president-elect did, however, support the Uyghurs in his first term. His administration banned exports to some Chinese companies involved in surveillance of the Muslim minority and imposed visa restrictions on officials implicated in detentions.Republicans, who will have control of Congress and the Senate, have overwhelmingly supported tough legislation to combat the mass detention of Uyghurs and demonstrated a willingness to pressure Trump to take action. “Certainly, the Uyghur forced labour prevention act had bipartisan support before,” says Rachel Chambers, a professor at the University of Connecticut. “The Chinese, of course, view laws like this as geopolitically motivated.”A woman in a Uyghur neighbourhood in Xinjiang. Western car companies were criticised by a US Senate report for using parts made by a Chinese group on a forced-labour ban list More

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