Economy

BENGALURU (Reuters) – India’s economy will grow at a solid pace this fiscal year and next, according to a Reuters poll of economists, but they cautioned that key drivers such as job creation and household spending will only increase mildly over the next 12 months.While Asia’s third-largest economy clocked 8.2% growth last fiscal year – the most among major economies – fueled by years of government spending, it failed to create enough well paying jobs for millions entering the workforce every year.With private investment failing to pick up significantly in the last decade, millions of job seekers are pinning their hopes on getting a government job.Economists cite weak household spending and a lack of reforms from the government as factors dampening private sector investment confidence and job creation, suggesting the benefits are increasingly funneled to only a select few.India’s economic growth was expected to slow to 6.9% this fiscal year (FY), slightly lower than the International Monetary Fund (IMF) forecast of 7%, and decline to 6.7% next fiscal year and to 6.6% in FY 2026/27, according to a Reuters poll of 48 economists taken over Oct. 21-28.”For economic growth to take off, consumption … needs to see an upturn,” Aditya Vyas, chief economist at STCI Primary Dealer Limited, said in an email.”Deeper issues such as job creation, a strong increase in levels of private investment etc, need to be addressed … else, it will not go much above the average trend.”After growth picked up slightly to 6.8% last quarter from 6.7% in the April-June period, it was expected to rise to 7% this quarter and next, in line with the long-term growth trend.But most economists reckon the economy needs to consistently grow over 8% for a long period of time to create adequate jobs.When asked what will happen to job creation in India over the next 12 months, 15 of 28 respondents said it will increase mildly, while nine said it will remain the same.”With manufacturing struggling especially the MSMEs (Micro, Small, and Medium Enterprises), we do not expect any major improvement in the employment scenario in India,” Kunal Kundu, India economist at Societe Generale (OTC:SCGLY), said by email.”A modest employment scenario, inadequate quality of job creation and still negative real wages suggest only modest growth in employment going forward. Consumption will likely continue to remain weak. This is a period of consumption normalisation as the phase of pent-up demand is over.”While consumer spending, which makes up 60% of the economy, has picked up recently, rising inflation is forcing millions of households to cut back on food and dip into their savings to stay afloat, suggesting consumption will slow over coming months.When asked what will happen to private consumption in India over the next 12 months, 19 of 28 respondents said it will increase mildly, while five said it will remain the same. “There will be some cyclical recovery on private consumption. However, a large part of this increase is likely to come from a recovery on the rural demand side, which so far has been muted and was a big drag on consumer demand,” said Sakshi Gupta, principal economist at HDFC Bank.”There is a very uncertain global environment that we are now moving into … that does bring an element of uncertainty as well as risk for domestic economic activity and job creation.”(Other stories from the October Reuters global economic poll) More

1. Futures riseUS stock futures pointed higher on Monday, as investors looked ahead to quarterly earnings from megacap technology names later this week, geared up for a key employment report, and braced for upheaval around the upcoming knife-edge US election.By 04:30 ET (08:30 GMT), the Dow futures contract had added 178 points or 0.4%, S&P 500 futures had gained 30 points or 0.5%, and Nasdaq 100 futures had risen by 135 points or 0.7%.The benchmark S&P 500 has jumped by around 22% this year, sparking concerns over elevated valuations in US equity markets that could be vulnerable to short-term ructions. According to LSEG data cited by Reuters, the S&P 500’s price-to-earnings ratio — a gauge of earnings estimates for the next 12 months — stands at 21.8, close to the highest level in more than three years.Whether valuations will remain at these heights is a major question facing investors, particularly as they prepare for the confluence of several potentially market-moving events in the coming days.2. Tech earnings aheadThis week will see the release of quarterly returns from a string of tech industry titans, which could heavily influence the direction of markets.Although shares in industrial and financial firms have recently helped broaden out the gains in stocks, the biggest tech players have been the most powerful drivers of a push higher in markets to record levels. The so-called Magnificent Seven tech groups are tipped to account for almost all of the earnings growth from the S&P 500 in the third quarter, according to FactSet data cited by The Wall Street Journal.Meanwhile, commentary from these companies around artificial intelligence could sway how analysts are assessing a spike in investment in the nascent technology, with some strategists worrying that the heavy spending may not lead to immediate returns.Of the Magnificent Seven firms, Google-parent Alphabet (NASDAQ:GOOGL), software giant Microsoft (NASDAQ:MSFT), Instagram-owner Meta Platforms (NASDAQ:META), iPhone-maker Apple (NASDAQ:AAPL) and e-commerce behemoth Amazon (NASDAQ:AMZN) are all due to report this week. Electric carmaker Tesla (NASDAQ:TSLA) posted better-than-expected earnings last week, while AI-darling Nvidia (NASDAQ:NVDA) is set to unveil its latest figures on Nov. 20.3. McDonald’s says beef patties not the source of E. coli outbreakMcDonald’s said over the weekend that beef patties were not the source of an E. coli outbreak stemming from its Quarter Pounders burgers that killed one person and sickened almost 75 others across multiple US states.In a statement, the fast-food chain’s North America Chief Supply Chain Officer Cesar Piña noted the “issue appears to be contained to a particular ingredient and geography,” adding “we remain very confident that any contaminated product related to this outbreak has been removed from our supply chain and is out of all McDonald’s (NYSE:MCD) restaurants.”The Colorado Department of Agriculture also said subsamples from McDonald’s fresh and frozen beef patties had all tested negative for E. coli. Testing has been completed and no further samples are expected to received, the department said.McDonald’s is now set to resume distribution of fresh supplies for the Quarter Pounder, with the offering anticipated to be available once again in all restaurants in the coming week, the company said.Shares in the group slipped last week after the Centers for Disease Control and Prevention flagged the health ramifications of the E. coli infections linked to the Quarter Pounder.4. Yen weakens as Japanese election dampens rate hike betsThe Japanese yen was one of the worst performing currencies in Asia on Monday, with its pair with the US dollar rising to its highest level since late-July.The yen was battered by local media reports showing a coalition led by Japan’s ruling Liberal Democratic party did not win a majority in the parliamentary elections held on Sunday. The LDP will now have to seek coalitions with smaller regional parties to retain power — a scenario that presents a more fractured political outlook for Japan.Traders were betting that the increased political uncertainty will keep the Bank of Japan from hiking interest rates further, weighing on the yen.5. Oil dipsOil prices fell sharply Monday after Israel’s retaliatory strike on Iran over the weekend avoided Tehran’s oil and nuclear facilities, easing geopolitical tensions in the Middle East.By 04:31 ET, the Brent contract dropped 4.5% to $72.23 per barrel, while U.S. crude futures (WTI) traded 4.8% lower at $68.34 per barrel.Traders had feared that any attacks on Iran’s oil and nuclear infrastructure would mark a dire escalation in the conflict, potentially disrupting oil supplies from the crude-rich region. Iran downplayed the impact of the attack, but still threatened retaliation.The strike caused some investors to price out a risk premium from crude prices, putting the focus squarely back on demand, which is expected to weaken in the coming months.(Reuters contributed reporting.) More

TOKYO (Reuters) – The loss of Japan’s ruling bloc’s parliamentary majority has heightened prospects that a new government will need to ramp up spending and of potential complications for further central bank interest rates hikes.Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party (LDP) and its longtime partner Komeito failed to retain a majority in lower house elections on the weekend, casting doubts over how long the 67-year-old premier can keep his job.”Regardless of who will be in power, the new government will be forced to take expansionary fiscal and monetary policies to avoid inflicting burdens on voters,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies.To stay firmly in power, the LDP, which has governed Japan for almost all its post-war history, will likely need to court smaller opposition parties, such as the Democratic Party for the People (DPP) and Japan Innovation Party (JIP), as coalition partners or at least for policy-based alliances.Both smaller parties have ruled out forming a coalition with the LDP but said they are open to some policy cooperation.In their election campaigns, both the DPP and JIP pledged to lower consumption tax from 10%. DPP’s proposals also included cutting power utility bills and tax for lower-income earners.While Ishiba has already proposed a supplementary budget that exceeds last year’s 13 trillion yen ($85 billion), he could face pressure for a package that exceeds 20 trillion yen, Sakai said.’POLITICAL NOISE’The heightened political turmoil could make it harder for the Bank of Japan in its bid to wean the economy off decades of monetary stimulus, analysts say.The central bank ended negative interest rates in March and raised short-term rates to 0.25% in July on the view Japan was making progress towards durably achieving its 2% inflation target.BOJ Governor Kazuo Ueda has vowed to continue lifting rates and economists don’t see any major immediate change to the broader policy direction.However, a markedly new parliamentary makeup could deprive the BOJ of the political stability it needs to steer a smooth lift-off from near-zero interest rates, analysts say.”The bar is higher for the BOJ to raise interest rates again by the end of this year amid this political noise,” said Masahiko Loo, senior fixed income strategist at State Street (NYSE:STT) Global Advisors.DPP leader Yuichiro Tamaki has criticised the BOJ for raising rates prematurely.JIP proposes legislative changes that would mandate the central bank with objectives beyond just price stability, such as sustained nominal economic growth rate and maximization of employment.Conversely, the biggest opposition, Constitutional Democratic Party of Japan, has called for BOJ’s inflation target to be lowered to one “exceeding zero” from 2% currently, which would reduce the threshold for more rate hikes.At the same time, a weak yen could become a headache for Japanese policymakers by boosting the cost of imported raw materials, pushing up inflation and hurting consumption.If the yen weakens toward 160 per dollar, the BOJ “would be pressured to raise rates again to stem the weakness of the Japanese currency,” said Takeshi Minami, chief economist at Norinchukin Research Institute.The need for another rate hike could also grow if a yen downturn is accelerated by a Donald Trump victory in the U.S. presidential election on Nov. 5, he added.Trump’s tariff and stricter immigration policies are seen as inflationary, which would diminish the need for U.S. rate cuts, in turn pushing the dollar up against the yen.”The visibility has gone down significantly for the BOJ,” Minami said.($1 = 153.5700 yen) More

Thousands of financiers, founders and investors are set to descend on the Saudi capital of Riyadh for the eighth edition of the kingdom’s Future Investment Initiative.
As Saudi Arabia moves full steam ahead with its focus on domestic investment, it’s introduced more stringent conditions for foreigners coming to the kingdom to take capital elsewhere.
The kingdom is taking clear steps to scale back spending, as oil prices fall well below its fiscal breakeven figure and it continues with crude production cuts agreed upon by OPEC+.

A delegate arrives at the King Abdulaziz Conference Centre in Saudi Arabia’s capital Riyadh to attend the Future Investment Initiative (FII) forum.
Fayez Nureldine | Afp | Getty Images

Thousands of financiers, founders and investors are set to descend on the Saudi capital of Riyadh for the eighth edition of the kingdom’s Future Investment Initiative, the flagship economic conference at the heart of Vision 2030 — the multi-trillion dollar plan to modernize and diversify Saudi Arabia’s economy.
Described in past years by some attendees as a bonanza for Saudi cash, fund managers who spoke to CNBC this year draw a distinctly different picture as the kingdom simultaneously upholds more requirements for prospective fundraisers and investors, while also facing a revenue crunch amid lower oil prices and production.

“Without question, it’s gotten way more competitive to attract money from the kingdom,” Omar Yacoub, a partner at U.S.-based investment firm ABS Global, which manages nearly $8 billion in assets, told CNBC. “Everyone and anyone has been going to ‘kiss the rings,’ so to speak, in Riyadh.”
“Competition for capital has heated up, combined with other factors such as Saudis always having a ‘home bias’ towards investing, plus the broader dynamic of a tighter budget throughout the kingdom due to lower oil prices,” Yacoub said. “This has meant that investing internationally has become much more selective.”
As Saudi Arabia moves full steam ahead with its focus on domestic investment, it’s introduced more stringent conditions for foreigners coming to the kingdom to take capital elsewhere. The kingdom’s $925 billion sovereign wealth fund, the Public Investment Fund, saw its assets jump 29% to 2.87 trillion Saudi riyals ($765.2 billion) in 2023 — and local investment was a major driver.

Saudi Arabia’s recently-updated Investment Law seeks to attract more foreign investment as well — and it’s set itself a lofty target of $100 billion in annual foreign direct investment by 2030. Currently, that figure is still a long way from that goal as foreign investment has averaged around $12 billion per year since Vision 2030 was announced in 2017.
“It’s no longer about ‘take our money and leave’ — it’s about adding value,” said Fadi Arbid, founding partner and chief investment officer of Dubai-based investment manager Amwal Capital Partners. “Value meaning hiring, developing the asset management ecosystem, creating new products, bringing in talent, and investing in Saudi capital markets also. So it’s multi-faceted investment, not only a pure financial transaction. It’s beyond that.”

‘More disciplined, more rational’

At the same time, the kingdom is taking clear steps to scale back spending, as oil prices fall well below its fiscal breakeven figure and it continues with crude production cuts agreed upon by OPEC+.
That fiscal breakeven oil price — what the kingdom needs a barrel of crude to cost in order to balance its government budget — has risen sharply as Saudi Arabia pours trillions of dollars into giga-project NEOM.
The IMF’s latest forecast in April, put that breakeven figure at $96.20 for 2024; a roughly 19% increase on the year before, and about 28% higher than the current price of a barrel of Brent crude, which was trading at around $72.75 as of Monday morning.
“I don’t think Saudi has the same means that they had literally two years ago,” one regional investor, who requested anonymity in order to speak freely, said. Nonetheless, they added, the kingdom “remains one of the very few countries that still have money to give. It might be somewhat on pause today, but … now it’s more disciplined, more rational.”

Some fund managers with years of experience in the Gulf suggested it may be too little too late for many of the investors making their first forays to the kingdom.
“You should have started that process two, three, four years ago,” Arbid said. However, he added, “For those that are coming in queue now, that doesn’t mean that they shouldn’t position — because it’s a cycle, right? But now, I think they’re more deliberate about it — they say you need to commit to the country.”
One example is the kingdom’s headquarters law, which went into effect on Jan. 1, 2024, and requires foreign companies operating in the Gulf to base their Middle Eastern HQ offices in Riyadh if they want contracts with the Saudi government.

In the shadow of regional war

The glitzy conference, held in the opulent Ritz-Carlton Riyadh, also takes place against the backdrop of regional war and just over a year after Israel launched its war on Hamas in Gaza.
In that time, attacks between Israel and Iranian proxies including Hezbollah and Yemen’s Houthis have soared, with the Jewish state invading Lebanon in September. The region has been on tenterhooks awaiting Israel’s avowed revenge against Iran for its missile barrage over Tel Aviv and other parts of the country on Oct. 1.
Early on Saturday, Israel struck military sites in Iran targeting missile manufacturing factories. Israel’s military later said it had completed “targeted” attacks in Iran, adding that it was ready to “conduct defensive and offensive action.”
Oil prices and the Saudi economy appear to so far have stayed largely unscathed, dropping 4% early Monday after Israel’s weekend strike on Iran. A key reason for that may be the rapprochement deal the kingdom signed with Iran, brokered by China, in March 2023.

“Saudi has done a phenomenal job recently of shielding itself from geopolitical events,” Arbid said.
That is also aided by the fact that local investors make up the majority of market participants, and local investor confidence is strong. The Tadawul All Shares Index, Saudi Arabia’s leading stock market index, is up 16.48% in the last year.
Still, some analysts in the region warn that the expanding crises in the Middle East have the potential to cause further instability.
“The war has gradually escalated to the point where there is a de-facto regional war,” Aziz Alghashian, director of research at the Observer Research Foundation Middle East, told CNBC. “The ongoing war is not only a geopolitical crisis, but the continuation of it has potential to create more radicalization in and around the region.”
“Attracting FDI and tourism, while maintaining oil prices at a desired level, are key for keeping Saudi Arabia’s mega projects and diversification plans on track,” Alghashian said.
“This of course is complicated by regional war, and so economy and security go very much hand in hand.” More

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TOKYO (Reuters) -Japanese stocks rose strongly on Monday as the yen sank to a three-month low after Prime Minister Shigeru Ishiba’s coalition lost its parliamentary majority in a drubbing in Sunday’s election, raising uncertainty over the path for policy and the economy.Ishiba’s Liberal Democratic Party (LDP), which has ruled Japan for almost all of its post-war history, and junior coalition partner Komeito took 215 seats in the lower house of parliament – well short of the 233 needed for a majority – public broadcaster NHK reported. The LDP previously held 247 seats and Komeito held 32.The outcome may force parties into fractious power-sharing deals to rule, potentially ushering in political instability.The Nikkei share average rose 1.5% to 38,492.25 as of 0039 GMT, and was earlier up nearly 2%. It had opened 0.4% lower.The yen sank as low as 153.34 per dollar for the first time since July 31, and last traded about 0.6% weaker at 153.22 per dollar.”The result of the election itself is a negative for the stock market, without a doubt, because of the rise in political uncertainty,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui (NYSE:SMFG) DS Asset Management.”However, the rally is partly on the fact that this big risk event is now behind us, so there’s a sense of relief. That and the weaker yen.”Benchmark 10-year Japanese government bond futures fell 0.07 yen to 143.99 yen, reversing an earlier rise.The five-year JGB yield rose 0.5 basis point (bp) to 0.58%, the 20-year yield added 2 bps to 1.8%, the highest since Aug. 8, and the 30-year yield gained 3 bps to 1.38%.The election result draws market attention to the policy stance of opposition parties that could become potential partners, many of which favour low interest rates. Markets could also price in more aggressive government spending. The upshot of the post-election uncertainty is “the Bank of Japan to hike later and more fiscal expansion,” leading the yield curve to steepen, said Naka Matsuzawa, chief Japan macro strategist at Nomura.”Reflationary, Abenomics-style policy will stay.”Coalition losses could reduce the chance the next government will implement “more challenging agenda items such as hiking the corporate tax rate”, analysts at Morgan Stanley said in a note.Analysts at BNY said the dollar could potentially rise to 155 yen again, as the BOJ downplays the immediate need for a rate increase and the Japanese election risks stoke additional political instability.Japan’s general election comes nine days before votes are counted in the closely contested U.S. presidential race, with investors weighing the possibility of a bullish dollar and higher yields in the event of another Donald Trump presidency and Republican sweep of the Senate and House of Representatives.(Reporting and writing by Brigid Riley and Kevin Buckland in Tokyo; Additional reporting by Vidya Ranganathan in Singapore; Editing by William Mallard and Lisa Shumaker) More

TOKYO (Reuters) -The make-up of Japan’s future government was in flux on Monday after voters punished Prime Minister Shigeru Ishiba’s ruling coalition, leaving no party with a clear mandate to lead the world’s fourth-largest economy.The uncertainty sent the yen currency to a three-month low as investors and analysts prepared for days, or possibly weeks, of political wrangling to form a government and potentially a change of leader.That comes as the country faces economic headwinds, a tense security situation fuelled by an assertive China and nuclear-armed North Korea, and less than a week before U.S. voters head to the polls in another unpredictable election. Ishiba’s Liberal Democratic Party (LDP) and its junior coalition partner Komeito took 215 seats in the lower house of parliament, down from 279 seats, as voters punished the incumbents over a funding scandal and a cost-of-living crunch. Two cabinet ministers and Komeito’s leader, Keiichi Ishii, lost their seats.The biggest winner of the night, the main opposition Constitutional Democratic Party of Japan (CDPJ), had 148 seats, up from 98 previously, but also still well short of the 233 majority.As mandated by the constitution, the parties now have 30 days to figure out a grouping that can govern, and there remains uncertainty over how long Ishiba – who became premier less than a month ago – can survive after the drubbing. Smaller parties also made gains and their role in negotiations could prove key. “Whether or not Prime Minister Shigeru Ishiba resigns as LDP leader today, it seems unlikely that he will survive to lead a new government as prime minister … though it is possible he could stay on as caretaker,” said Tobias Harris, founder of Japan Foresight, a political risk advisory firm.Ishiba is scheduled to hold a press conference at 2 p.m. (0500 GMT). Ahead of the election, the LDP had been planning to convene parliament on Nov. 7 to confirm the prime minister, according to Japanese media including Jiji and the Yomiuri newspaper. CDPJ leader Yoshihiko Noda has said he would work with other parties to try and oust the incumbents, though analysts see this as a more remote possibility. The LDP has ruled Japan for almost all of its post-war history and the result marked its worst election since it briefly lost power in 2009 to a precursor of the CDPJ.In a statement, the head of Japan’s most powerful business lobby said the country needed political stability to steer an economy that faced urgent tasks such as boosting the supply of nuclear energy and maintaining the momentum for wage hikes.”We strongly hope for policy-oriented politics through the establishment of a stable government centred on the LDP-Komeito (coalition),” Keidanren Chairman Masakazu Tokura said. More

The bank took the decision to maintain a “reasonable abundance of liquidity in the banking system and further enrich the central bank’s monetary policy toolbox,” it said in a statement. State-owned Shanghai Securities News said in an article published shortly after the People’s Bank of China’s (PBOC)notice that the facility was expected to cover three- and six-month tenors and that it would aid liquidity adjustments over the next year, citing people close to the central bank.The PBOC’s announcement said its new tool would have a tenor of less than one year. “The central bank’s choice to launch this new tool at this time is also expected to be a better hedge against the concentrated expiry of medium-term lending facility before the end of the year,” the article said. More