Economy

(Reuters) -Chipmaker Qualcomm (NASDAQ:QCOM) forecast fourth-quarter revenue above Wall Street estimates on Wednesday, betting on strong demand for high-end Android devices and the need for more chips in smartphones that are getting AI upgrades.Shares of San Diego, California-based Qualcomm rose more than 5% in extended trading after it reported results, but pared gains to trade down 1.4% after the firm flagged a revenue hit from the U.S. revoking one of its export licenses for sanctioned Chinese telecom firm Huawei. Tighter export curbs on sharing high-end chip technology with China and mounting Sino-U.S. trade tensions are hindering chipmakers from serving one of the largest markets for semiconductors.      “This change will impact our revenues in both the current quarter and the first quarter of fiscal 2025,” CFO Akash Palkhiwala said on a post-earnings call, without detailing the impact. Qualcomm will continue to negotiate with Huawei, said Alex Rogers (NYSE:ROG), president of the company’s licensing segment.The company said early in May that it did not expect any chip revenue from Huawei beyond 2024, but was pursuing licensing negotiations with the Chinese firm.The warning on trade curbs overshadowed Qualcomm’s optimistic forecast. The addition of AI capabilities to smartphones has driven a resurgence in end-market demand, lifting orders for Qualcomm, after the industry slumped to its lowest level in years.The chipmaker could benefit from higher sales of Apple (NASDAQ:AAPL) iPhones in China, for instance, where the world’s most valuable company slashed iPhone prices to compete better against a resurgent Huawei.”While the smartphone market end-demand has remained somewhat muted, Qualcomm is benefiting from the stronger share position in the premium-tier segment where end-market demand has been more resilient as (smartphone makers) have been slashing prices to spur demand,” said Kinngai Chan, analyst at Summit Insights.Analysts expect Apple to return to revenue growth when the iPhone maker reports results for its fiscal third quarter on Thursday. Qualcomm forecast a fourth-quarter revenue range with a midpoint of $9.9 billion, compared with analysts’ average estimate of $9.71 billion, according to LSEG data. The addition of AI features have also led to smartphone providers using more of Qualcomm’s chips in their devices to help support advanced processing requirements. For its core business that sells chips to customers, the company forecast a fiscal fourth-quarter sales just above analyst estimates of $8.33 billion, according to Visible Alpha.”We believe Apple and ARM-based PCs are driving Qualcomm’s handset outlook. We think the premium tier smartphone market, which Qualcomm has more market share in, is faring better than the mainstream segment,” Chan said.Qualcomm may also benefit significantly from the rebounding personal computer market where its Arm-based processors used in Microsoft (NASDAQ:MSFT)’s latest AI PCs threaten Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD)’s longstanding stronghold over the industry.   More

SINGAPORE (Reuters) -Singapore’s United Overseas Bank (OTC:UOVEY) (UOB) maintained earnings guidance for 2024 after posting on Thursday a 1% year-on-year rise in second quarter net profit that slightly missed expectations.”Global growth continues to be weighed down by geopolitical tensions and higher interest rates. However, we expect ASEAN to stay relatively resilient,” said UOB Deputy Chairman and CEO Wee Ee Cheong in a statement.UOB maintained its 2024 projections of low single-digit loan growth, double-digit fee growth and positive growth in total income, according to Wee’s presentation slides accompanying the earnings results. The bank, which is Southeast Asia’s third-largest by assets, also maintained expectations of core cost-to-income ratio at 41% to 42% and credit costs at lower end of 25 to 30 basis points, the slides showed.UOB said its April-June net profit rose to S$1.43 billion ($1.07 billion) from S$1.42 billion a year earlier on the back of higher net fee income, a rebound in loan-related fees and wealth management fees, and double-digit growth in credit card fees.This was however lower than the mean estimate of S$1.44 billion from four analysts polled by LSEG.Net interest margin, a key gauge of profitability, declined to 2.04% in the first half of this year from 2.13% in the same period a year earlier.UOB’s results kick start the current earnings season for Singaporean banks, which have benefited from strong inflows of wealth into Asia due to its political stability, low taxes, and policies favourable towards family offices and trusts. Larger peers DBS and Oversea-Chinese Banking Corp (OCBC) are due to announce their quarterly results on August 7 and Friday respectively. UOB’s second quarter result showed a 40% year-on-year jump in wealth management income and 10% year-on-year increase in total asset under management to S$182 billion, the company’s presentation slides showed.The bank announced an interim dividend of 88 Singapore cents per ordinary share.($1 = 1.3365 Singapore dollars) More

SAO PAULO (Reuters) -Brazil’s central bank on Wednesday kept interest rates unchanged at a second consecutive policy meeting, as expected, flagging a need for “more vigilance” in monetary policy due to worsening inflation expectations and recent market swings.The bank’s rate-setting committee, known as Copom, held the Selic benchmark interest rate at 10.50% in a unanimous decision, in line with forecasts from all 40 economists polled by Reuters.Inflation has outpaced expectations and Brazil’s currency has depreciated nearly 4% since the bank’s last policy meeting in mid-June, flirting with more than two-year lows amid investor concerns about fiscal discipline.”The Committee judges that the domestic and international environments require even greater caution on the conduct of monetary policy,” wrote policymakers in their policy statement.”In particular, the inflationary impacts of the movements of market variables and inflation expectations, if persistent, corroborate the need for more vigilance,” they added.Citi analysts said they still expect the Selic rate to be held at 10.50% in coming meetings, despite the rising risks on the inflation outlook.”The unquestionable deterioration in the inflation outlook pushed Copom to escalate the hawkish tone, although not yet indicating an imminent interest rate hike,” Citi analysts wrote in a report. Inflation projections for this year climbed to 4.10% in the latest central bank survey, more than a full percentage point above the 3.0% center of the official policy target.Sticky services inflation also pushed up consumer prices more than forecast in the month to mid-July, driven up higher fuel and airfare costs.Rafaela Vitoria, chief-economist at lender Inter, said the committee had a “cautions tone, stressing the need to keep monetary policy in a contractionary territory until the disinflation process is consolidated”.The central bank kept rates unchanged even as Brazil’s President Luiz Inacio Lula da Silva has repeatedly pushed for a lower Selic.At an official event in Mato Grosso state on Wednesday, Lula said minutes before the central bank decision that inflation is under control and that interest rates need to be reduced.The central bank on Wednesday raised its base scenario inflation projections to 4.2% this year and 3.6% for 2025, up from 4% and 3.4% previously.The monetary authority on Wednesday published its first price increase projections for the first quarter of 2026, seeing an inflation rate of 3.4% under its base scenario. More

LONDON (Reuters) – The Bank of England looks in a position to cut interest rates on Thursday after holding them at a 16-year high of 5.25% for the past year, though markets and economists are far from certain the British central bank will take the plunge.Economists polled by Reuters last week overwhelmingly expected a quarter-point cut but think the vote will be close on the BoE’s Monetary Policy Committee, with only a 5-4 majority in favour. Late on Wednesday, financial markets were pricing in a 66% chance of a quarter-point cut, and then expected one more quarter-point cut before the end of the year.”It’s certainly going to be a finely balanced decision. You can see that from the market pricing,” said Jack Meaning, chief UK economist at Barclays.In June, the MPC voted 7-2 to keep rates on hold, but minutes of the meeting recorded that several of those who voted to hold had been close to voting for a cut. How those policymakers’ views have shifted since then is hard to tell. Only one potential swing voter – chief economist Huw Pill – spoke during the two-and-a-half week window between the end of Britain’s election campaign on July 4 and the start of the BoE’s pre-decision quiet period last week.There has also been a change of personnel – with former OECD and finance ministry chief economist Clare Lombardelli succeeding Ben Broadbent as deputy governor, giving the MPC a female majority for the first time.British consumer price inflation returned to the BoE’s 2% target in May and stayed there in June, down from a 41-year high of 11.1% struck in October 2022.This leaves British inflation lower than in the euro zone – where the European Central Bank cut rates in June – and the United States, where on Wednesday the Federal Reserve kept interest rates steady but opened the door to a September cut.However, the BoE expects headline inflation to edge up over the coming months and is more focused on what it sees as the medium-term drivers of inflation: services prices, wages and more general tightness in the labour market.Services price inflation is the biggest sticking point. At 5.7% in June, it has fallen much less than the BoE forecast three months ago.The question for policymakers is whether that represents greater medium-term pressures, or is due to one-off effects such as a surge in hotel prices during concert tours by artists such as U.S. singer Taylor Swift.NO TIME TO DELAY?Meaning, a former BoE economist, said policymakers would be wrong to delay a rate cut until September.”There is always a reason to wait a little bit longer … (but) if you wait until it’s absolutely conclusive, then you’ve probably waited too long,” he said.By September, official data is likely to show headline inflation back above 2% – superficially making a rate-cut look ill-timed – and, unlike in August, there is no scheduled press conference for Governor Andrew Bailey to explain the decision.Moreover, updated BoE forecasts on Thursday are likely to still show inflation falling back below its 2% target in the medium term – making a rate cut necessary sooner rather than later, given the time it takes for lower rates to affect prices.The September meeting is also when the MPC must hold an annual vote on the pace at which it reverses past quantitative easing – a decision that it tries to keep distinct from its regular votes on interest rates.However, it is possible the MPC will opt for caution.Bailey in June said that policymakers “need to be sure that inflation will stay low” before cutting rates, and Pill last month said wages and services prices continued to show “uncomfortable strength”.Growth so far this year has also been stronger than the BoE or most economists expected “While it will be a very close call, the economy’s recent strength and the stickiness of services inflation leads us to think that the Bank of England will wait,” said Ruth Gregory, deputy chief UK economist at Capital Economics. More

(Reuters) – U.S. Federal Reserve Chair Jerome Powell said on Wednesday political considerations play no part in either near-term monetary policy deliberations or the central bank’s longer-run forecasting work.”We don’t change anything in our approach to address other factors like the political calendar,” Powell said at a press conference that followed the most recent meeting of the central bank’s rate-setting Federal Open Market Committee. “I’ll say this too: We never use our tools to support or oppose a political party, a politician or any political outcome.”Powell addressed the Fed’s intent to stay out of the political fray as the central considers a possible rate cut in September, less than two months before the November presidential election. While the FOMC left rates steady and maintained its interest rate target range at between 5.25% and 5.5%, where its been for a year now, easing inflation data has almost certainly opened the door to a rate cut in the next few months. In his press conference Powell wouldn’t commit to an action but strongly suggested that if the data continues on its current path, a rate cut at the Fed’s next meeting on Sept. 17-18 was possible. If the Fed cuts rates in September, it would likely set the central bank up for criticism from Republican presidential contender Donald Trump. When he was last in office, the former president was a sharp critic of the Fed and Powell. In a recent Bloomberg Businessweek interview, he said a pre-election rate cut is “something that they know they shouldn’t be doing,” presumably because easier borrowing conditions might favor his presumptive Democratic opponent, Kamala Harris. Fed officials have consistently argued that politics do not bear on their monetary policy choices and Powell reiterated that point in his press conference, saying it’s the data alone that will make the call for when the Fed is able to cut interest rates. “This is my fourth presidential election at the Fed,” Powell said, and with that experience, any monetary policy choice “will be based on the data, the outlook and balance of risks and not on anything else.”FORECASTING FACTORSPowell also said that potential changes in the nation’s political direction are not something central bankers will take on board as part of their longer-range forecasts, which are made public on a quarterly basis, with the next update due in September. “We absolutely do not do that,” Powell said, noting the inherent uncertainty in knowing who might win a given election. While it’s possible to “run simple simulations of different potential policies” a government might pursue, changing actual Fed policy to reflect these types of shifts is “a line we would never cross,” Powell said, adding “we don’t want to be involved in politics in any way, so we wouldn’t do that.”The question of whether the Fed should factor a change in administration or control of Congress into its forecasts and policy outlook is being driven by Trump’s economic agenda. Experts across ideological stripes believe the former president’s pro-tariff, anti-immigration and tax-cut agenda means inflation would again rise.For some, those risks might mean the Fed needs to rethink some of its longer-run hopes for rate cuts and lower inflation. Some former Fed officials have even argued in favor of factoring that outlook in, although current officials have rejected that view. Derek Tang, an analyst at LHMeyer, a forecasting firm, is skeptical the Fed can shrug off politics’ impact on forecasts. “Powell acknowledged that they run alternative scenarios but then denied that it filters through to their forecasts,” Tang said. “This does not seem believable given that the 2025, 2026, (and, in September, 2027) macro projections and dots are a crucial piece of their forward guidance,” and for those forecasts to be taken seriously, Fed watchers would need to know the central bank is thinking about how shifts in government policy will affect the economy, he said. More

(Reuters) – A look at the day ahead in Asian markets. After an unexpectedly bold move from the Bank of Japan, the Federal Reserve indicating that U.S. rates are about to come down, and an explosive rise in U.S. megacap stocks on Wednesday, investors may be in need of some respite on Thursday. Good luck with that.Aside from the continuing ripples across all asset classes from the BOJ, Fed and tech boom, a wave of manufacturing PMIs from China and across Asia lands and investors are bracing for more Big Tech earnings and a possible Bank of England rate cut.Thursday is also the first trading day of the month, and investors may want to put capital to work. Wednesday’s surge in risk appetite, especially in chip stocks, may fuel those spirits.Investors usually baulk at volatility but appear to be embracing it right now. Look at Nvidia (NASDAQ:NVDA) shares – down 7% on Tuesday then soaring 13% on Wednesday to bring its market cap back above $3 trillion. That’s a one-day increase in market value of over $350 billion.Wednesday’s action across all markets may have been tied to position adjustments on the last trading day of the month, but was nevertheless extraordinary. The Nasdaq had its best day since February last year, geopolitical tensions helped fuel a 5% rise in WTI crude oil for its best day this year, and palladium was the pick of the bunch in a buoyant precious metals complex, rising 4%.U.S. bond yields fell to their lowest since February or March, depending on what part of the curve, while the dollar’s slump against a rampant yen dragged down its broader value against a range of G10 and emerging currencies.The South Korean won posted its biggest rise this year, aided by strong Samsung (KS:005930) earnings and a chip-fueled stock market rally, while the Thai baht hit a four-month high.That momentum will likely extend into Asia on Thursday, although the BOJ’s hawkish stance and Fed’s more balanced posture – certainly relative to some recent soundings from key former Fed officials – may put the brakes on as the day progresses.The yen and Nikkei could be most primed for reversal, having rallied strongly on Wednesday. The yen jumped 2% to break through 150.00 per dollar for the first time since March. On the data front, the most market-sensitive releases will probably be manufacturing sector purchasing managers index reports from China and across Asia. China’s ‘official’ PMIs on Wednesday showed that manufacturing sector activity continued to shrink in July while service sector growth slowed.Here are key developments that could provide more direction to markets on Thursday:- China, Asia manufacturing PMIs (July)- Indonesia inflation (July)- South Korea trade (July) More

The Federal Reserve has said it could start lowering interest rates as soon as September, after US policymakers voted to hold borrowing costs at a 23-year high for the eighth meeting in a row.“A reduction in our policy rate could be on the table as soon as the next meeting in September,” Fed chair Jay Powell told a press conference on Wednesday, adding that there had been “a real discussion” at the Federal Open Market Committee this week about cutting rates. The FOMC flagged “further progress” towards lowering inflation to its 2 per cent goal. But it maintained that officials would need even “greater confidence” before they were willing to cut.“The second quarter’s inflation readings have added to our confidence and more good data would further strengthen that confidence,” Powell said. The comments mark the clearest sign yet that the central bank is readying a policy pivot more than two years after ramping up its fight against inflation in earnest.“He’s sending the signal as many ways as possible that unless something dramatic happens between now and September, they will begin cutting rates at that meeting by a quarter point,” said Bob Michele, chief investment officer at JPMorgan Asset Management.In recognition of newfound concerns over the labour market confronting the Fed, the FOMC said on Wednesday that it was “attentive to the risks to both sides of its dual mandate”, affirming that it no longer viewed inflation as the foremost issue, but rather that a rising unemployment rate was also top of mind as it charts its policy path.Powell noted that the Fed does not need to see further weakening across the labour market to believe it has a handle on inflation.“There was a lot of focus in the press conference on dual-sided risks, with lots more from Powell on labour market risks than I have heard in some time,” said Gargi Chaudhuri, chief investment strategist for the Americas at BlackRock.The Fed’s September meeting, at which it is expected to lower its benchmark interest rate by a quarter point from its current 5.25-5.5 per cent, will be the last one before November’s presidential election.Donald Trump, the Republican candidate for the presidency, warned Powell recently not to cut rates before November’s election, saying that if elected he would let the Fed chair serve out his term only if he was “doing the right thing”. “We never use our tools to support or oppose a political party or a politician or any political outcome,” Powell said on Wednesday. As Powell spoke, short-term Treasury yields dropped, as investors added to bets on rate cuts happening this year. Traders in the futures market are pricing in two or three cuts this year, with the first coming in September, but increased the odds of three cuts by December, putting the chances at 96 per cent. The two-year Treasury yield, which moves with interest rate expectations, fell 0.1 percentage points to 4.26 per cent, its lowest level since February. The benchmark 10-year yield, which moves with inflation and growth expectations, also fell to its lowest level since February, down 0.11 percentage points to 4.04 per cent. The blue-chip S&P 500 and the tech-heavy Nasdaq rose, with both recording their best day since February. After soaring to its highest level in decades after the Covid-19 pandemic, inflation is now declining steadily towards the central bank’s target.The Fed’s preferred inflation gauge, based on the core personal consumption expenditures price index, is now at 2.6 per cent, having peaked at more than 5 per cent in 2022. Powell said recent data releases pointed to “broader disinflation”.Growth in the US labour market is also beginning to slow from its earlier red-hot pace, with the unemployment rate rising over the past few months to 4.1 per cent. Wage pressures have also eased, new data on Wednesday showed.The central bank is trying to pull off a “soft landing”, in which inflation is brought down to target without tipping the economy into a recession.So far, it appears to be succeeding, with price pressures declining without a sharp jump in lay-offs, as employers reduce hiring instead of cutting existing jobs. Powell on Wednesday said the odds of a hard landing were “low”.In the event of a more significant downturn, Powell said the central bank would respond, but made clear that it was not considering cutting rates by half-a-percentage point increments.“If the Fed leaves rates and policy where they are for too long, we risk sliding into a recession. The Fed is aware of that risk,” said JPMorgan’s Michele.Sam Coffin, an economist at Morgan Stanley, said he expected the Fed to lower rates by a quarter-point at each of its remaining meetings this year as growth in the second half of 2024 slows to 2 per cent. His team believes the central bank will deliver another four cuts in 2025, pulling the policy rate down another percentage point. More

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