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Central banks hike rates again, but a pause is coming
  + stars: | 2023-02-02 | by ( )   time to read: +5 min
REUTERS/Joshua RobertsLONDON, Feb 2 (Reuters) - Major central banks are steadily moving closer to a pause in their aggressive interest rate hiking campaigns. The European Central Bank and the Bank of England raised rates on Thursday, but markets suspect a peak is nearing. Overall, 10 big developed economies have raised rates by a combined 2,965 basis points in this cycle to date, with Japan the holdout dove. Canada's central bank has raised its policy rate at a record pace of 425 basis points in 10 months. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%.
End of easy-cash era is going to hurt
  + stars: | 2023-02-01 | by ( )   time to read: +5 min
LONDON, Feb 1 (Reuters) - The end of the easy-cash era is over and its impact yet to be felt on world markets, hopeful that the pain of aggressive rate hikes and high inflation has passed. Reuters Graphics3/ GOING PRIVATEPrivate debt markets have ballooned since the financial crisis to $1.4 trillion from $250 billion in 2010. Reuters Graphics Reuters Graphics4/CRYPTO WINTERRising borrowing costs roiled crypto markets in 2022. Reuters Graphics5/FOR SALEReal estate markets, first responders to rate hikes, started cracking last year and 2023 will be tough with U.S. house prices expected to drop 12%. How the sector services its debt is in focus and officials warn European banks risk significant profit hits from sliding house prices.
[1/2] Men walk past an electric board displaying Nikkei and other countries' indexes outside a brokerage in Tokyo, Japan January 16, 2023. After $14 trillion was wiped off world shares in 2022, $4 trillion has been added back this month. "Markets are in this Goldilocks-scenario of OK growth, slowing inflation and softer monetary policy," said Richard Dias, founder of London-based investment consultancy Acorn Macro. Major central banks have added almost 3,000 basis points to global borrowing costs in this tightening cycle to date. "We've had a monumental rally in government bonds based on expectations we've reached the peak in interest rates," he said.
ECB President Christine Lagarde, speaking in Davos recently, stressed the need for monetary policy to "stay the course." "There were questions recently about why markets don't understand what the ECB will do next," said ING's Brzeski. With updated ECB projections not out until March, Lagarde is likely to be pressed on how the ECB views core inflation, which strips out volatile food and energy prices. The ECB targets headline inflation at 2%, but officials are focused on a core measure. Reuters Graphics5/ Is the ECB more upbeat on the growth outlook?
Take Five: Goldilocks and the three bears
  + stars: | 2023-01-27 | by ( )   time to read: +5 min
Will the Federal Reserve tone down its hawkish rhetoric in the face of cooling inflation or stick to its guns? Investors widely expect a 25-basis point rate increase at the Feb. 1 meeting and for rates to stop short of hitting 5%. Fed officials, however, have indicated they expect the key policy rate to top out at 5.00-5.25% this year. Dollar bears, meanwhile, will watch for dovish leanings that could further accelerate a decline in the greenback. Amundi reckons ECB rates could reach 4%.
Take Five: Staring at the ceiling
  + stars: | 2023-01-23 | by ( )   time to read: +5 min
All told, companies worth more than half the S&P 500's market value are reporting results over the next two weeks. Stock markets can predict the global PMI levels, tending to bounce ahead of a sustainable rise of the index. On Wednesday, watch out for Australian and New Zealand inflation data as well, with the RBNZ pondering how much more to tighten, and the RBA wondering whether it's time to pause. Reuters Graphics5/LONDON CALLINGLondon's bluechip FTSE 100 index (.FTSE) is poised to launch a new attempt to scale an all-time high in days to come. British public sector borrowing numbers, producer price inflation and PMI data are all due as well ahead of a Bank of England meeting the following week.
[1/4] Turkish President Tayyip Erdogan and Central Bank Governor Sahap Kavcioglu are pictured during a signing ceremony in Ankara, Turkey, June 8, 2022. But his drastic transformation of the economy and financial markets means such a change would bring its own uncertainties. The election will also determine what role regional military power and NATO member Turkey plays in conflicts in Ukraine, where Erdogan has helped broker talks, and in neighbour Syria. In the short-term it seems to have worked however, halting a years-long rise in Turks converting lira into dollars. Last week, Turkey had no problem borrowing $2.75 billion from international capital markets.
Take Five: Much to say in Tokyo (and Davos)
  + stars: | 2023-01-13 | by ( )   time to read: +5 min
U.S. earnings and retail sales numbers, a slew of China data and inflation readings elsewhere mean there's plenty to mull over. Recent data showed Tokyo inflation at double the central bank's target. Reuters Graphics Reuters Graphics3/ HOPE AND FEARU.S. retail sales data and more earnings reports are on tap. Before then comes December's data deluge, with industrial output (CNIO=ECI), retail sales (CNRSL=ECI) and Q4 economic growth data (CNGDP=ECI) lining up to be ugly. Economists expect retail sales to have dropped 7.8% for a fourth straight monthly decline and for annual growth to finish up at a meagre 1.8%.
Analysis: Move over TINA, it's time for TARA
  + stars: | 2023-01-11 | by ( Naomi Rovnick | )   time to read: +5 min
Reuters GraphicsIdanna Appio, a portfolio manager at First Eagle Investments, said that TINA was good for passive investors as it meant that equity prices went up because bond yields went down. "The risk free rate," he added, referring to core government bond yields, "actually gives you something." Bond funds recorded net inflows for six straight weeks until early January, BofA said, based on its analysis of EPFR data. "The end of TINA is very important," said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe's largest fund manager. "You don’t need a bond bull market, you now have income," said Jeffrey Sherman, deputy chief investment officer at U.S. money manager DoubleLine.
Take Five: Welcome to 2023
  + stars: | 2023-01-06 | by ( )   time to read: +5 min
LONDON, Jan 6 (Reuters) - A potential shift by the world's most dovish major central bank, inflation pressures abating, a turn in the economic outlook and oil markets suffering their biggest tumble in decades: Welcome to 2023! 1/ EARNINGS AND INFLATIONThe week ahead brings a critical read into two key themes for Wall Street in 2023: the health of corporate profits and inflation. With crude oil volatility soaring, 2023 might be anything but plain sailing for producers and consumers alike. Barclays expects the UK economy to keep contracting until the end of the third quarter of 2023. It takes time for declines in market prices to filter through into household bills, but signs are positive for cash-strapped consumers and businesses.
Reuters Graphics3/ RE-EMERGING MARKETSWhisper it, but the emerging markets (EM) bulls are back after 2022 delivered some of the biggest losses on record. Credit Suisse particularly likes hard currency debt and DoubleLine's Jeffrey Gundlach, AKA the "bond king", has EM stocks as his top pick. Economists polled by Reuters expect headline U.S. inflation to decelerate to 3.1% by the end of 2023. Valentine Ainouz, fixed income strategist at the Amundi Institute, predicts the 10-year U.S. Treasury yield will end 2023 at 3.5% from around 3.88% currently. Reuters Graphics5/ EQUITIES: SELL NOW, BUY LATEREquity investors hope a V-shaped year for the global economy will see stocks end it comfortably higher.
How 2022 shocked, rocked and rolled global markets
  + stars: | 2022-12-30 | by ( Marc Jones | )   time to read: +6 min
The main drivers have been the war in Ukraine, combined with rampant inflation as global economies broke out of the pandemic, but China remained shackled by it. U.S. Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in troubled times, lost 17% and 25% respectively in dollar terms. Ten-year Treasury yields jumped to 1.8% from less than 1.5%, knocking 5% off MSCI's world stocks index (.MIWD00000PUS) in January alone. The Fed has delivered an eye-watering 400bps of rate hikes and the European Central Bank, a record 250bps, despite saying this time last year it was unlikely to budge. "What has gone in global markets this year has been traumatic," said EFG Bank Chief Economist and ex-Deputy Governor of Ireland's central bank, Stefan Gerlach.
Reuters GraphicsOn a monthly basis, data showed that seven out of the 10 major central banks lifted rates in December. This compares to the monthly peak of 550 bps in September, though not all central banks meet on a monthly basis. "Most emerging market central banks are close to having completed their rate hike cycle," said Charles-Henry Moncheau, chief investment office at Syz Group. Central banks in Korea, South Africa, Thailand, Malaysia and Israel did not hold rate setting meetings in December. Emerging markets interest ratesReporting by Karin Strohecker and Vincent Flasseur in London, editing by Tomasz JanowskiOur Standards: The Thomson Reuters Trust Principles.
Take Five: Keeping the lights on
  + stars: | 2022-12-16 | by ( )   time to read: +5 min
1/PICKING A (JAPANESE) PIVOTEven the uber-dovish Bank of Japan has not been spared from investors trying to pick central bank pivot points. France is striving to avert power cuts, and Germany is bleeding cash to keep the lights on. Thursday has meetings scheduled for Indonesia - where the central bank has just seen growth added to its mandate - as well as Egypt, which is in line for support from the International Monetary Fund. Expectations of a softer dollar as the U.S. economy slows have sparked optimism about emerging markets, which should also benefit from China easing COVID-19 restrictions. Emerging markets interest ratesCompiled by Karin Strohecker, Graphics by Sumanta Sen and Vincent Flasseur, editing by Barbara LewisOur Standards: The Thomson Reuters Trust Principles.
Central banks ramp up rates again but the pace slows
  + stars: | 2022-12-15 | by ( )   time to read: +5 min
LONDON, Dec 15 (Reuters) - Central banks in Britain, Norway, Switzerland, the euro zone and the United States have all raised interest rates this week. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%. Money markets moved after the statement to forecast UK interest rates will top out at around 4.5% in August. Markets anticipate an 80% chance of a 50 bps hike when the Riksbank meets next in February. But market players do not expect any significant change from the world's lone major central bank dove.
Almost half a trillion dollars, and counting, since the Ukraine war jolted it into an energy crisis nine months ago. The money set aside stands at up to 440 billion euros ($465 billion), according to the calculations, which provide the first combined tally of all of Germany's drives aimed at avoiding running out of power and securing new sources of energy. That equates to about 1.5 billion euros a day since Russia invaded Ukraine on Feb. 24. Energy rationing is a risk in the event of a long cold spell this winter, Germany's first in half a century without Russian gas. There's no security in sight either, with the push to build up of two alternatives to Russian fuel - liquefied natural gas (LNG) and renewables - years away from targeted levels.
Take Five: The grand 2022 central bank finale
  + stars: | 2022-12-09 | by ( )   time to read: +5 min
1/TWICE THE FUNInvestors will be fed a huge helping of year-end U.S. news when Tuesday's release of November consumer inflation data is followed by the Federal Reserve's last rate decision of 2022 on Wednesday. Reuters Graphics2/ SUPER THURSDAYIt's super Thursday in Europe, where central banks in the euro area, Britain, Switzerland and Norway all meet. The pace of aggressive rate hikes from big central banks is slowing but the fight against inflation is not over yet. Surging energy and food costs propelled consumer price inflation to a 41-year high of 11.1% in the year to October. Wednesday's UK inflation data may hint at price rises having peaked, following trends in the eurozone and the U.S.
Headline inflation slowed in November for the first time in 1-1/2 years, to 10%, raising hopes that sky-high price growth has passed. ECB President Christine Lagarde will likely be careful about calling a peak after last year's "big mistake" of insisting surging prices were "transitory," said Pictet's Ducrozet. ECB Chief Economist Philip Lane reckons wages would be a "primary driver" of price inflation even after energy price shocks fade. Closely-watched business activity data points to a mild recession and latest forecasts should show how the ECB views the coming slowdown. Lane believes record price growth will start to subside next year.
Take Five: Ready for that Santa rally?
  + stars: | 2022-12-02 | by ( )   time to read: +5 min
1/FRANC DISCUSSIONCredit Suisse executives may need to sit down for an honest chat about whether the bank's latest strategic plan is enough to rally investors. And with the Federal Reserve, European Central Bank and Bank of England meeting in coming weeks, the drama isn't over. For some, the notion of peak rates, peak inflation and China's reopening is reason enough for cheer. After months of pain inflicted by high inflation and aggressive rate increases, perhaps it's time to bring on the Santa rally. That wouldn't necessarily cut short a rally in Aussie dollar, which recently has been driven more by China's re-opening hopes and a retreating greenback than the RBA.
SummarySummary Companies G10 central banks deliver 350 bps of rate hikes last monthEmerging central banks tightened policy by 400 bpsHiking cycle coming to an end in many developing economiesLONDON, Dec 2 (Reuters) - The pace and scale of rate hikes delivered by central banks in November picked up speed again as policy makers around the globe battle decade high inflation. Central banks overseeing six of the 10 most heavily traded currencies delivered 350 basis points (bps) of rate hikes between them last month. The European Central Bank, the Bank of Canada, the Swiss National Bank and the Bank of Japan did not hold rate setting meetings in November. The latest moves have brought total rate hikes in 2022 from G10 central banks to 2,400 bps. "Central banks' determination to bring down inflation suggests that policy rates need to go higher still."
LONDON, Nov 28 (Reuters) - Paris' luxury-laden stock exchange is now worth more than London's. France's CAC All Shares index (.PAX) is now worth almost $3 trillion, making it Europe's largest stock market by value thanks to demand for its luxury-retailer blue chips. Reuters GraphicsFUND FLOWSSo far in 2022, funds investing in UK stocks have seen record outflows of 23 billion euros, according to Refinitiv Lipper, up from almost 18 billion euros last year and the 14.6 billion euros shed in 2016, when Britain voted to leave the European Union. Annual outflows from French equity funds are much smaller - at 2 billion euros this year. FX MATTERSIt's also worth noting that currency comes into play when measuring the size of London's market against Paris' in dollar terms.
Take Five: Everything to play for
  + stars: | 2022-11-25 | by ( )   time to read: +5 min
Markets are hopeful the Federal Reserve will soon slow the pace of its aggressive rate hikes. The U.S. economy likely created 200,000 new jobs, a Reuters poll of economists forecasts found, in what would be the smallest gain since December 2020. Manufacturing indicators, mainly PMIs, due next week might attest to the weakness already seen across the economy. Inflation in the euro zone was 10.6% in October, more than five times the European Central Bank's 2% target. Indeed, the Fed may be getting ready to slow the pace of its rate hikes, but the ECB is not there yet.
German housing giant Vonovia (VNAn.DE) last week raised 1.5 billion euros ($1.54 billion) amid strong investor demand in primary markets, a bright spark for a beleaguered property sector. Also noteworthy was a 750 million euro hybrid bond sale from Spanish telecoms firm Telefonica (TEF.MC), the first offering of its kind in Europe in two months. There were no hybrid bond deals in June and July, and only one transaction in September before Telefonica's offering. New hybrid bond sales total just over 10 billion euros so far this year, compared with 30 billion euros for the whole of 2021. In the broader market, investment grade corporate issuers have raised 258 billion euros so far this year compared with 322 billion euros in 2021, according to Refinitiv data.
He will replace Bob Chapek, who took over as Disney CEO in February 2020 just as the COVID-19 pandemic led to park closures and visitor restrictions. Disney disappointed investors this month with an earnings report that showed mounting losses at its streaming media unit that includes Disney+. [1/2] Executive Chairman of the Walt Disney Company, Bob Iger arrives at the world premiere for the film 'The King's Man' at Leicester Square in London, Britain December 6, 2021. Disney did not respond to a request for comment on Trian and Trian did not respond to a request for comment. During his tenure, Disney made several key acquisitions, including Pixar Animation Studios, Marvel Entertainment and 21st Century Fox, and boosted its market capitalization five-fold.
He will replace Bob Chapek, who took over as Disney CEO in February 2020 just as the COVID-19 pandemic hit, leading to park closures and restrictions on visitors globally. Disney disappointed investors this month with an earnings report that showed mounting losses at its streaming media unit that includes Disney+. [1/2] Executive Chairman of the Walt Disney Company, Bob Iger arrives at the world premiere for the film 'The King's Man' at Leicester Square in London, Britain December 6, 2021. IGER'S RETURNSIger exited Disney on a high note as the company led the battle against Netflix in the streaming wars. During his tenure, Disney made several key acquisitions, including Pixar Animation Studios, Marvel Entertainment and 21st Century Fox, and boosted its market capitalization five-fold.
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