A tradesman works on the roof of a house under construction at a housing development located in the western Sydney suburb of Oran Park in Australia, October 21, 2017. Picture taken October 21, 2017. REUTERS/David Gray Acquire Licensing Rights
BENGALURU, Dec 1 (Reuters) – The Reserve Bank of Australia will keep its key interest rate unchanged at 4.35% on Tuesday and a rate cut is now not expected to happen until the fourth quarter of next year due to a strong housing market, according to a Reuters poll.
Even with rates at a 12-year high, Australian home prices have recovered all of their 2022 losses since finding a floor in January. They are expected to rise 8% this year and another 5% next year, a separate Reuters poll showed.
“We expect there will be no change from the RBA next week, but we do think they will maintain a hawkish bias. So they’re going to talk up the prospect of rate hikes, but ultimately we don’t think they’re going to deliver,” said Ben Picton, senior strategist at Rabobank.
The interest rate poll, conducted Nov. 29-Dec. 1, showed 28 of 30 economists, including those at Australia’s big four banks, expect the central bank will keep its official cash rate (AUCBIR=ECI) on hold on Dec. 5.
Although consumer price inflation in October logged a slower annual pace of 4.9% growth compared with 5.6% in September, that was still well above the RBA’s 2-3% target range.
Two economists, however, predicted a 25 basis point hike.
Looking further ahead, 20 of 29 economists predicted the RBA will hold rates steady until end-March while the rest forecast a quarter percentage point hike by then.
Poll medians showed rates on hold until end-September followed by a 25 basis points cut to 4.10% in the last quarter of 2024, one quarter later than predicted in a November survey and putting the RBA behind many of its peers.
The Australian housing market, already one of the most expensive in the world, is expected to maintain steady growth as increasing demand outstrips supply.
Expectations for average home prices in Australia this year have been revised up consistently – from a 9.1% fall in Reuters’ February poll to an 8.0% rise in the December poll, underscoring the market’s resilience in spite of higher interest rates.
“Multiple consecutive interest rate rises earlier in the year were expected to considerably impact Australia’s current mortgage holders. However, distressed sales were relatively minimised due to increasing cash buyers propping up the residential market and the Australian economy continuing to hold full employment,” wrote Michelle Ciesielski at Knight Frank, who took part in the Nov. 16- Dec .1 survey of 11 property analysts.
“Compared to the significantly higher migration, the current limited number of new homes being built or being started by developers points to inevitably higher house prices being achieved in 2024.”
The poll, which asked about the outlook for home prices in Sydney, Melbourne, Brisbane, Adelaide, and Perth, showed expectations ranging between 3.5% and 7.0% growth for both 2024 and 2025.
Asked about how the ratio of home ownership to renters will change over the coming five years, all nine analysts who responded to the question said it would decrease.
“Affordability looks terrible right now because home prices are back to their record highs and interest rates are at their multi-year highs, which means you’re kind of getting hit from both sides,” said Diana Mousina, deputy chief economist at AMP.
“Affordability could improve if prices fall a little bit and it will also improve marginally if the RBA cuts interest rates. But it’s not going to improve dramatically unless you see a very big fall in prices by 30%, if not more.”
(Other stories from the Reuters quarterly housing market polls)
Reporting by Devayani Sathyan; Polling by Susobhan Sarkar and Anant Chandak; Editing by Ross Finley, Jonathan Cable and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
French Minister for Economy, Finance, Industry and Digital Security Bruno Le Maire and French Junior Minister for Public Accounts Thomas Cazenave leave following the weekly cabinet meeting at the Elysee Palace in Paris, France, September 27, 2023. REUTERS/Johanna Geron Acquire Licensing Rights
PARIS, Nov 19 (Reuters) – France wants to reduce government spending on office space and may consider real estate sales in a bid to reduce the state deficit, the budget and finance ministers said in a media interview on Sunday.
The government also plans to review unemployment benefits for seniors, they said.
Budget Minister Thomas Cazenave told La Tribune that the government wants to reduce the amount of office space occupied by the administration by 25%.
“There is real leverage for savings there, in particular given the new ways of working,” he said, referring to the increase in home working following the COVID-19 pandemic.
He said the ratio of office space area per civil servant is 24 square metres (258 square feet), far above private industry standards, and the government wants to reduce that to 16 square metres.
“We may also consider real estate sales,” he added.
Asked about whether the government could achieve its target of reducing the unemployment rate from 7% to 5% by 2027, Finance Minister Bruno Le Maire said this would require reviewing social policies, notably unemployment benefits.
“We have worked hard to move from 9% to 7%, but to move to 5%, courageous choices need to be made… All the schemes that feed seniors’ unemployment must be reviewed,” Le Maire said.
Cazenave also confirmed that the government will seek an additional 12 billion euros of spending cuts for the 2025 budget, as discussed with Prime Minister Elisabeth Borne on Thursday.
“We confirm spending cut targets of 16 billion euros ($17.5 billion) for the 2024 budget, and we are already preparing 12 billion of savings for the 2025 budget,” he said, adding that the government was still aiming to reduce its deficits to 4.4% of GDP in 2024 and 3.7% in 2025.
($1 = 0.9168 euros)
Reporting by Geert De Clercq; Editing by Hugh Lawson
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Nov 16 (Reuters) – World stocks fell for the first time in five sessions, oil slipped and the dollar saw a slight lift on Thursday, as markets continued to acclimatize to falling borrowing costs after nearly two years of relentless gains.
Europe’s moves saw the STOXX 600 (.STOXX) slip from a more than one-month high, Wall Street look set for an early dip, and Taiwan’s dollar rise after China’s President Xi Jinping and U.S. counterpart Joe Biden agreed to reopen key military communications channels between the two superpowers.
Xi also underscored the point by saying China would not “fight a cold war or a hot war with anyone”.
Global markets have rallied sharply this month as inflation data out of the United States and parts of Europe, such as Britain, have reinforced hopes that major central banks are now done raising borrowing costs.
Robust U.S. retail sales figures on Wednesday were a reminder that it might not be a straight line move, however, with the focus now squarely on weekly U.S. jobless claims data later and a monthly euro zone inflation print on Friday.
“If you don’t get confirmation of the slowing economic direction from every single piece of data every single day we risk running out of momentum on the big trades,” Societe Generale FX strategist, Kit Juckes, said.
“Until we get to the point where rate cuts are just around the corner, everything is going to be very stop-start. The dollar sell-off is stop-start, the bond market rally is really stop-start and the equity market is all over the place.”
Key government bond market borrowing costs resumed their broad downward trend on Thursday, driven by increasing confidence that rate cuts are coming next year.
Germany’s 10-year bond yield dipped to 2.62% but held above the previous day’s two-month low of 2.568%, while sterling sank to a six-month low against the euro as dealers in London inched closer their predictions on when the Bank of England (BoE) will start cutting rates. EUR/GVD
Many now think it might be as soon as May although BoE policymaker Meg Greene warned on Thursday that investors are missing the message that central banks have been pushing recently that interest rates will remain higher for longer.
“I think markets globally haven’t really clocked on to this,” Greene told Bloomberg Television, adding that the BoE was not talking about cutting rates.
CHINA PROPERTY
Asian stocks fell overnight as new Chinese data showed continued weakness in its problem-hit property sector which dented recent optimism about a recovery in the world’s second-largest economy.
While data this week showed China’s industrial and retail sectors are now making a comeback, figures have also shown a sharp drop in property investment and weak home prices, underscoring the ongoing drag the sector is having.
There was mixed news from Japan too, where exports grew for a second straight month in October but at a sharply slower pace due to slumping China-bound shipments of chips and steel.
“The weak economic data from both countries indicate the fact that the global economy is slowing down, highlighting ongoing macro headwinds that businesses face,” said Tina Teng, market analyst at CMC Markets.
XI AND BIDEN
Australian shares (.AXJO) ended their day down 0.7% as strong wage data indicated that inflationary pressures there are still running high.
Japan’s Nikkei (.N225) dipped 0.3%, moving into reverse after it, along with the main MSCI Asian and emerging market indexes, all posted their biggest gains in a year on Wednesday.
Chinese stocks showed some disappointment at Xi and Biden’s first meeting in years, with Shanghai’s blue-chip CSI300 index (.CSI300) closing down 1% and Hong Kong’s Hang Seng index (.HSI) ending 1.3% lower.
While the two leaders agreed to resume military-to-military communications and cooperate on anti-drug policies, a sign ties are improving, some investors were disappointed at a lack of other breakthroughs in the talks.
The MSCI main 47-country global stocks index (.MIWD00000PUS) was down for the first time in five sessions after a near 8% surge this month.
Wall Street futures pointed to a slightly weaker start there too, although there was modest relief that the Senate had overwhelmingly approved a temporary funding measure to avert another U.S. government shutdown for now.
Money market traders have now fully priced in that the Federal Reserve will keep U.S. interest rates steady in December. They see the first rate cut of the cycle in May.
The yield on benchmark 10-year Treasury notes was back under 4.5% compared with its U.S. close of 4.537% on Wednesday. The two-year yield hovered at 4.88% compared with a U.S. close of 4.916%.
In currencies, the euro was flat at $1.0848, having gained 2.5% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was fractionally higher.
Oil traders, meanwhile, nudged U.S. crude down 0.3% to $76.55 a barrel. Brent crude was at $80.90 per barrel while safe-haven gold was slightly higher at $1,965 per ounce .
Additional reporting by Julie Zhu in Hong Kong; Editing by Christina Fincher and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
BEIJING, Nov 15 (Reuters) – China’s industrial output and retail sales growth beat expectations in October, but the underlying economic picture highlighted significant pockets of weakness with the crisis-hit property sector continuing to forestall a full-blown revival.
The world’s second-biggest economy has struggled to mount a strong post-COVID recovery as distress in the housing market, local government debt risks, slow global growth and geopolitical tensions have dented momentum. A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.
China’s industrial output grew 4.6% in October year-on-year, accelerating from the 4.5% pace seen in September, data from the National Bureau of Statistics (NBS) showed on Wednesday, beating expectations for a 4.4% increase in a Reuters poll. It also marked the strongest growth since April.
Retail sales rose 7.6% in October with improvement in both auto and restaurant sales growth, quickening from a 5.5% gain in September and hitting the fastest pace since May. Analysts had expected retail sales to grow 7.0% due to the low base effect in 2022 when COVID curbs disrupted consumers and businesses.
Analysts struck a cautious note on the upside data surprise, noting that the property sector remains a weak link for the economy and pointed to the lack of major reforms as another impediment to sustainable longer term revival in growth.
“Due to the impact of holidays and low base effect in 2022, year-on-year figures cannot reflect the actual momentum of the economy,” said Xing Zhaopeng, senior China strategist at ANZ.
He said month-on-month figures suggest economic momentum has further weakened with “increasing deflationary risks”.
Louise Loo, China economist at Oxford Economics, said prolonged weakness in external demand could hamper industrial production despite strengthening last month as destocking pressures eased further.
Consumption didn’t make much headway either during the eight-day Golden Week holiday earlier in October. Trips made in that period missed government estimate as economists say consumers are concerned about their jobs and income growth in an uncertain employment market.
The nationwide survey-based jobless rate stayed at 5.0% in October, unchanged from September, the NBS data showed. Youth unemployment, which hit a record high 21.3% in June, wasn’t available after the statistics bureau stopped publishing it since July.
China has been ramping up efforts to revive its post-COVID economy with a slew of policy support measures in recent months, although the positive effects have been marginal so far.
Wednesday’s upbeat data comes as a raft of other indicators for October released over recent weeks pointed to muted growth momentum. Imports grew unexpectedly, but exports shrank at a quicker pace, household borrowing remained weak, consumer prices swung lower while factory deflation persisted.
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Authorities are faced with a challenging task as any aggressive monetary support would further widen interest rate differentials between China and the West, especially the United States, and dent an already weakened yuan. That could intensify capital outflows, while Beijing is wary of a return to the big-bang fiscal stimulus of the past which created massive debt and hamstrung the economy.
The economy grew faster-than-expected in the third quarter, with analysts generally expecting it to reach the government’s full-year growth target of around 5%, though a full-blown recovery is still some time away.
The yuan held near a more than two-month high after surprisingly softer U.S. inflation reading overnight boosted bets that the Federal Reserve had reached the end of its tightening cycle.
PROPERTY, INVESTMENT DISAPPOINT
The country’s central bank, People’s Bank of China (PBOC), boosted liquidity injections but kept the interest rate unchanged when rolling over maturing medium-term policy loans on Wednesday.
In a rare revision last month, the government also lifted its 2023 budget deficit to around 3.8% of gross domestic product from 3% to account for the planned issuance of 1 trillion yuan ($137.10 billion) in sovereign bonds.
The PBOC has cut banks’ reserve requirement ratio (RRR) twice this year to free up liquidity to aid the economic recovery. Analysts widely expect another RRR cut and an interest rate cut in the final months of this year.
China’s crisis-hit property sector has yet to see a meaningful rebound despite strengthened support measures for homebuyers, including relaxing of home purchase restrictions, lowering in borrowing costs and other programmes.
Property investment fell 9.3% in January-October year-on-year, after a similarly sharp 9.1% drop in January-September.
Fixed asset investment disappointed with a 2.9% expansion year-on-year in the first 10 months, missing expectations for a 3.1% rise. It grew 3.1% in the January-September period.
Confidence among private businesses also remained depressed, with investment in the sector shrinking 0.5% during January-October, narrowing slightly from the 0.6% decline in the first nine months.
“Overall, the data published today suggest that the recovery was struggling to gain a strong footing at the start of Q4, but it was not nearly as weak as some had feared,” said Sheana Yue, China economist at Capital Economics.
“Policy looks set to remain supportive, and possibly even stepped up to prevent the economy from backsliding.”
($1 = 7.2939 Chinese yuan renminbi)
Additional reporting by Albee Zhang and Liangping Gao;
Editing by Shri Navaratnam
Our Standards: The Thomson Reuters Trust Principles.
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SYDNEY, Nov 9 (Reuters) – Asian share markets rallied on Thursday and the dollar firmed, even as global investors again sold off the troubled mainland Chinese property sector.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.1%, and is up 4.3% so far this month.
The yield on benchmark 10-year Treasury notes reached 4.4902% compared with their U.S. close of 4.508% on Wednesday.
The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 4.9277% compared with a U.S. close of 4.936%.
Australian shares (.AXJO) were up 0.26%, while Japan’s Nikkei stock index (.N225) rose 1.53%.
Hong Kong’s Hang Seng Index (.HSI) reversed an early gain and was down 0.25% in the afternoon while China’s bluechip CSI300 Index (.CSI300) was 0.1% higher.
China’s troubled property sector is being closely watched on Thursday after most major stocks rallied one day earlier following a Reuters report that Ping An Insurance Group had been asked by the Chinese authorities to take a controlling stake in Country Garden Holdings (2007.HK) .
A spokesperson for Ping An (601318.SS) said the company had not been approached by the government and denied the Reuters report that cited four sources familiar with the plan.
The Hang Seng Mainland Properties Index (.HSMPI) shed 3.73% on Thursday and the Hang Seng Properties Index (.HSNP), which covers Hong Kong developers, was down 0.7%.
“I think for equities investors, they are still shying away from Chinese property because there are so many unknowns,” said Jason Lui, BNP Paribas’s Head of APAC Equity & Derivative Strategy.
“It’s difficult to ask investors to go back to pre-property downturn days, fundamentally property is going to play a very different role in Chinese economic development going forward.
“Property needs to stop being a drag on GDP and sentiment so investors can move on to the real growth drivers.”
In early European trades, the pan-region Euro Stoxx 50 futures were up 0.1%, German DAX futures were down 0.05%, FTSE futures were down 0.16% at 7,401.5,
U.S. stock futures, the S&P 500 e-minis , were down 0.06% at 4,396.8.
Chinese inflation figures for October published on Thursday showed a 0.1% decline compared to September and a 0.2% fall from one year, according to official statistics.
The dollar dropped 0.03% against the yen to 150.93 . It is moving back towards its high this year of 151.74 on Oct. 31.
The European single currency was up 0.0% on the day at $1.0708, having gained 1.25% in a month, while the dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was up at 105.51.
The dollar has rebounded from last week’s sharp sell-off on rising confidence the Fed has ended raising rates. There is less agreement on whether a rate cut is on the horizon with inflation still above the U.S. Federal Reserve’s 2% target.
On Wall Street, the S&P 500 (.SPX) rose 0.10% and the Nasdaq Composite (.IXIC) added 0.08%. The Dow Jones Industrial Average (.DJI) fell 0.12%.
The S&P 500 rose for the eighth consecutive day, extending its longest win streak in two years.
The Federal Reserve last week kept the benchmark overnight interest rate in the current 5.25%-5.50% range and the central bank is due to meet again mid next month.
The U.S weekly jobless claims published on Thursday will be closely watched as an indicator of the how the country’s labour market is performing. Economists predict claims will reach 219,000 after coming in at 217,000 last week.
Oil prices slid over 2% on Wednesday to their lowest in more than three months on concerns over waning demand in the U.S. and China.
In Asian trading Thursday, U.S. crude ticked up 0.15% to $75.44 a barrel. Brent crude rose to $79.68 per barrel.
Gold was slightly lower. Spot gold was traded at $1948.9332 per ounce.
Reporting by Scott Murdoch; Editing by Tom Hogue and Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
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SYDNEY, Nov 1 (Reuters) – Chances of an imminent hike in Australian interest rates grew on Wednesday after data showed house prices rebounding to near record highs and the International Monetary Fund recommended tightening monetary and fiscal policy screws to curb inflation.
Markets responded by pricing in a near-70% chance that the Reserve Bank of Australia (RBA) will raise rates by a quarter point to 4.35% when it meets on Nov. 7, ending four months of keeping rates on hold.
High readings for inflation and consumer spending had already suggested policy might be too loose, and that view was reinforced by a CoreLogic report showing house prices had regained all the ground lost during the RBA’s previous 12 rate hikes.
“The turnaround in property prices has been quite remarkable,” declared Gareth Aird, head of Australian economics at CBA. “The RBA’s 400 basis points of tightening reduced home borrower capacity by 30%, but property prices are now back to their previous peak.”
So far this year, values in Sydney, Perth and Brisbane are all up more than 10%, adding billions to household wealth at a time when the RBA would really rather they not be spending.
A separate report from PropTrack foresaw further gains ahead given booming migration, a tight rental market and a supply squeeze as home building lagged far behind population growth.
IMF WEIGHS IN
The IMF also weighed in on Wednesday by arguing tighter monetary and fiscal policy was needed in order to bring inflation back to the RBA’s target band of 2-3%.
In its regular review of Australia, the IMF staff noted the resilience of the economy as the jobless rate remained near a 50-year low of 3.6%, while economic output was estimated to be running at 1% above potential.
“Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations,” they said.
They also called for different levels of government to take a more measured approach to infrastructure investment as massive projects compete for scarce resources and push up costs.
S&P Global Ratings estimates capital expenditure by Australian states and territories will be a record A$320 billion over the next four years.
“Each project on its own probably doesn’t add that much to national inflation,” said Martin Foo, lead analyst at S&P Global Ratings. “But the problem is that if you add up all of these projects together, then they are having a significant impact.”
Reporting by Stella Qiu and Wayne Cole; Editing by Jamie Freed & Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, Oct 31 (Reuters) – U.S. labor costs increased solidly in the third quarter amid strong wage growth while house price inflation accelerated in August, the latest signs that the Federal Reserve could keep interest rates high for some time.
The reports on Tuesday pose a threat to efforts by the U.S. central bank to bring inflation to its 2% target. Fed officials started a two-day policy meeting on Tuesday. The U.S. central bank is expected to leave interest rates unchanged but maintain its hawkish bias at the conclusion of that meeting as a recent spike in U.S. Treasury yields and stock market sell-off have tightened financial conditions.
“Those wage increases are likely to keep inflation running above target while higher house prices could lead to a pick-up in shelter inflation,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York. “For now the Fed will remain on-hold, but the evident upside risk to inflation means Chair (Jerome) Powell and committee will keep potential further rate hikes on the table.”
The Employment Cost Index (ECI), the broadest measure of labor costs, rose 1.1% last quarter after increasing 1.0% in the April-June period, the Labor Department’s Bureau of Labor Statistics reported. Economists polled by Reuters had forecast the ECI would rise 1.0%.
Labor costs increased 4.3% on a year-on-year basis, the smallest gain since the fourth quarter of 2021, after advancing by 4.5% in the second quarter. Growth in annual compensation is gradually slowing after peaking at 5.1% last year, in line with some easing in labor market conditions. It, however, remains well above the pre-pandemic pace.
The rise in compensation helps to explain the surge in consumer spending last quarter, which contributed to the fastest economic growth rate in nearly two years.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.
Wages increased 1.2% in the third quarter after climbing 1.0% in the prior three months. They were up 4.6% on a year-on-year basis after advancing by the same margin in the second quarter. Strong wage growth is being driven by worker shortages that still persist in some services industries.
September’s job openings data on Wednesday will shed light on the state of demand for labor.
Though consumers continue to worry about the economy’s outlook, more are planning vacations over the next six months and are not contemplating scaling back in a major way on purchases of motor vehicles and other big-ticket items, according to a survey from the Conference Board on Tuesday.
Their concerns about the economy center around the violence in the Middle East as well as domestic politics, likely reflecting the protracted battle to elect a speaker in the U.S. House of Representatives.
The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, rose to 26.3 from 25.5 in September. This measure correlates to the unemployment rate from the Labor Department. Overall, the consumer confidence index dropped moderately to 102.6 this month from 104.3 in September.
“The U.S. consumer is in okay financial shape,” said Bill Adams, chief economist at Comerica Bank in Dallas. “For well-off Americans, inflation is a source of frustration but not enough to force cutbacks in overall spending.”
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Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.
CONSUMER CONFIDENCE EBBS
The compensation report showed private-sector wages gained 1.1% after rising 1.0% in the April-June quarter. They advanced 4.5% on a year-on-year basis. There were notable increase in wages in the financial activities and education and health services sectors. But wage growth slowed in the leisure and hospitality industry, which had experienced worker shortages.
Manufacturing also reported a moderation in wage gains.
State and local government wages shot up 1.8% after increasing 0.8% in the prior quarter. They were driven by rises in education and health services as well as public administration. State and local government wages increased 4.8% on a year-on-year basis, the most since the government started tracking the series in 2001.
Inflation-adjusted wages for all workers rose 0.9% on a year-on-year basis after jumping 1.7% in the second quarter. While slowing, wages should continue to underpin spending.
Benefits rose 0.9% last quarter after climbing by the same margin in the April-June period. They increased 4.1% on a year-on-year basis.
Economists expected the higher wages and benefits to pressure corporate profits, with Nationwide chief economist Kathy Bostjancic noting that “some companies are losing a bit of their pricing power.”
A third report from the Federal Housing Finance Agency showed house prices increased 0.6% in August, driven by an acute shortage of previously owned homes. House prices rose 0.8% in July. While lofty house prices are boosting household wealth, they could keep inflation elevated in the near-term.
In the 12 months through August, house prices accelerated 5.6% after advancing 4.6% in July. With the rate on the popular fixed 30-year mortgage near 8%, some economists see limited scope for house prices to keep rising, which would result in rents contributing less to inflation.
Higher rents were the major drivers of inflation in September after cooling somewhat in prior months.
Even as house prices continue to march higher, there are signs that shelter inflation could moderate next year.
A fourth report from the Commerce Department’s Census Bureau showed the rental vacancy rate jumped 6.6% in the third quarter, the highest since the first quarter of 2021, from 6.3% in the April-June period.
“We still think it is likely that the surge in mortgage rates will slow the rise in prices in the secondary market going forward,” said Lou Crandall, chief economist at Wrightson ICAP in New York.
Reporting by Lucia Mutikani; Editing by Paul Simao and Deepa Babington
Our Standards: The Thomson Reuters Trust Principles.
A look at the day ahead in U.S. and global markets from Mike Dolan
A more modest yearend schedule of Treasury debt sales than many feared helped bonds rally overnight while the Bank of Japan closed out a scary October for world markets on Tuesday with another modest tightening tweak.
A hectic Halloween of policy meetings, big macro reports and another slew of company earnings is seeing most world markets shave off the sharpest edges of a rough month, just as the Federal Reserve kicks off its latest two-day gathering.
But relief in Treasuries, the villain of the piece for several weeks, is probably the most significant marker for the remainder of the year.
On Monday, the U.S. Treasury said it expects to borrow $776 billion in the fourth quarter of the year, less than $852 billion it has previously indicated and below Wall St forecasts.
Officials said the reduced tally was down to an increased revenue estimate and that was mainly because tax payments from California and other states that had been previously deferred due to natural disasters were now flowing to Treasury coffers.
Given that the announcement in July of third-quarter borrowing of more than trillion dollars was largely responsible for the bond market selloff since, the more benign forecast for the final three months dragged 10-year benchmark yields back further from bruising 16-year peaks above 5%.
With hopes the resurfaced risk premium for holding long-term debt may ease as a result, 10-year yields were as low as 4.82% on Tuesday – some 20 basis points off recent highs.
Even though the Bank of Japan further loosened its grip on long-term interest rates on Tuesday by re-defining 1.0% as a loose “upper bound” rather than a rigid cap, markets took some solace it wasn’t more draconian. Even though 10-year Japanese government yields jumped as much as 7bps to 0.96%, the yen weakened again sharply past 150 per dollar and the Nikkei 225 index of leading stocks rose (.N225).
And there were further soothing noises for world bonds, even if not for global growth, from surprisingly weak Chinese business surveys for October. Chinese stocks (.CSI300) underperformed and closed lower yet again.
Adding to the mix on Monday was a retreat in crude oil prices to their lowest since the October 7 attacks on Israel, as Israel’s land invasion into Gaza advanced slowly and pressure to up stuttering humanitarian aid to the besieged citizens there increased.
Crude prices steadied around $83 per barrel on Tuesday, with market speculation about a rise in U.S. shale oil output circulating following recent major acquisitions by Big Oil firms.
In Europe, falling energy stocks (.SXEP) bucked a more positive wider market due to a 4.2% fall in BP (BP.L) after third-quarter earnings missed analysts’ forecasts.
Overall, the picture pointed to another positive day for Wall Street stocks, with futures marginally positive ahead of the open as the Fed meeting gets underway. The S&P500 (.SPX) rebounded after an awful month on Monday to clock its best day’s gain since August – but it remains on course to record its third straight month of losses since 2020.
The U.S. central bank is expected to leave policy rates unchanged again on Wednesday as it assess the final-quarter trajectory of inflation and the economy after a bumper Q3.
With the October jobs report due Friday, the latest consumer confidence reading for this month tops the economic diary on Tuesday in the meantime. The likes of pharma giant Pfizer and construction bellwether Caterpillar are on a heavy earnings slate.
In other positive news, General Motors (GM.N) and the United Auto Workers struck a tentative deal late on Monday, ending the union’s unprecedented six-week campaign of coordinated strikes that won record pay increases for workers at the Detroit Three automakers.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* U.S. Oct consumer confidence, Oct Chicago business survey, Oct Dallas Fed service sector survey, Q3 employment costs, Aug house prices
* Federal Reserve starts 2-day policy meeting
* U.S. corporate earnings: Pfizer, Caterpillar, AMD, Amcor, Amgen, Marathon, MSCI, Caesars, Global Payments, Sysco, Eaton, Franklin Resources, Allegion, Assurant, AMETEK, Equity Residential, GE Healthcare, First Solar, Incyte, Paycom, Match, Bio-Techne, WEC Energy, Hubbell, Echolab, Zebra, ONEOK, Xylem
* U.S. Treasury auctions 12-month bills
By Mike Dolan, editing by Christina Fincher, <a href=”mailto:mike.dolan@thomsonreuters.com” target=”_blank”>mike.dolan@thomsonreuters.com</a>. Twitter: @reutersMikeD
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[1/2]Hong Kong Chief Executive John Lee delivers his annual policy address at the Legislative Council in Hong Kong, China October 25, 2023. REUTERS/Tyrone Siu Acquire Licensing Rights
HONG KONG, Oct 25 (Reuters) – Hong Kong’s leader focused on bolstering the property market and stabilising the ailing economy in his annual policy blueprint on Wednesday, while confirming new national security laws would be enacted next year to counter meddling by “external forces”.
Chief Executive John Lee said Hong Kong’s economy, which contracted 3.5 percent last year, would “resume growth this year” as inbound tourism and consumption improved, and unemployment fell.
Hong Kong’s economy grew 2.2% in the first half of the year, and is expected to grow four percent this year. year-on-year.
Lee noted, however that the external environment remains challenging given interest rate hikes in some advanced economies, with Hong Kong investment and asset markets “negatively impacted.”
NEW SECURITY LAW
Lee, who was sanctioned by the U.S. government for his role in cracking down on freedoms after mass pro-democracy protests in 2019, also emphasized the need to further bolster national security.
“External forces continue to meddle in Hong Kong affairs,” he said, without giving specifics or naming any country.
Despite Hong Kong’s attempts to restore the city’s international reputation and lure more capital, further security legislation including anti-espionage laws, known as Article 23, would be enacted by the end of 2024, Lee said.
Some Western governments have criticised the ongoing national security clamp down, which has led to the imprisonment of many opposition democrats and closure of liberal media outlets.
Reporting by Clare Jim, Twinnie Siu, Jessie Pang, Donny Kwok; Writing by James Pomfret; Editing by Simon Cameron-Moore
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BENGALURU, Oct 23 (Reuters) – The Bank of Canada is probably done raising interest rates and will hold them at 5.00% for at least six months, according to a Reuters poll of economists that found a majority expecting a reduction in the second quarter of 2024 as the economy slows.
Up until recent days, the prospect of another quarter-point rate rise on Oct. 25 remained a serious risk, but a report this week showing inflation fell more than expected in September has mostly solidified views that no more is needed for now.
The economy is showing signs of strain from 475 basis points of rate hikes since early 2022, likely giving policymakers enough reason to wait and see how much more past rate decisions will crimp demand and an already cooling housing market.
In the meantime Canada’s job market remains tight, with explosive payrolls growth in September, which has left BoC Governor Tiff Macklem confident that while the economy is slowing, it is not headed for a serious recession.
The risk of a revival in inflation, last measured at 3.8%, has led most to forecast now is not the time for the central bank to strongly signal they are done raising rates.
Twenty-nine of 32 economists polled Oct. 13-20 expect no change to the central bank’s 5.00% overnight rate (CABOCR=ECI), with the remaining three expecting a 25 basis point hike.
“The Bank of Canada’s rate decision next week is going to be a hawkish hold,” said Randall Bartlett, senior director of Canadian economics at Desjardins.
“It will recognize the economy has cooled more quickly than it anticipated back in July and inflation in September, particularly core inflation, demonstrated a pace of slowing that provides us with some room for cautious optimism.”
While most are confident the central bank is done hiking, a significant minority of economists who answered an additional question, 8 of 18, said the risk of the BoC raising rates at least once more is “high”.
With inflation still running at nearly double the BoC’s 2.0% target and not expected to fall that low until at least 2025, the central bank does not yet have leeway for policy easing.
Still, a two-thirds majority, 20 of 30, see the BoC cutting its overnight rate at least once before end-June 2024. That is a slightly higher proportion than in a poll published this week on rate expectations for the U.S. Federal Reserve, which is overseeing a stronger economy.
The distribution of where economists saw the overnight rate by end-June was split many ways. Seven economists held the median view of 4.75%, 12 see it at 4.50% or lower and 11 expect it to be at 5.00% or 5.25%.
The most recent BoC business outlook survey showed the weakest conditions since the COVID-19 pandemic, underscoring worries the economy could be headed for trouble in coming months.
Housing market activity has dropped off and house prices are also falling as higher mortgage rates put pressure on households among the most indebted in the world.
While most in the latest poll do not expect a major downturn, one-third of economists surveyed had an official recession in their forecasts, defined as two consecutive quarters of contracting economic output.
“In our view, monetary policy tightening is only now fully working its way through the economy,” said Tony Stillo, director of Canada economics at Oxford Economics.
“Unlike the Bank that predicts a soft landing, we expect Canada has slipped into a recession that will help return inflation back to target by late next year. However, the Bank may choose to err on the side of over-tightening rather than under-tightening.”
(For other stories from the Reuters global economic poll:)
Reporting by Milounee Purohit, Polling by Maneesh Kumar; Editing by Ross Finley and Jonathan Oatis
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