SINGAPORE, Jan 30 (Reuters) – Oil prices fell on Monday, giving up earlier gains, as global producers this week will likely keep output unchanged during a meeting this week and investors are cautious ahead of a U.S. Federal Reserve meeting that may spur market volatility.
Brent crude futures fell 20 cents, or 0.2%, to $86.46 a barrel by 0435 GMT while U.S. West Texas Intermediate crude was at $79.57 a barrel, down 11 cents, or 0.1%.
Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, are unlikely to tweak their current oil output policy when they meet virtually on Feb. 1.
Still, an indication of a rise in crude exports from Russia’s Baltic ports in early February caused Brent and WTI to post their first weekly loss in three last week.
“No change to the OPEC+ output is expected to be announced at this week’s meeting and we expect outlook commentary from the U.S. Fed to be the key driver of the outlook in the near term,” said National Australia Bank analysts in a research note.
Ahead of the Federal Reserve’s policy meeting scheduled on Jan. 31-Feb. 1, the market broadly expects the U.S. central bank to scale back rate hikes to 25 basis points (bps) from 50 bps announced in December, which may ease concerns of an economic slowdown that would curb fuel demand in the world’s biggest oil consumer.
Oil prices earlier gained amid tensions in the Middle East following a drone attack in oil producer Iran and as China, the world’s biggest crude importer, pledged over the weekend to promote a consumption recovery which would support fuel demand.
“It is not really clear yet what’s happening in Iran, but any escalation there has the potential to disrupt crude flow,” said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.
“We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day above or below expectation,” said Grasso, formerly an oil trader with Italy’s Eni.
“China seems to have surprised the market in terms of how fast they are coming out of zero COVID while Russia has surprised in terms of resilience of export volume despite the sanctions.”
China resumes business this week after its Lunar New Year holidays. The number of passengers travelling prior to the holidays rose above levels in the past two years but is still below 2019, Citi analysts said in a note, citing data from the Ministry of Transport.
“Overall international traffic recovery remains gradual, with high-single to low-teens digits to 2019 level, and we expect further recovery when outbound tour group travel resumes on Feb. 6,” the Citi note said.
Reporting by Florence Tan and Emily Chow; Editing by Muralikumar Anantharaman and Christian Schmollinger
Our Standards: The Thomson Reuters Trust Principles.
Fourth-quarter GDP forecast to increase at a 2.6% rate
Strong consumer spending seen; other sectors to contribute
Weekly jobless claims expected to rise moderately
WASHINGTON, Jan 26 (Reuters) – The U.S. economy likely maintained a strong pace of growth in the fourth quarter as consumers boosted spending on goods, but momentum appears to have slowed considerably towards the end of the year, with higher interest rates eroding demand.
The Commerce Department’s advance fourth-quarter gross domestic product report on Thursday could mark the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in. Most economists expect a recession by the second half of the year, though mild compared to previous downturns.
Retail sales have weakened sharply over the last two months and manufacturing looks to have joined the housing market in recession. While the labor market remains strong, business sentiment continues to sour, which could eventually hurt hiring.
“This looks like it could be the last really positive, strong quarterly print we’ll see for a while,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Markets and most people will look through this number. More recent data are suggesting that economic momentum is continuing to slow.”
According to a Reuters survey of economists, GDP growth likely increased at a 2.6% annualized rate last quarter after accelerating at a 3.2% pace in the third quarter. Estimates ranged from a 1.1% rate to a 3.7% pace.
Robust second-half growth would erase the 1.1% contraction in the first six months of the year.
Growth for the full year is expected to come in at around 2.1%, down from the 5.9% logged in 2021. The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have grown at a pace faster than the 2.3% rate notched in the third quarter. That would mostly reflect a surge in goods spending at the start of the quarter.
Spending has been underpinned by labor market resilience as well as excess savings accumulated during the COVID-19 pandemic. But demand for long-lasting manufactured goods, which are mostly bought on credit, has fizzled and some households, especially lower income, have depleted their savings.
Economic growth also likely received a lift from business spending on equipment, intellectual property and nonresidential structures. But with demand for goods tanking, business spending also lost some luster as the fourth quarter ended.
Despite the clear signs of a weak handover to 2023, some economists are cautiously optimistic that the economy will skirt an outright recession, but rather suffer a rolling downturn, where sectors decline in turn rather than all at once.
ROLLING RECESSION
They argue that monetary policy now acts with a shorter lag than was previously the case because of advances in technology and the U.S. central bank’s transparency, which they said resulted in financial markets and the real economy acting in anticipation of rate hikes.
“We will continue to have positive GDP numbers,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The reason is sectors are taking turns going down, and not simultaneous declining. The rolling recession began with housing and now we are seeing the next phase which is consumption related.”
Indeed, with demand for goods slumping, factory production has declined sharply for two straight months. Job cuts in the technology industry were also seen as flagging cutbacks in capital spending by businesses.
While residential investment likely suffered its seventh straight quarterly decline, which would be the longest such streak since the collapse of the housing bubble triggered the Great Recession, there are signs the housing market could be stabilizing. Mortgage rates have been trending lower as the Fed slows the pace of its rate hikes.
Inventory accumulation was seen adding to GDP last quarter, but with demand slowing, businesses are likely to focus on reducing stock in their warehouse rather than placing new orders, which would undercut growth in the quarters ahead.
Trade, which accounted for the bulk of GDP growth in the third quarter, was seen either making a small contribution or subtracting from GDP growth. Strong growth is expected from government spending.
While the labor market thus far has shown remarkable resilience, economists argue that deteriorating business conditions will force companies to slow hiring and lay off workers.
Companies outside the technology industry as well as interest-rate sensitive sectors like housing and finance are hoarding workers after struggling to find labor during the pandemic.
A separate report from the Labor Department on Thursday is likely to show initial claims for state unemployment benefits rose to a seasonally adjusted 205,000 for the week ended Jan. 21, from 190,000 in the prior week, according to a Reuters survey of economists.
“We expect initial jobless claims will eventually start to turn back up after their recent drop, consistent with an eventual downturn in payrolls and a rise in the unemployment rate,” said Kevin Cummins, chief economist at NatWest Markets in Stamford, Connecticut. “In turn, we expect spending to slow as consumers will be less willing to run down savings in the face of a deteriorating labor market.”
Reporting by Lucia Mutikani; Editing by Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
J&J falls on sales warning; GE down on weak profit view
Microsoft to report quarterly earnings after market close
Indexes: Dow up 0.18%, S&P 500 off 0.13%, Nasdaq down 0.25%
NEW YORK, Jan 24 (Reuters) – Wall Street was mixed on Tuesday as a raft of mixed earnings took some wind out of the sails of the recent rally.
The session got off to an rocky start, as a spate of NYSE-listed stocks were halted at the opening bell due to an apparent technical glitch, which caused initial price confusion and prompted an investigation by the U.S. Securities and Exchange Commission (SEC).
More than 80 stocks were affected by the glitch, which caused wide swings in opening prices in stocks, including Walmart Inc (WMT.N) and Nike Inc (NKE.N).
“It looks like NYSE got on it real early,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now they’re trying to determine what opening trade prices were.”
“Everyone involved in trade settlements is going to have a long day today.”
All three indexes sputtered near the starting line, with little apparent momentum in either direction.
Fourth quarter earnings season is in full swing, with 72 of the companies in the S&P 500 having reported. Of those, 65% have beaten consensus, just a hair below the 66% long-term average, according to Refinitiv.
On aggregate, analysts now expect S&P 500 earnings 2.9% below the year-ago quarter, down from the 1.6% year-on-year decline seen on Jan. 1, per Refinitiv.
“Earnings don’t make a bull or bear case for the market yet, but there’s an anxiousness among investors to be long when the Fed is done raising rates,” Sroka added. “We’re hitting a ramp in the earnings cycle, and by next week we’ll have a lot more information on the direction of the market.”
Economic data showed shallower-than-expected contraction in the manufacturing and services sector in the first weeks of the year, suggesting that the Federal Reserve’s restrictive interest rates are dampening demand.
The Dow Jones Industrial Average (.DJI) rose 60.69 points, or 0.18%, to 33,690.25, the S&P 500 (.SPX) lost 5.36 points, or 0.13%, to 4,014.45 and the Nasdaq Composite (.IXIC) dropped 28.39 points, or 0.25%, to 11,336.03.
Among the 11 major sectors of the S&P 500, industrials was down the most.
Intercontinental Exchange Inc (ICE.N), owner of the New York Stock Exchange, dropped 2.5% as SEC investigators searched for the cause of Tuesday’s opening bell confusion.
Alphabet Inc (GOOGL.O) shares dipped 1.8% after the Justice Department filed a lawsuit against Google for abusing its dominance of the digital advertising business.
Johnson & Johnson’s (JNJ.N) profit guidance came in above analyst expectations. Even so, its stock softened 0.3%.
Industrial conglomerates 3M Co (MMM.N) and General Electric Co (GE.N) both provided underwhelming forward guidance due to inflationary headwinds.
3M’s shares were off 5.1% while General Electric’s were modestly lower.
Aerospace/defense companies Lockheed Martin Corp (LMT.N) and Raytheon Technologies Corp (RTX.N) were a study in contrasts, with the former issuing a disappointing profit forecast and the latter beating estimates on solid travel demand.
Lockheed Martin and Raytheon were up 1.5% and 2.5%, respectively.
Railroad operator Union Pacific Corp missed profit estimates as labor shortages and severe weather delayed shipments. Its shares shed 2.7%.
Microsoft Corp (MSFT.O) is due to report after the bell.
Advancing issues outnumbered declining ones on the NYSE by a 1.16-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored decliners.
The S&P 500 posted 27 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 69 new highs and 21 new lows.
Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru; Editing by Aurora Ellis
Our Standards: The Thomson Reuters Trust Principles.
Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked worries that the central bank may not pause interest rate hikes any time soon.
Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December. Also production at U.S. factories fell more than expected in December and output in the prior month was weaker than previously thought.
With Wall Street’s major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw the week data as an opportunity to take profits while others worried about the prospects for a recession.
“The market was overbought. Today’s economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year,” said Stovall.
By 2:14PM ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and the Nasdaq Composite (.IXIC) dropped 87.02 points, or 0.78%, to 11,008.10.
The weakest sectors on the day are the defensive consumer staples (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which was last down 1.8%.
The benchmark S&P and the blue-chip Dow were both on track for their second straight day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.
U.S. stocks had started 2023 on a strong footing, with the S&P having closed up almost 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to dial down the size of its interest rate hikes.
Roughly halfway through January, the S&P was up 2.7% for the month so far while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.
Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.
The Fed commentary also highlighted the disparity between the U.S. central bank’s estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.
“This market is very hopeful that we’re going to get a soft landing and every time you have hawkish comments from the Fed, it feels you’re not going to get that,” Dennis Dick, trader at Triple D Trading.
Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.
Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.
IBM Corp (IBM.N) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”.
Early gainers Microsoft Corp (MSFT.O) and Tesla Inc (TSLA.O) erased gains by late afternoon trading with Microsoft down 1.2% and Tesla off 2.7%.
Moderna Inc (MRNA.O) rose 3.6% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.
PNC Financial Services Group Inc (PNC.N) was down 5.4% after the company missed estimates for fourth-quarter profit.
Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.
The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 14 new lows.
Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
China overcame unprecedented difficulties in COVID battle: Xi
Still a time of struggle for controlling COVID: Xi
In Wuhan, surge in new cases shows signs of easing
Shanghai has 10 million infections, health official says
End of zero-COVID curbs prompts global concern
WUHAN/BEIJING, Dec 31 (Reuters) – Chinese President Xi Jinping called on Saturday for more effort and unity as the country enters a “new phase” in its approach to combating the pandemic, in his first comments to the public on COVID-19 since his government changed course three weeks ago and relaxed its rigorous policy of lockdowns and mass testing.
China’s abrupt switch earlier this month from the “zero-COVID” policy that it had maintained for nearly three years has led to infections sweeping across the country unchecked. It has also caused a further drop in economic activity and international concern, with Britain and France becoming the latest countries to impose curbs on travellers from China.
The switch by China followed unprecedented protests over the policy championed by Xi, marking the strongest show of public defiance in his decade-old presidency and coinciding with grim growth figures for the country’s $17 trillion economy.
In a televised speech to mark the New Year, Xi said China had overcome unprecedented difficulties and challenges in the battle against COVID, and that its policies were “optimised” when the situation and time so required.
“Since the outbreak of the epidemic … the majority of cadres and masses, especially medical personnel, grassroots workers braved hardships and courageously persevered,” Xi said.
“At present, the epidemic prevention and control is entering a new phase, it is still a time of struggle, everyone is persevering and working hard, and the dawn is ahead. Let’s work harder, persistence means victory, and unity means victory.”
New Year’s Eve prompted reflection online and by residents of Wuhan, the epicentre of the COVID outbreak nearly three years ago, about the zero-COVID policy and the impact of its reversal.
People in the central city of Wuhan expressed hope that normal life would return in 2023 despite a surge in cases since pandemic curbs were lifted.
Wuhan resident Chen Mei, 45, said she hoped her teenage daughter would see no further disruptions to her schooling.
“When she can’t go to the school and can only have classes online it’s definitely not an effective way of learning,” she said.
VIDEO REMOVED
Across the country, many people voiced similar hopes on social media, while others were critical.
Thousands of users on China’s Twitter-like Weibo criticised the removal of a video made by local outlet Netease News that collated real-life stories from 2022 that had captivated the Chinese public.
Many of the stories included in the video, which by Saturday could not be seen or shared on domestic social media platforms, highlighted the difficulties ordinary Chinese faced as a result of the previously strict COVID policy.
Weibo and Netease did not immediately reply to a request for comment.
One Weibo hashtag about the video garnered almost 4 million hits before it disappeared from platforms at about noon on Saturday. Social media users created new hashtags to keep the comments pouring in.
“What a perverse world, you can only sing the praises of the fake but you cannot show real life,” one user wrote, attaching a screenshot of a blank page that is displayed when searching for the hashtags.
The disappearance of the videos and hashtags, seen by many as an act of censorship, suggests the Chinese government still sees the narrative surrounding its handling of the disease as a politically sensitive issue.
HOSPITALS OVERWHELMED
The wave of new infections has overwhelmed hospitals and funeral homes across the country, with lines of hearses outside crematoriums fuelling public concern.
China, a country of 1.4 billion people, reported one new COVID death for Friday, the same as the day before – numbers that do not match the experience of other countries after they reopened.
UK-based health data firm Airfinity said on Thursday that about 9,000 people in China were probably dying each day from COVID. Cumulative deaths in China since Dec. 1 have likely reached 100,000, with infections totalling 18.6 million, it said.
Zhang Wenhong, director of the National Centre for Infectious Diseases, told the People’s Daily in an interview published on Saturday that Shanghai had reached a peak of infections on Dec. 22, saying there were currently about 10 million cases.
He said those numbers indicated that some 50,000 people in the city of 25 million would need to be hospitalized in the next few weeks.
At the central hospital of Wuhan, where former COVID whistleblower Li Wenliang worked and later died of the virus in early 2020, patient numbers were down on Saturday compared with the rush of the past few weeks, a worker outside the hospital’s fever clinic told Reuters.
“This wave is almost over,” said the worker, who was wearing a hazmat suit.
A pharmacist whose store is next to the hospital said most people in the city had now been infected and recovered.
“It is mainly old people who are getting sick with it now,” he said.
In the first indication of the toll on China’s giant manufacturing sector from the change in COVID policy, data on Saturday showed factory activity shrank for the third straight month in December and at the sharpest pace in nearly three years.
Reporting by Martin Quinn Pollard, Tingshu Wang and Xiaoyu Yin in Wuhan, Eduardo Baptista in Beijing; Writing by Sumeet Chatterjee
Editing by Helen Popper and Frances Kerry
Our Standards: The Thomson Reuters Trust Principles.
China’s industrial output growth slows more than expected
Retail sales contraction deepens
Property investment falls most in over two decades
Nationwide jobless rate climbs
Near-term outlook darkens following COVID relaxation – analysts
BEIJING, Dec 15 (Reuters) – China’s economy lost more steam in November as factory output slowed and retail sales extended declines, both missing forecasts and clocking their worst readings in six months, hobbled by surging COVID-19 cases and widespread virus curbs.
The data suggested a further deterioration in economic conditions as lockdowns in many cities, a property-sector crunch and weakening global demand pointed to a bumpy road ahead even as Beijing ditched some of the world’s toughest anti-virus restrictions following widespread and rare public protests.
Industrial output rose 2.2% in November from a year earlier, missing expectations for a 3.6% gain in a Reuters poll and slowing significantly from the 5.0% growth seen in October, the National Bureau of Statistics (NBS) data showed on Thursday. It marked the slowest growth since May, partly due to disruptions in key manufacturing hubs Guangzhou and Zhengzhou.
Retail sales fell 5.9% amid broad-based weakness in the services sector, also the biggest contraction since May. Analysts had expected the gauge of consumption to shrink 3.7%, accelerating from a 0.5% dip in October.
In particular, sales in the contact-intensive catering sector fell 8.4% from a year earlier, accelerating from the 8.1% decline in October.
Meanwhile, automobile production slumped 9.9%, swinging from an 8.6% gain in October.
China’s yuan eased against the dollar on Thursday, as the data hit investor confidence.
“The weak activity data suggest that the policy needs to be eased further to revive the growth momentum,” said Hao Zhou, chief economist at GTJAI. “The increased size of the MLF rollover this morning is in line with the overall easing policy tones. Looking ahead, we also forecast that the rates for MLF will be lowered by 10bps next Q1.”
China’s central bank ramped up cash injections into the banking system on Thursday and held interest rates on the medium-term policy loans, or MLF, to keep liquidity conditions ample.
Reuters Graphics Reuters Graphics
The world’s second-largest economy has been depressed by its zero-COVID policy, as tight movement controls hampered consumption and production. Other headwinds the country faces are its property slump, global recession risks and geopolitical uncertainties.
Property investment fell 19.9% year-on-year, the fastest pace since the statistics bureau began compiling data in 2000, according to Reuters calculations based on data from the NBS.
Policymakers have rolled out support for the sector on almost all fronts, including credit lines from banks, bond financing and equity financing, but analysts said such effects have yet to be seen as home sales still remained weak.
Fixed asset investment expanded 5.3% in the first 11 months of the year, versus expectations for a 5.6% rise and growth of 5.8% in January-October.
Hiring remained low among companies wary about their finances. The nationwide jobless rate rose to 5.7% in November from 5.5% in October. Youth unemployment dipped to 17.1% from 17.9% in October.
“December data might be even worse – that’s not because everything is getting worse in China, because the end of the tunnel is coming,” said Alicia Garcia-Herrero, chief economist of Asia-Pacific at Natixis.
“I am expecting a big collapse in industrial production in December. This will be the immediate consequence of the opening up,” she said, downgrading GDP growth in the fourth quarter to 2.8% from 3% previously.
China has set out plans to expand domestic consumption and investment, state media said on Wednesday, as policymakers face multiple challenges following abrupt relaxations of harsh COVID-related restrictions, which are expected to usher in a surge of infections.
That would hit businesses and consumers, while a weakening global economy hurts Chinese exports.
China’s economy grew just 3% in the first three quarters of this year and is expected to stay around that rate for the full year, well below the official target of “around 5.5%”.
All eyes are on the closed-door annual Central Economic Work Conference, when Chinese leaders gather to set next year’s economic agenda. They will likely map out more stimulus steps, eager to underpin growth and ease disruptions caused by a sudden end to COVID-19 curbs, policy insiders and analysts said.
($1 = 6.9593 Chinese yuan)
Additional reporting by Liz Lee, Liangping Gao and Kevin Yao; Editing by Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
BEIJING, Dec 9 (Reuters) – China’s factory-gate prices showed an annual fall for a second month in November while consumer inflation slowed, indicating weak activity and soft demand in an economy that has been held back by tough pandemic controls.
Analysts said they expected the government to keep interest rates low and take measures to boost confidence.
The producer price index (PPI) was down 1.3% on a year earlier, unchanged from an annual contraction seen in October, according to National Bureau of Statistics (NBS) data issued on Friday. That was slower than a 1.4% fall tipped in a Reuters poll.
The November consumer price index (CPI) rose at its slowest pace in eight months, climbing 1.6% from a year earlier, which was less than the 2.1% annual rise seen in October but in line with a Reuters poll.
“These data suggest the economic momentum (continues) to weaken,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
A high-level political meeting on Tuesday, a gathering of the ruling Communist Party’s Politburo, emphasised that in 2023 the government would focus on stabilising growth, promoting domestic demand and opening up to the outside world.
Zhang said that, although the government had eased pandemic controls over the past week, it would take further measures to spur the economy.
“The Politburo meeting … identified weak confidence as a major problem for the economy,” he said. “I expect the government will do more to boost market and household confidence. The fast pace of reopening indicates the government’s sense of urgency.”
Growth in the world’s second-largest economy has sagged this year, largely impacted by the uncompromising COVID-19 curbs as global demand has also wavered.
The producer price deflation and milder consumer price inflation of November accompanied record COVID-19 infections and related curbs that disrupted production and curbed mobility.
Although markets have cheered the shift in pandemic policy, economists say it will likely depress growth over the next few months as infections surge, bringing an economic rebound only later in 2023.
Reuters Graphics
Producer deflation was led by the steel industry, in which prices were down 18.7%.
Part of the explanation for slower growth in consumer prices was in food markets.
Food prices were up 3.7% on a year earlier, whereas the rise seen in October was 7.0%. Within the food category, pork was a factor behind moderating inflation: it was 34.4% pricier in November than in the same month last year, but in October the annual rise had been 51.8%.
Underlying core annual inflation, which excludes volatile food and energy prices, was just 0.6% in November, unchanged from October
“The overall inflation pressure remains benign in China, and we expect the CPI inflation will be around 1.6% for 2023, down from 2.0% in 2022. Given this, the monetary policy will remain accommodative over the coming year,” said Hao Zhou, chief economist at Guotai Junan Group.
China’s central bank has kept its benchmark one-year loan prime rate at 3.65% since August. It expects consumer inflation to remain moderate next year.
Reporting by Liangping Gao and Liz Lee; Editing by Edmund Klamann and Bradley Perrett
Our Standards: The Thomson Reuters Trust Principles.
China’s exports worst since Feb. 2020, miss forecast
Imports fall steepest since May 2020 on sluggish demand
Global economic slowdown, China’s COVID woes heap pressure
Politburo meet points to domestic demand key driver in 2023, analyst says
BEIJING, Dec 7 (Reuters) – China’s exports and imports shrank at their steepest pace in at least 2-1/2 years in November, as feeble global and domestic demand, COVID-led production disruptions and a property slump at home piled pressure on the world’s second-biggest economy.
The downturn was much worse than markets had forecast, and economists are predicting a further period of declining exports, underlining a sharp retreat in world trade as consumers and businesses slash spending in response to central banks’ aggressive moves to tame inflation.
Exports contracted 8.7% in November from a year earlier, a sharper fall from a 0.3% loss in October and marked the worst performance since February 2020, official data showed on Wednesday. They were well below analysts’ expectations for a 3.5% decline.
Beijing is moving to ease some of its stringent pandemic-era restrictions, but outbound shipments have been losing steam since August as surging inflation, sweeping interest rate increases across many countries and the Ukraine crisis have pushed the global economy to the brink of recession.
Exports are likely to shrink further over coming quarters, Julian Evans-Pritchard, senior China Economist at Capital Economics, said in a note.
“Outbound shipments will receive a limited boost from the easing of (China’s) virus restrictions, which are no longer a major constraint on the ability of manufacturers to meet orders,” he said.
“Of much greater consequence will be the downturn in global demand for Chinese goods due to the reversal in pandemic-era demand and the coming global recession.”
Responding to the broadening pressure on China’s economy, state media reported on Wednesday that a high-level meeting of the ruling Communist Party held on the previous day had emphasised the government’s focus in 2023 will be on stabilising growth, promoting domestic demand and opening up to the outside world.
“The Politburo meeting held yesterday points to domestic demand as the major driver for growth for the next year, and the fiscal policy will remain proactive to support demand,” said Hao Zhou, chief economist at Guotai Junan International
Reuters Graphics
‘BUMPY REOPENING’
Almost three years of pandemic controls have exacted a heavy economic toll and caused widespread frustration and fatigue in China.
The widespread COVID curbs hurt importers too. Inbound shipments were down sharply by 10.6% from a 0.7% drop in October, weaker than a forecast 6.0% decline. The downturn was the worst since May 2020, partly also reflecting a high year-earlier base for comparison.
Imports of soybeans and iron ore fell in November from a year earlier while those of crude oil and copper rose.
This resulted in a narrower trade surplus of $69.84 billion, compared with a $85.15 billion surplus in October and marked the lowest since April when Shanghai was under lockdown. Analysts had forecast a $78.1 billion surplus.
The government has responded to the weakening economic growth by rolling out a flurry of policy measures over recent months, including cutting the amount of cash that banks must hold as reserves and loosening financing curbs to rescue the property sector.
But analysts remain sceptical the steps could achieve quick results, as the full-blown relaxation of pandemic controls will take more time and as both domestic and external demand remains weak.
Many businesses are struggling to recover, while surveys last week on factory activity in China and globally suggested many more months of hard grind ahead.
Apple supplier Foxconn (2317.TW) said that revenue in November dropped 11.4% year-on-year, after production problems related to COVID controls at the world’s biggest iPhone factory in Zhengzhou.
“The shift away from zero-COVID and step up in support for the property sector will eventually drive a recovery in domestic demand but probably not until the second half of next year,” Evans-Pritchard said.
With the Chinese yuan already down sharply this year, policymakers’ room for manoeuvre is also limited as hefty monetary policy stimulus at home at a time of rapidly rising interest rates globally could trigger large scale capital outflows.
The Ukraine war, which sparked a surge in already high inflation globally, has intensified geopolitical tensions and further undermined the business outlook.
China’s economy grew just 3% in the first three quarters of this year, well below the annual target of around 5.5%. Full-year growth is widely expected by analysts to be just over 3%.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, cautioned about China’s “bumpy reopening” process.
“As global demand weakens in 2023, China will have to rely more on domestic demand,” he said.
Reporting by Ellen Zhang and Ryan Woo; Editing by Shri Navaratnam
Our Standards: The Thomson Reuters Trust Principles.
Tesla cuts output plan for Shanghai plant for December-sources
All S&P 500 sectors decline, with energy stocks hit hard
Indexes down: Dow 1.4%, S&P 1.79%, Nasdaq 1.93%
Dec 5 (Reuters) – U.S. markets ended Monday lower, as investors spooked by better-than-expected data from the services sector re-evaluated whether the Federal Reserve could hike interest rates for longer, while shares of Tesla slid on reports of a production cut in China.
The electric-vehicle maker (TSLA.O) slumped 6.4% on plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month.
This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline.
Broadly, indexes suffered as data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.
The data came on the heels of a survey last week that showed stronger-than-expected job and wage growth in November, challenging hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.
“Today is a bit of a response to Friday, because that jobs report, showing the economy was not slowing down that much, was contrary to the message which (Chair Jerome) Powell had delivered on Wednesday afternoon,” said Bernard Drury, CEO of Drury Capital, referencing comments made by the head of the Federal Reserve saying it was time to slow the pace of coming interest rate hikes.
“We’re back to inflation-fighting mode,” Drury added.
Investors see an 89% chance that the U.S. central bank will increase interest rates by 50 basis points next week to 4.25%-4.50%, with the rates peaking at 4.984% in May 2023.
The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.
“Stock Exchange” is seen over an entrance to the New York Stock Exchange (NYSE) on Wall St. in New York City, U.S., March 29, 2021. REUTERS/Brendan McDermid/File Photo
The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan, Citigroup and BlackRock among those that believe a recession is likely in 2023.
The Dow Jones Industrial Average (.DJI) fell 482.78 points, or 1.4%, to close at 33,947.1, the S&P 500 (.SPX) lost 72.86 points, or 1.79%, to end on 3,998.84, and the Nasdaq Composite (.IXIC) dropped 221.56 points, or 1.93%, to finish on 11,239.94.
In other economic data this week, investors will also monitor weekly jobless claims, producer prices and the University of Michigan’s consumer sentiment survey for more clues on the health of the U.S. economy.
Energy (.SPNY) was among the biggest S&P sectoral losers, dropping 2.9%. It was weighed by U.S. natural gas futures slumping more than 10% on Monday, as the outlook dimmed due to forecasts for milder weather and the delayed restart of the Freeport liquefied natural gas (LNG) export plant.
EQT Corp (EQT.N), one of the largest U.S. natural gas producers, was the steepest faller on the energy index, closing 7.2% lower.
Financials (.SPSY) were also hit hard, slipping 2.5%. Although bank profits are typically boosted by rising interest rates, they are also sensitive to concerns about bad loans or slowing loan growth amid an economic downturn.
Meanwhile, apparel maker VF Corp (VFC.N) dropped 11.2% – its largest one-day decline since March 2020 – after announcing the sudden retirement of CEO Steve Rendle. The firm, which owns names including outdoor wear brand The North Face and sneaker maker Vans, also cut its full-year sales and profit forecasts, blaming weaker-than-anticipated consumer demand.
Volume on U.S. exchanges was 10.78 billion shares, compared with the 11.04 billion average for the full session over the last 20 trading days.
The S&P 500 posted six new 52-week highs and four new lows; the Nasdaq Composite recorded 105 new highs and 133 new lows.
Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian and Devik Jain in Bengaluru and David French in New York; Editing by Anil D’Silva, Shounak Dasgupta and Lisa Shumaker
Our Standards: The Thomson Reuters Trust Principles.
Unemployment rate steady at 3.7%; participation rate falls
Average hourly earnings rise 0.6%; up 5.1% year-on-year
WASHINGTON, Dec 2 (Reuters) – U.S. employers hired more workers than expected in November and increased wages, shrugging off mounting worries of a recession, but that will probably not stop the Federal Reserve from slowing the pace of its interest rate hikes starting this month.
Despite the strong job growth, some details of the Labor Department’s closely watched employment report on Friday were a bit weak, which economists said could be flagging upcoming labor market weakness. Household employment decreased for a second straight month. About 186,000 people left the labor force, keeping the unemployment rate unchanged at 3.7%.
Labor market tightness and strength keeps the Fed on its monetary policy tightening path at least through the first half of 2023, and could raise its policy rate to a higher level where it could stay for sometime. It also underscores the economy’s resilience heading into was is expected to be a tough year.
“November’s labor market report was clearly bad news for the Fed’s war on inflation,” said Jan Groen, chief U.S. macro strategist at TD Securities in New York. “The Fed has no other choice than to remain in tightening mode for the near future, with 50 basis points hikes in December and February.”
Nonfarm payrolls increased by 263,000 jobs last month. Data for October was revised higher to show payrolls rising 284,000 instead of 261,000 as previously reported. Monthly job growth of 100,000 is needed to keep pace with growth in the labor force.
Economists polled by Reuters had forecast payrolls increasing 200,000. Estimates ranged from 133,000 to 270,000. Employment growth has averaged 392,000 per month this year compared with 562,000 in 2021.
Hiring remains strong despite announcements of thousands of job cuts by technology companies, including Twitter, Amazon (AMZN.O) and Meta (META.O), the parent of Facebook.
Economists say these companies are right-sizing after over-hiring during the COVID-19 pandemic, noting that small firms remain desperate for workers.
There were 10.3 million job openings at the end of October, with 1.7 openings for every unemployed person, many of them in the leisure and hospitality as well as healthcare and social assistance industries.
The gains in employment last month were led by the leisure and hospitality sector, which added 88,000 jobs, most of them at restaurants and bars. Leisure and hospitality employment remains down 980,000 from its pre-pandemic level.
There were 45,000 jobs added in healthcare, while government payrolls increased 42,000. Construction employment increased by 20,000 jobs despite the housing market turmoil, while manufacturing added 14,000 jobs.
But retail trade employment fell by 30,000 jobs, with most of the losses in general merchandise stores. Transportation and warehousing payrolls decreased by 15,000 jobs. Temporary help jobs, a segment normally considered a harbinger of future hiring, decreased by 17,200.
“The labor market might encounter some bumps in the road next year, but it’s heading into 2023 cruising,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.
Fed Chair Jerome Powell said on Wednesday the U.S. central bank could scale back the pace of its rate hikes “as soon as December.” The Fed has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in the fastest rate-hiking cycle since the 1980s.
Policymakers meet on Dec. 13 and 14. Attention now shifts to November’s consumer price data due on Dec. 13.
Stocks on Wall Street fell. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.
WAGES ACCELERATE
With the labor market still tight, average hourly earnings increased 0.6% after advancing 0.5% in October. That raised the annual increase in wages to 5.1% from 4.9% in October. Wage growth peaked at 5.6% in March.
Reuters Graphics Reuters Graphics
The broad wage gains suggest that the moderation in inflation, evident in October data, will be gradual. Economists said this also raised concerns about a wage-price spiral that could keep service prices rising outside the shelter component. Fed officials have shied away from calling a price-wage spiral.
“The broad-based nature of the increase and its consistency with other data on wages makes us think that around 5% average hourly earnings growth is not an aberration,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York.
Strong wage gains are helping to drive consumer spending, which surged in October, leading economists to believe that an anticipated recession next year would be short and shallow. But there are some signs of weakness emerging in the labor market.
Household employment decreased by 138,000 jobs, the second straight monthly decline. Though household employment tends to be volatile as it is drawn from a smaller sample compared to nonfarm payrolls, economists said the divergence between these two measures was important to watch.
“The household survey may be better in capturing turning points in the labor market than the payroll survey, since the payroll survey is unable to adequately capture activity in opening and closing firms while the household survey can,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
Others, however, argued nonfarm payrolls were a better gauge and expected household employment to converge with payrolls.
The participation rate, or the proportion of working-age Americans who have a job or are looking for one, slipped to 62.1% from 62.2% in October. Some of the decrease in household employment and participation was likely because of illness, with 1.6 million people saying they were absent from work because they were sick, up 265,000 from October.
The participation rate for Americans 55 years and older fell, possibly reflecting retirements. The employment-to-population ratio dipped to 59.9% from 60.0% in October.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.