2025-12-09 05:03

Dec 9 (Reuters) - The strength of the euro is amplifying the deflationary effect of China’s export machine, which may end up being the catalyst that could jolt the European Central Bank out of its "good place" and into more interest rate cuts. The euro is around $1.166, having hit a four-year high of $1.1918 in September and set for a gain of nearly 13% this year, the most since 2017. Sign up here. EURO MORE EXPENSIVE THAN MEETS THE EYE The ECB's euro real effective exchange rate - essentially the basket of key trading partner currencies adjusted for inflation - hit a high of 98.68 in September, the most since May 2014. It was at 97.81 in November . The nominal rate , which is around 129.96, hit a record 130.87 in September, having risen 5.7% so far in 2025. "The euro is a lot more expensive than meets the eye," said Themos Fiotakis, Barclays global head of forex strategy. "If you look at the euro on a trade-weighted basis, and also against some of its more direct competitors, you’ll see that the euro is at historically high levels," he argued, adding that factoring in U.S. tariffs offers a euro rate closer to $1.28. One of the main drivers of the rise in the trade-weighted euro has been the 7% drop in the Chinese yuan in the offshore market this year . China is Europe's largest trading partner. The most recent data show the euro zone had a trade deficit of 33 billion euros with China in September, compared with a 22.2-billion euro surplus with the United States, the region's second-largest partner. ONE OR TWO RATE CUTS STILL POSSIBLE Goldman Sachs recently delivered its biggest upgrade to China's growth outlook in a decade, saying Beijing’s push to flood markets with cheap goods could stoke deflation, particularly in Europe. Chinese exporters will be looking to expand their footprint in markets other than the United States and, given the country's grip on supply of critical rare earth materials, there may be little room for trade barriers. ECB Vice President Luis de Guindos said in July the central bank can ignore an appreciation of the euro up to $1.20, but it would get "much more complicated" above that level. "We’re seeing only limited pass-through from the exchange rate so far, as margins are still being rebuilt—and that process may not be complete yet,” said Simon Wells, chief European economist at HSBC. "If the trade-weighted euro were to appreciate sharply from here, say by around 5%, that could well trigger further policy easing,” he added, noting that in this case there would likely be more than one cut. ECB official Martin Kocher said in September the exchange rate wasn't a risk, but further euro appreciation could "become problematic" for exporters, while Martins Kazaks recently said the exchange rate and Chinese trade flows were key risks to the central bank's policy outlook. “What I’m telling clients is that our base case remains that rates will be unchanged, but the likelihood that the ECB will cut one or two more times between now and the summer of next year is still pretty high,” said Carsten Brzeski, global head of macro research and chief euro zone economist at ING. “The China story could be the tipping factor to push the ECB into rate cuts.” BETS ON ECB RATES SENSITIVE TO TRADE TENSIONS Markets show traders expect the ECB to be firmly on hold until at least March 2027. But tariffs and fears of a global trade war have seen that pricing come back from a low in April of 1.55%, when Trump slapped tariffs on all major trading partners. Strategists say the outlook for the euro will remain dominated by the difference between euro zone and U.S. interest rates. The Federal Reserve is widely expected to deliver a series of cuts next year that could weigh on the dollar and, in turn, boost the euro. “Lower rates and a weaker dollar go hand in hand,” said Andreas Koenig, head of global currency management at Amundi Asset Management, arguing that Trump will influence the Fed toward more easing ahead of mid-term elections. "I think that the first sequence is a lower dollar, then an accelerating (U.S.) economy." https://www.reuters.com/world/china/euros-hidden-strength-could-muddy-ecbs-good-place-2025-12-09/

2025-12-09 00:23

Dec 9 (Reuters) - Russian drones attacked the northern Ukrainian city of Sumy late on Monday in the second major strike on the city in 24 hours, triggering a power outage, the regional governor said. "In the space of half an hour, the Russians launched more than 10 drone strikes on the city," Governor Oleh Hryhorov wrote on Telegram. "There is no electricity in Sumy. Some critical infrastructure is operating on reserve power sources." Sign up here. Hryhorov said officials were checking for casualties and that power would be restored as soon as it was safe for crews to do so. Sumy, a city of around 250,000 before war broke out in February 2022, has been a frequent target of Russian attacks. Earlier on Monday, Hryhorov said, Russian drones struck an apartment block in the city, injuring seven people. Russian attacks on Ukraine have for months focused on energy targets in the run-up to winter. https://www.reuters.com/world/europe/russian-drone-attacks-cut-power-sumy-northern-ukraine-2025-12-09/

2025-12-09 00:11

Trump administration vehicle efficiency rule rollback would reduce upfront car costs by $930 Upfront car cost savings would evaporate quickly due to fuel, repair costs, analysts say WASHINGTON, Dec 8 (Reuters) - The Trump administration's proposal to roll back Biden-era vehicle fuel-efficiency standards may save automakers in the U.S. tens of billions of dollars and potentially lower upfront purchase costs for American car buyers. But any savings for car buyers will vanish quickly as drivers are forced to shell out more cash at the fuel pump, according to industry experts who analyzed the administration’s proposal as well as the administration's own projections. Sign up here. The National Highway Traffic Safety Administration and the Environmental Protection Agency last Wednesday proposed cutting the fuel-economy requirements for cars to 34.5 miles per gallon on average by 2031, down from the 50.4 miles per gallon (21.4 km per liter) set by former President Joe Biden. AUTOMAKERS SAVE BILLIONS As a result, automakers would save $35 billion through 2031 and average upfront vehicle costs would decline by about $930, assuming the automakers pass along the savings, according to NHTSA’s economic analysis in support of the proposal. But the NHTSA’s same economic analysis said the proposal would raise fuel consumption by around 100 billion gallons through 2050 relative to the Biden standard, costing Americans up to $185 billion. "The Department of Transportation is now estimating larger upfront savings on technology costs, but they are also estimating even larger losses in fuel savings," said Jason Schwartz, legal director at New York University's Institute for Policy Integrity. "As for just how quickly any upfront savings will evaporate in the face of more money spent at the gas pump, very quickly indeed," he said. Car buyers with long-term financing may not feel even the short-term benefits, as purchase savings would be spread out over time alongside the higher fuel bills. "From the very first day of driving, it will cost consumers more to operate their less-efficient cars: more for gas, more for repairs, more time wasted pumping gas," he said. WHITE HOUSE DEFENDS ROLLBACKS The Trump administration touted the fuel economy rollback proposal as a boost to the auto industry and a benefit for consumers by potentially allowing for the comeback of less-efficient vehicles such as station wagons, a staple of 1970s and 1980s family travel. It criticized Biden’s standards as a mandate for more electric vehicles that are more expensive, and which American automakers have struggled to produce profitably at scale. Some of the biggest beneficiaries of the proposal include U.S. automakers Ford (F.N) , opens new tab and GM (GM.N) , opens new tab, along with Europe-based Stellantis (STLAM.MI) , opens new tab, which produces vehicles under the Chrysler, Dodge and Ram brands in the United States, according to the NHTSA’s analysis. The administration has said that longer-term cost estimates including fuel prices are more speculative and that its cost-benefit analysis did not factor in maintenance costs. "Under our proposal, initial vehicle owners will save more upfront relative to fuel costs. Moreover, that savings calculation does not include savings from reduced fines [from non compliance with higher CAFE standards]," an NHSTA spokesperson said. SCIENTISTS CHALLENGE ANALYSIS Dave Cooke, a senior scientist for the clean transportation program at Union of Concerned Scientists, said he believed the proposal amounted to a financial hit to consumers. "It shows that consumers will be paying more in lifetime fuel costs than saved in technology costs beginning in model year 2027 in every single one of their three alternative (scenarios) compared to the original standards under Biden," he said of the NHTSA analysis. He also criticized the administration’s analysis for omitting the foregone financial benefits associated with increased tailpipe pollution and greenhouse gas emissions. The NHTSA’s analysis showed the proposal would raise vehicle carbon dioxide emissions by around 5% relative to the Biden standards. Transport is the top source of U.S. carbon dioxide output, according to the EPA. Trump has called global warming a "con job" and pulled the United States out of international efforts to combat it. The EPA said its administrator, Lee Zeldin, had made revitalizing the American auto industry one of his priorities. "EPA is committed to delivering on this promise and giving consumers choice through rulemaking within EPA’s jurisdiction," the agency said in a statement. Analysts for Edmunds, a consumer research guide for car buyers, said it may be too early to forecast how quickly the projected upfront savings on vehicles might be offset by higher fuel costs. Edmunds told Reuters that product development cycles are typically planned years in advance, so any meaningful impact would take quite a while to materialize. https://www.reuters.com/sustainability/climate-energy/trump-fuel-economy-rollback-may-make-cars-cheaper-higher-gas-bills-will-absorb-2025-12-08/

2025-12-09 00:10

LONDON, Dec 9 (Reuters) - Britain launched its second-ever carbon capture licensing round on Tuesday for 14 locations that could potentially store up to 2 gigatons of carbon dioxide, the North Sea Transition Authority regulator said. Carbon capture technology can help to decarbonise industrial sites such as gas-fired power plants by filtering emissions before they reach the air and storing the CO2 in depleted oil and gas fields or other underground rock structures. Sign up here. But making such projects commercially viable is difficult in the context of a fragmented carbon price landscape, typically leaving them dependent on government subsidies. Britain awarded 21 carbon capture licenses in 2023. In terms of receiving actual permits to proceed towards CO2 injection, so far only two projects - Endurance and HyNet, which predate the 2023 licensing round - have reached that stage. The new licensing round will run until March 24, 2026, the NSTA said, adding licensing would likely be awarded in early 2027. https://www.reuters.com/sustainability/climate-energy/britain-launches-second-carbon-capture-licensing-round-2025-12-09/

2025-12-08 23:57

SAO PAULO, Dec 8 (Reuters) - Brazil's Federal Audit Court (TCU) on Monday voted six to three to recommend that operators of existing container terminals at the Santos port be barred from participating in the first phase of bidding for a planned mega terminal, citing concerns over market concentration. The decision deals a blow to companies such as Danish shipping group Maersk (MAERSKb.CO) , opens new tab, MSC (009780.KQ) , opens new tab and others already operating container terminals in Latin America's largest port, as these companies will only be able to enter a second phase of the auction if the first does not attract valid bids. Sign up here. The two-phase model, proposed by port regulator Antaq and challenged by Maersk in court, could benefit new entrants from Asia or even companies belonging to the JBS meatpacking group, which entered the shipping sector last year as operator of a container terminal in Santa Catarina. The Brazilian government expects the winner of the Tecon 10 auction to invest nearly 6 billion reais ($1.11 billion) over 25 years, and boost container handling capacity at Santos by 50%, minimizing logistical bottlenecks. "Accepting the proposal to hold the auction in two phases increases the chance of an independent operator entering (the port) and reduces the risk that a single operator controls the terminal," said Augusto Nardes, a member of the TCU court. In a statement, Maersk said the TCU's decision disregards technical studies done by different Brazilian government agencies, adding it "significantly reduces the project's potential in Latin America's largest port." Philippines-based International Container Terminal Services, operator of 33 container handling terminals in various countries, welcomed the TCU's decision. "This is a traditional and well-known model in the infrastructure sector, which encourages the effective entry of a new player into the Port of Santos," it said in a statement. But the TCU's recommendation, which allows for the auction to be scheduled by the Ministry of Ports, was not unanimous. Benjamin Zymler, a member of the court, defended an alternative model whereby the winner, if already an operator at Santos, would be forced to divest assets. Barring current operators from the first phase of the auction could breach the principle of competition in the bidding process, said Cristina Machado, a public prosecutor at the TCU. ($1 = 5.4298 reais) https://www.reuters.com/world/americas/brazil-court-recommends-two-stage-auction-of-mega-santos-port-terminal-blow-2025-12-08/

2025-12-08 23:46

Indexes fall: Dow 0.45%, S&P 500 0.35%, Nasdaq composite 0.14% Paramount Skydance rallies as it bids for Warner Brothers, against Netflix Confluent jumps after report that IBM nears $11 billion buyout deal Oppenheimer sets Street-high 8,100 S&P 500 target for 2026 Dec 8 (Reuters) - Wall Street's main indexes closed lower on Monday, with most S&P 500 industry sectors in the red, while Treasury yields gained as investors waited nervously for the Federal Reserve monetary policy update due in two days. Hopes for a December rate cut were solidified after last week's data that showed consumer spending increased moderately toward the end of the third quarter. However, investors are still waiting for clues about future policy moves from what is expected to be the most divided Fed in years. Sign up here. "It'll be hard for the market to find a direction that it wants to follow until after the Fed meeting," said Carol Schleif, chief market strategist at BMO Private Wealth. "We just came off a really strong earnings season and we won't have earnings again for another four weeks. The only thing that the market really has to hang its hat on or to point to is the Fed." Traders are now pricing in a roughly 89% chance of a 25-basis-point rate cut on Wednesday according to the CME's FedWatch Tool , opens new tab. Meanwhile, higher yields on U.S. Treasury bonds also put some pressure on equities. The U.S. 10-year Treasury yield rose soon after a powerful earthquake struck off the coast of Japan before U.S. stock trading had opened. The Dow Jones Industrial Average (.DJI) , opens new tab fell 215.67 points, or 0.45%, to 47,739.32, the S&P 500 (.SPX) , opens new tab lost 23.89 points, or 0.35%, to 6,846.51 and the Nasdaq Composite (.IXIC) , opens new tab lost 32.22 points, or 0.14%, to 23,545.90. In individual stocks, Paramount Skydance's (PSKY.O) , opens new tab hostile $108.4 billion bid to buy Warner Bros Discovery (WBD.O) , opens new tab garnered investor attention as it aimed to outbid Netflix (NFLX.O) , opens new tab. The bid sent shares of Warner Bros Discovery up 4.4%, while Paramount's shares jumped 9% and Netflix stock dropped 3.4%. Netflix was among the major drags on the S&P 500 Communication Services Index (.SPLRCL) , opens new tab, which closed down 1.8% and was the biggest laggard of the benchmark's 11 major industry sectors. The sole advancing sector was technology (.SPLRCT) , opens new tab, which added 0.9% with boosts from Microsoft (MSFT.O) , opens new tab, Nvidia (NVDA.O) , opens new tab and Broadcom (AVGO.O) , opens new tab. Later this week, the focus will shift to tech sector valuations, with earnings reports due from Broadcom and Oracle (ORCL.N) , opens new tab, as investors have been worried about debt-funded artificial intelligence spending. In a move that BMO's Schleif said was positive for AI-related companies, U.S. President Donald Trump said he would sign an executive order this week to create a single national rule for artificial intelligence. Technology companies have been looking to override disparate laws passed by U.S. states. However, Google parent Alphabet (GOOGL.O) , opens new tab still ended down more than 2%, marking the biggest drag on the communications services index, followed by Meta Platforms (META.O) , opens new tab. Elsewhere, chipmaker Marvell Technology (MRVL.O) , opens new tab shares dropped 7% after used-car dealer Carvana beat it to securing a spot in the S&P 500. Carvana shares finished up 12% after the decision. Confluent shares soared 29% after IBM said it will acquire the data-infrastructure company for about $11 billion. IBM shares ended up a modest 0.4%. Tesla (TSLA.O) , opens new tab ended down 3% following Morgan Stanley's bearish view on the electric-vehicle maker. Also on Monday, Oppenheimer forecast a Street-high year-end 2026 target of 8,100 points for the S&P 500, citing strong earnings and macro resilience. Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, where there were 167 new highs and 68 new lows. On the Nasdaq, 2,092 stocks rose and 2,672 fell as declining issues outnumbered advancers by a 1.28-to-1 ratio. The S&P 500 posted 20 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 149 new highs and 79 new lows. On U.S. exchanges, 16.12 billion shares changed hands, compared with the 17.52 billion average for the last 20 sessions. https://www.reuters.com/business/wall-st-futures-edge-up-fed-interest-rate-cut-decision-nears-2025-12-08/