2025-01-09 00:56

Jan 8 (Reuters) - The union representing 45,000 dock workers on the U.S. East and Gulf Coasts and their employers on Wednesday said they reached a tentative deal on a new six-year contract, averting a strike that could have snarled supply chains and taken a toll on the U.S. economy. It would have been the second strike in just four months by U.S. dock workers. The tentative agreement did not, however, include terms on the use of automation, which has been the thorniest issue of the labor talks. The United States Maritime Alliance (USMX) employer group and the International Longshoremen's Association (ILA), in a joint statement, called the agreement a "win-win." "This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports – making them safer and more efficient, and creating the capacity they need to keep our supply chains strong," the groups said. Terms of the deal were not disclosed. The two sides extended talks until Jan. 15 to hammer a deal on automation. Shipping industry executives were concerned that the parties would not be able to overcome their impasse, leading to a second ILA strike just days before President-elect Donald Trump's Jan. 20 inauguration. A three-day ILA strike in October triggered a surge in shipping prices and cargo backlogs at the 36 affected ports. Longshoremen returned to work after employers agreed to a 62% wage increase over the next six years. ILA and USMX have agreed to continue operating under the current contract until the union can meet with its full Wage Scale Committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract. Sign up here. https://www.reuters.com/world/us/us-dockworkers-port-employers-reach-tentative-agreement-2025-01-09/

2025-01-09 00:25

Water systems in LA not designed for wildfire demands 70,000 evacuated, five dead as fires burn unimpeded Experts highlight infrastructure challenges in rapid water delivery LOS ANGELES, Jan 8 (Reuters) - Crews battling multiple wildfires that raged across Los Angeles on Wednesday were up against a near-perfect storm: intense wind, low humidity and, most troubling for residents, inadequate supplies of water to contain the blazes. Los Angeles authorities said their municipal water systems were working effectively but they were designed for an urban environment, not for tackling wildfires. On Wednesday, at least three major blazes burned in LA County communities simultaneously, including a fire in the affluent Pacific Palisades neighborhood, an area west of downtown LA dotted with multimillion-dollar celebrity homes built along steep canyons. Jay Lund, a professor in civil and environmental engineering at the University of California Davis, said city water tanks are typically designed to be able to put out localized fires, not widespread fires like the ones blazing in Los Angeles. "It's not a matter of there's not enough water in Southern California, it's a matter of there's not enough water in that particular area of Southern California just for those few hours that you need it to fight the fires," Lund added. Across the county, more than 70,000 people were ordered to evacuate and at least five were left dead as fierce winds fueled the fires, which have burned unimpeded since Tuesday. The fires have destroyed hundreds of buildings. "A firefight with multiple fire hydrants drawing water from the system for several hours is unsustainable," said Mark Pestrella, director of Los Angeles County Public Works. Janisse Quinones, CEO and chief engineer of the Los Angeles Department of Water and Power, said the demand for water to fight fires at lower elevations was hampering the city's ability to refill water tanks at higher elevations. The lack of water hampered efforts particularly in Pacific Palisades, an upscale coastal enclave where a wildfire has consumed nearly 12,000 acres (4,856 hectares). TANKS FILLED IN ADVANCE The Los Angeles Department of Water and Power said that in advance of the windstorm, it had filled all available water tanks in the city, including three 1-million-gallon (3.8-million-litre) tanks in the Palisades area. The area had exhausted the three water storage tanks by early Wednesday, Quinones said in a press briefing. "We're fighting a wildfire with urban water systems, and that is really challenging," she added, noting that Pacific Palisades experienced four times the normal water demand for 15 hours as firefighters battled the blaze. The department urged Angelenos to conserve water, and said it had deployed 18 water trucks of 2,000 to 4,000 gallons since Tuesday to help firefighters. Lund said the nature of the fires was such that it was nearly impossible to arrange enough water in advance. "If everything catches fire at once, there's not going to be enough water for everybody," he said. "There's just no way that you could fit the pipes to work to move that much water across that area in a short period of time." Gregory Pierce, director of the UCLA Water Resources Group and an adjunct professor at the Department of Urban Planning, said the fires were unusually intense even by Southern California standards. His brother's house burned down, he said. He said the problem was not a lack of water so much as the difficulties in rapidly getting large amounts of water to a specific point where it was needed, which would entail major investments in power and infrastructure. Sanah Chung, a Pacific Palisades resident who spoke to a reporter while hosing down hedges and trees in his front yard, said governments at all levels should have been more proactive in preparing for the fires. "There must be some things we can do to try to mitigate this. Please. Fire hydrants are empty. Firefighters are doing everything they can, but we need to do things more proactively before," Chung, 57, told Reuters. Sign up here. https://www.reuters.com/business/environment/los-angeles-water-runs-short-wildfires-burn-out-control-2025-01-09/

2025-01-08 23:30

ORLANDO, Florida, Jan 8 (Reuters) - China, the global growth engine for the last 20 years, now boasts lower long-term bond yields than Japan, the former poster child for deflationary economic stagnation. This may signal that the "factory to the world" faces the real risk of "Japanification." China's bond yields have plunged to their lowest levels on record, with the two-year yield about to break below 1.00%, having been 1.50% only a few months ago. Remarkably, China's 30-year yield recently fell below the Japanese Government Bond (JGB) yield for the first time ever. That phenomenon looks set to hit the 10-year tenor, with China's bond yield now less than 50 basis points above its JGB equivalent. It's a situation that would have scarcely been believable to any observer of the global economy over the past 30 years. But here we are. The collapse in Chinese yields is a reminder that the deflation, bad debt dynamics and troubling demographic trends plaguing Asia's largest economy today are strikingly similar to those that hobbled its fiercest regional rival for three decades. CAPITAL FLIGHT Japan has recently begun to free itself from its decades of deflation, sluggish growth and negative interest rates, enabling the Bank of Japan to begin gradually "normalizing" rate policy. Meanwhile, Beijing is struggling to reflate an economy slammed by COVID-19 pandemic shutdowns and a property sector bust. Deflation, lackluster consumer demand and capital flight forced Beijing to announce unprecedented stimulus and liquidity measures late last year. Investors initially cheered Beijing's pledges, but the optimism has faded quickly. Chinese stocks are down 5% so far this year and are underperforming their regional and global peers. The country's foreign exchange reserves also tumbled $64 billion in December, representing nearly 2% of China's total stash. This was the biggest monthly fall since April 2022 and one of the steepest since the yuan slide and capital flight of 2015-2016. Analysts at JP Morgan reckon the sharp drop was a result of Beijing's efforts to mitigate capital outflows in December, which they believe neared $80 billion. China's plight is exacerbated by the very real risk of another U.S.-Sino trade war once President-elect Donald Trump officially begins his second term in the White House later this month. And if UBS economists are right, China's economy will grow just 4.0% in 2025 compared with 4.9% last year. Apart from the pandemic-ravaged years of 2020 and 2021, that would be China's lowest growth since it emerged as a global economic force in the 1990s. Those with a decent memory will recall that it took decades for Japanese property and equity prices to recover their pre-crash peaks following the country's real estate bust in the early 1990s. It's too early to know if a similar fate awaits Chinese assets, but investors right now are unquestionably pessimistic. 'TACTICALLY NEUTRALISING' Consequently, many are reevaluating their relative exposure to these two Asian powerhouses. Societe Generale's asset allocation team said at the end of last year that it was "tactically neutralising" the Chinese equity allocation in its portfolio from overweight, as it increased its exposure to Japan. This week, analysts at HSBC slashed their year-end forecast for China's 10-year yield to 1.2% from 1.8%. The generally pessimistic and optimistic consensus outlooks for China and Japan, respectively, are obviously not without risk. Perhaps Japan won't "normalize" as quickly as many expect. The country has not seen interest rates as high as 0.5% in nearly 20 years, which helps explain Japanese policymakers' caution. Indeed, economists at Barclays recently pushed out their forecast for the next BOJ interest rate hike to March from January and the timing of the subsequent increase to October from July. In the short term, the inverse correlation between Chinese and Japanese bond yields may fizzle out or even reverse, simply because it has been too powerful in recent months to be sustainable. But longer term? Beijing has its work cut out. (The opinions expressed here are those of the author, a columnist for Reuters.) Sign up here. https://www.reuters.com/markets/asia/chinas-tumbling-bond-yields-intensify-japanification-risks-mcgeever-2025-01-08/

2025-01-08 23:18

Jan 8 (Reuters) - CME Group (CME.O) , opens new tab said on Wednesday it plans to launch spring wheat futures and options in the coming months that will compete directly with a historic Minneapolis market now owned by Miami International Holdings. Traders expect CME, which dominates agricultural futures with benchmark grain and soy contracts, may steal trading volume for hard red spring wheat after its launch slated for early in the second quarter. The owner of the Chicago Board of Trade already runs U.S. markets for two other types of wheat, soft red winter wheat and hard red winter wheat. "Market participants will now be able to manage price risk across every major type of wheat on one exchange and all cleared in a single clearing house," said John Ricci, CME's global head of agricultural products. Hard red spring wheat was historically traded at the Minneapolis Grain Exchange, or MGEX, which launched its signature contract in 1883 to trade the high-quality crop used to make bread and frozen dough products. It has the thinnest trading volume of the three U.S. wheat contracts. Miami International Holdings last year renamed the Minneapolis market as MIAX Futures Exchange after buying MGEX in 2020. MIAX plans to transition the trading and dissemination of market data for MGEX products from CME's Globex platform to a platform it is building on June 30, spokesman Andy Nybo said. MIAX is developing its own platform so it can launch new products without asking CME to add them to Globex, he added. "We can control our own destiny," Nybo said. Asked about CME's launch, he said competition is healthy in markets. "We're in it to compete." MIAX said in September it entered a licensing agreement with Bloomberg Index Services and will list a number of equity index products. But exiting Globex will cost it some wheat business. Brian Hoops, president of broker Midwest Market Solutions, said he will shift to CME's product. "Taking it off of Globex, I think, is going to eliminate a lot of the volume from someone like me who's doing brokerage work with clients that are growing spring wheat," Hoops said. "It's kind of the end of the old Minneapolis Grain Exchange product." Commercial traders, such as flour mills and grain elevators, initially might favor the Miami exchange as the established marketplace, or use both trading platforms, said Frayne Olson, an agricultural economist with North Dakota State University. Ultimately, he said, speculative traders will determine which platform dominates. "If you don't have the trading volumes, the liquidity to get into and out of positions, the contract is going to fail," Olson said. "And that is driven by the speculator." Sign up here. https://www.reuters.com/markets/commodities/cme-group-challenges-miami-exchange-with-new-spring-wheat-contract-2025-01-08/

2025-01-08 23:15

CEG set to pay mostly in stock, absorb $12 bln Calpine debt Deal talks advanced, could come as soon as Monday Would be largest U.S. power M&A deal since 2007 Calpine gas plants complement CEG's current nuclear-heavy fleet Jan 8 (Reuters) - Constellation Energy (CEG.O) , opens new tab is nearing a roughly $30 billion deal to acquire power producer Calpine, people familiar with the matter said on Wednesday, a move that would significantly expand Constellation's generation assets at a time of rising U.S. power demand. The transaction could be announced as early as Monday, said the people. Constellation is expected to pay mostly stock, with a small cash component, said one, adding the purchase price would include around $12 billion of Calpine debt which the buyer will absorb. The deliberations are ongoing, the sources said, cautioning that while the talks are advanced, a deal is not guaranteed. Constellation and Calpine did not respond to comment requests. Shares of Constellation, which have more than doubled over the past year, closed down 4.6% on Wednesday, following news of talks with Calpine. The company has a market value of around $76 billion. Reuters was first to report in May that the private equity owners of Calpine were considering various options, including a sale of the company, at a valuation of about $30 billion, including debt. If the talks are successful, a takeover of Calpine would rank as the biggest in the U.S. power industry since TXU Corp's $45 billion leveraged buyout in 2007. For Constellation, a successful acquisition would add significant gas-fired power generation to its existing mix, which is around 60% nuclear and also includes some gas, renewables and oil, according to its website. It would also broaden Constellation's geographic footprint outside of its traditional focus areas of the northeast and Midwest: Calpine has a dozen power plants in Texas, as well as numerous generation assets on the West Coast. The news comes as the boom in artificial intelligence and data centers is driving power demand higher, making generation assets increasingly attractive to buyers. For investors with long-standing bets on the power industry, the backdrop is allowing them to exit profitably. Calpine was taken private in 2017 by buyout firm Energy Capital Partners, Canadian pension fund CPP Investments and Access Industries for a total of $17 billion, including debt. Both Constellation and Calpine are independent power producers and, unlike regulated utilities, can sell power at market prices, allowing them to profit more when demand rises. U.S. power demand is forecast to hit a record this year, building on an expectation of record demand in 2024, according to the U.S. Energy Information Administration. A government-backed report last month said power demand from data centers was expected to triple in the next three years, and consume as much as 12% of the country's electricity. Bloomberg reported on Constellation's talks with Calpine earlier on Wednesday. Sign up here. https://www.reuters.com/business/energy/constellation-nearing-30-bln-deal-calpine-corp-bloomberg-news-reports-2025-01-08/

2025-01-08 21:49

Jan 9 (Reuters) - A look at the day ahead in Asian markets. China's latest inflation figures are out on Thursday, and they could not be coming at a more fascinating - some might say alarming - time for global bond markets. Long-term yields around the world are shooting higher as investors bet that sticky inflation will force the U.S. Federal Reserve and other central banks to dial down or even halt their rate-cutting cycles. The 30-year UK gilt yield is the highest since 1998, the 30-year U.S. Treasury yield is a whisker from 5%, and the U.S. 'term premium' - the risk premium investors demand for lending long to Uncle Sam rather than rolling over shorter-term debt - is the highest in a decade. If this is a reflection of investors' fears that the inflation genie has not been put back in the bottle and central banks are losing control over the long end of the bond curve, policymakers should be worried. Fed Governor Christopher Waller seems relatively relaxed though, saying on Wednesday he still thinks inflation will fall toward the Fed's 2% target, allowing for further rate cuts. But minutes of the Fed's policy meeting last month showed policymakers are wary, particularly around the impact of policies expected from the incoming Trump administration. Money markets are pricing in only 40 basis points of Fed easing this year, and year-on-year oil price rise is the highest in six months. Investors' inflation fears are bubbling up. The global outlier is China, where policymakers are fighting deflation. As Jim Bianco at Bianco Research points out, it is the only major bond market in the world where yields are falling. Annual producer inflation has been negative every month since October 2022, indicating that price pressures across the economy remain deflationary. Annual consumer inflation is close to zero, and hasn't been above 1% for nearly two years. China's producer and consumer price inflation figures for December will be released on Thursday. According to the consensus forecasts in Reuters polls, economists expect annual PPI inflation shifted slightly to -2.4% from -2.5% in November, while annual CPI inflation cooled to just 0.1% from 0.2%. This is the context in which Chinese bond yields are tumbling to their lowest-ever levels. The 30-year yield is already below the 30-year Japanese Government Bond yield, and the 10-year yield is now less than 50 basis points away from going below its 10-year JGB equivalent. HSBC analysts on Wednesday slashed their year-end 10-year Chinese yield forecast to 1.2% from 1.8%. The yuan remains under heavy selling pressure and on Wednesday slipped to a fresh 16-month low. It is now poised to break the September 2023 low of 7.35 per dollar, a move that will take it to levels last seen in 2007. Here are key developments that could provide more direction to markets on Thursday: - China PPI, CPI inflation (December) - Australia retail sales (November) - Taiwan, Australia, Philippines trade (December) Sign up here. https://www.reuters.com/markets/asia/global-markets-view-asia-graphic-2025-01-08/