2024-09-26 08:56

MOSCOW, Sept 26 (Reuters) - The impending expiry of a U.S. licence permitting transactions involving the pillars of Russia's financial infrastructure could make it harder and costlier for Russian businesses to deal in Chinese yuan, sources engaged in imports and payments told Reuters. The yuan, which hit a near-one-year high against the rouble on Wednesday, has become the most traded foreign currency in Moscow since Russia's decision to send troops into Ukraine in February 2022 sparked sweeping Western sanctions and a ramping-up of Russia's de-dollarisation policy. With Chinese banks wary of the secondary sanctions risks of dealing with Russian entities blacklisted by Washington, and the Bank of Russia reluctant to continue pumping in yuan liquidity through FX swaps, some importers fear that payment issues between Russia and China could worsen. "The situation may change after Oct. 12," a person engaged in importing told Reuters. "An abrupt shortage of yuan or a complete refusal to accept payments from Russia by Chinese banks is possible." YUAN LIQUIDITY SHORTAGE The U.S. Treasury's Office of Foreign Assets Control (OFAC) in June imposed sanctions on Moscow Exchange (MOEX.MM) , opens new tab and its clearing agent, the National Clearing Centre (NCC), leading to an immediate trading halt in dollars and euros on Russia's largest bourse. OFAC issued a licence, due to expire on Oct. 12, authorising the winding down of certain transactions. OFAC did not respond to a request for comment when asked whether another extension to the licence was possible. Upon expiry, all conversion operations, including for Chinese banks' subsidiaries, will halt and all open FX positions through Moscow Exchange will be closed and stopped, a person in the payments market said. "Accordingly, the situation with the supply of yuan liquidity will become even more difficult," the person said. Payments worth billions of yuan are being held up as Chinese state banks shut down transactions with Russia, Reuters reported last month, while many transactions face lengthy delays, increased logistics costs and higher agents' fees. Complicating things, the Russian unit of Austria's Raiffeisen Bank International (RBIV.VI) , opens new tab has refused to make payments to China since September, a person familiar with the matter said. RBI declined to comment. SYSTEMIC RISK The central bank has acknowledged the payment issues and urged commercial lenders to reduce their yuan loan portfolios as this exacerbates the yuan liquidity shortage by forcing the central bank to replenish short-term yuan stocks and driving up the swap interest rate and market volatility. "The central bank is trying to somehow stop the shortage of yuan, as swap rates ... last week reached up to 120%," said Finam brokerage analyst Alexander Potavin, describing the risk as systemic for the largest Russian companies. Central bank data shows banks have cut swap borrowings, to 15.4 billion yuan ($2.19 billion) on Wednesday from a peak of 35.2 billion yuan in early September. "If yuan trading on Moscow Exchange is really cancelled, then there will be no exchange benchmark for the rouble," said Potavin. "Yuan quotes will be formed on the results of trades on the interbank market, which is absolutely non-transparent, manipulable and volatile." ($1 = 7.0184 Chinese yuan renminbi) Sign up here. https://www.reuters.com/markets/currencies/impending-expiry-us-sanctions-licence-threatens-russias-yuan-liquidity-2024-09-26/

2024-09-26 08:00

SNB cuts rates by 25 basis points for third time this year Chairman Jordan says more cuts may be necessary SNB slashes inflation forecasts Swiss franc rises after decision Strong franc has caused problems for Swiss exporters ZURICH, Sept 26 (Reuters) - The Swiss National Bank reduced interest rates by 25 basis points on Thursday, echoing steps to lower borrowing costs by the European Central Bank and U.S. Federal Reserve, and left the door wide open for more rate cuts as inflation cools sharply. The SNB cut its policy rate to 1.00%, the lowest level since early 2023, as expected by analysts in a Reuters poll. The cut was its third such reduction this year as the central bank dialled back measures designed to combat inflation. The decision, the last in the 12-year tenure of SNB Chairman Thomas Jordan, was enabled by the taming of price rises in Switzerland - which slowed to 1.1% in August and has been within the central bank's 0-2% target range for the last 15 months. The SNB is ready to cut interest rates again, Jordan said after the decision, noting that inflationary pressure in Switzerland had decreased significantly. "Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term," he told a press conference after his 42nd and last monetary policy meeting. His successor Martin Schlegel said the SNB's view that inflation was likely to fall further meant further cuts were likely, although he did not give any guarantees. "It's important to know that we don't give forward guidance and we never pre commit, but if you look at monetary conditions, the situation now, it's not unlikely that we also cut in December," Schlegel told Reuters in an interview. The current SNB Vice Chairman, who takes charge of the central bank on Tuesday, did not give guidance on possible moves in the more distant future. The SNB's success in fighting inflation has enabled it to become the frontrunner among central banks in lowering borrowing costs, cutting rates in both March and June. Schlegel said decision to cut rates again was helped by weaker inflationary pressure in Switzerland, with the SNB slashing its inflation forecasts for 2025 and 2026 and predicting consumer price growth of 0.6% in the second quarter of 2027. He also highlighted the rise in the value of the Swiss franc as a contributor to low inflation and acknowledged the difficulties the safe haven currency caused for Swiss exporters already facing weak demand from abroad The franc has appreciated in recent weeks, hitting its highest level in nine years against the euro in early August. It strengthened after the 25-basis-point cut, which followed similar monetary policy easing by the ECB and the Fed earlier this month, was announced. Charlotte de Montpellier, senior economist at ING, said the SNB's 25 point reduction was "the most dovish you could ask for." "Not only is the SNB making it very clear that further rate cuts may be necessary, but it has also revised its inflation forecasts very sharply downwards, and much more sharply than expected," she said. CUTS ON THE WAY Karsten Junius, chief economist at J Safra Sarasin, saw the bank's outlook as more dovish than markets expected. "This is the strongest hint towards future policy decisions that the SNB has given in the past years and a break from previous communication patterns," he said. The SNB trimmed its 2024 inflation forecast to 1.2% from its 1.3% prediction in June. It also cut its forecasts for 2025 to 0.6% from 1.1% previously and for 2026 to 0.7% from 1.0%. "With inflation now expected to average 0.6% in 2025 and 0.7% in 2027, the SNB seems to want to send a very clear signal to the markets that further rate cuts are on the way, in order to weaken the Swiss franc," said de Montpellier at ING. Sign up here. https://www.reuters.com/markets/rates-bonds/snb-cuts-interest-rates-third-time-this-year-flags-further-action-2024-09-26/

2024-09-26 07:57

Weak PMI, sentiment strengthens rate cut calls Hawks likely to push for pause until Dec ECB cut rates this month amid slowing inflation FRANKFURT, Sept 26 (Reuters) - Policy doves at the European Central Bank are preparing to fight for an interest rate cut next month after a string of weaker-than-expected economic data, a move likely to meet resistance from their more conservative peers, seven sources told Reuters. ECB policymakers had seen an Oct. 17 rate cut as rather unlikely after lowering borrowing costs this month on the back of weaker growth forecasts and expectations for a continued, albeit bumpy, fall in inflation over the next year. However, disappointing euro zone business surveys and German sentiment data, as well as a bigger-than-envisaged slowdown in wages, have emboldened policymakers who favour lower rates - or doves in market parlance - to push for a cut, the sources said. Energy costs have also tumbled in recent weeks and some market indicators now point to a risk that the bank could undershoot its inflation target for an extended period. Any push to cut rates again, however, will encounter vigorous opposition from so-called hawks, who argue that surveys often paint a bleaker picture than hard data such as GDP figures, the sources added. Some sources raised a compromise solution in which rates are kept on hold in October but a strong hint is given about a likely December cut if data doesn't improve. But this would contradict the ECB's "meeting by meeting" approach. An ECB spokesperson declined to comment on the matter. With the Oct. 17 decision still three weeks away and important data such as September inflation only due to be published next week, the decision remains wide open and some swing voters have yet to make up their mind, the sources said. Policy hawks have long argued that the emphasis should be on hard data such as wage and GDP figures, as well as the ECB's own projections, all of which become available only for the December meeting. While few policymakers have gone as far as ruling out an October rate cut in private conversations, Slovakia's Peter Kazimir has publicly said the ECB will "almost surely" have to wait until December. Traders have ramped up their bets on an October rate cut after the recent weak data. Money market prices now put a 50-60% likelihood on the ECB lowering its deposit rate by 25 basis points to 3.25%, compared to a 35% chance a week ago. "Overall, September’s PMI (Purchasing Manager Index survey) data suggests that the euro zone's economic recovery rests on shaky foundations, which combined with softer price pressures, is likely to see ECB doves increasingly vocal about the need to deliver another cut in October," said Paul Hollingsworth, chief Europe economist at BNP Paribas. Economists at HSBC said they expected the ECB to cut interest rates by 25 basis points at every meeting from October through to next April, while Societe Generale economist Anatoli Annenkov said there was a case to front-load rate cuts. Sign up here. https://www.reuters.com/markets/europe/ecb-doves-push-rate-cut-oct-hawks-dig-sources-2024-09-26/

2024-09-26 07:49

OPEC+ committed to raising production on Dec 1, FT says Riyadh unwilling to continue ceding market share, FT says Brent down about 2.6% Sept 26 (Reuters) - Saudi Arabia is preparing to abandon its unofficial oil price target of $100 a barrel as it prepares to increase output to win back market share, even if it means lower prices, the Financial Times reported on Thursday, citing people familiar with the matter. The Organization of the Petroleum Exporting Countries, de facto led by Riyadh, along with allies including Russia - together known as OPEC+ - have been cutting oil output to support prices. However, prices are down nearly 6% so far this year, amid increasing supply from other producers, especially the United States, as well as weak demand growth in China. Earlier this month, OPEC+ agreed to delay a planned oil output increase for October and November after crude prices hit their lowest in nine months, saying it could further pause or reverse the hikes if needed. The Financial Times reported that the group is committed to increasing production as planned on Dec. 1, even if that means a longer period of low oil prices. Global crude benchmark Brent was down about 2.6% to $71.57 at 0745 GMT following the report. The Saudi government communications office did not immediately return a request for comment. Saudi Arabia has decided that it is unwilling to continue to cede market share to other oil producers and believes it has enough funding options, including foreign reserves and debt, to withstand a period of lower crude prices, the FT said. The kingdom, the world's top oil exporter, has shouldered a large share of OPEC+ output cuts, reducing its own output by about 2 million barrels per day (bpd) since late 2022. OPEC+ members are currently cutting output by a total of 5.86 million bpd, equivalent to about 5.7% of global oil demand. The kingdom has, however, in the past increased production to defend its market share. In 2020, Saudi Arabia and Russia engaged in a price war, both flooding world markets with oil after Moscow refused to support OPEC's decision to make deeper output cuts to deal with the fallout from the COVID-19 pandemic. Riyadh in 2014 blocked calls by some OPEC members to make output cuts to halt a slide in oil prices, setting the stage for a battle for market share between OPEC and non-OPEC producers amid a boom in U.S. shale production. OPEC and Saudi Arabia have repeatedly said they do not target a certain oil price and make decisions based on market fundamentals and in the interest of balancing supply and demand. Sign up here. https://www.reuters.com/business/energy/saudi-arabia-abandon-100-crude-target-take-back-market-share-ft-reports-2024-09-26/

2024-09-26 07:44

LONDON, Sept 26 (Reuters) - Deutsche Bank said on Thursday it now anticipated a faster European Central Bank rate-cutting cycle, with back-to-back quarter-point rate cuts starting from December. The bank said that it had previously expected the central bank to follow a gradual easing path with quarter point cuts every quarter until a terminal rate of 2-2.5% was reached around end-2025. "We are moving to a faster normalization call, with the ECB to reach the same terminal rate of 2.00-2.50% six months earlier in mid-2025," the bank said in a note. "We expect this more rapid easing cycle to be achieved with back-to-back 25 bp cuts from December, but we do not rule out a 50bp cut in December." Deutsche is the latest bank to change its ECB policy call this week following further signs of a weakening economic outlook. Sign up here. https://www.reuters.com/markets/rates-bonds/deutsche-bank-says-now-expects-faster-ecb-rate-cutting-cycle-2024-09-26/

2024-09-26 07:28

Sept 25 (Reuters) - U.S. Steel (X.N) , opens new tab said on Wednesday an arbitration board had ruled in favour of Nippon Steel's (5401.T) , opens new tab $14.9 billion buyout of the company, but that the United Steelworkers union (USW)disagreed with the decision. The board, jointly selected by the company and the union to settle disputes, ruled that U.S. Steel had satisfied each of the conditions of the successorship clause in its basic labour agreement with the USW. "The arbitrators accepted at face-value Nippon Steel's statement that it would assume the Basic Labor Agreement," USW said. The union said the decision did not change its opposition to the deal. In a statement, Nippon Steel said: "We remain focused on forging a productive relationship with the USW, which includes fulfilling our commitments that go far beyond what is currently required in the existing BLA,", referring to the basic labour agreement. The deal has faced political opposition since it was signed last December. Democratic presidential candidate Kamala Harris and her Republican challenger Donald Trump say they support keeping U.S. Steel as an American-owned company. Nippon Steel agreed to pay a hefty premium to clinch the deal for U.S. Steel on a bet that it could benefit from U.S. President Joe Biden's infrastructure spending bill. Earlier this month, U.S. Steel warned that a failure to conclude the deal would put thousands of U.S. union jobs at risk and signalled that it would close some steel mills and potentially move its headquarters out of the politically important state of Pennsylvania. Nippon Steel President Tadashi Imai told reporters on Thursday in Tokyo that the U.S. Committee on Foreign Investment (CFIUS) had extended its review of the deal until the end of December, or until after the Nov. 5 presidential elections. He said the extension was not necessarily a reason to be overly optimistic and the company continued to seek dialogue with the USW as it aimed to close the deal by the end of December. With regard to Imai's comments on CFIUS, a Nippon Steel spokesperson later said: "Due to confidentiality of obligations, we have requested that this comment be withdrawn." Sign up here. https://www.reuters.com/markets/deals/us-steel-says-arbitration-board-rules-favor-nippon-steels-149-bln-buyout-deal-2024-09-25/