2024-09-19 00:30

BOGOTA, Sept 18 (Reuters) - Colombia's government has called off peace talks with leftist rebel group the National Liberation Army (ELN), its peace delegation said on Wednesday, following an attack which killed two soldiers and injured more than two dozen. The decision is another devastating blow to President Gustavo Petro's cornerstone total peace policy, which looked to remove the ELN from its role in the Andean country's six-decades of internal armed conflict. "Today the peace process is on hold. Its viability is severely diminished and its continuation can only go ahead with an unequivocal demonstration of peace by the ELN," the government peace delegation said in a post on X. The government restarted negotiations with the ELN at the end of 2022 and held six rounds of talks with the rebel group in Mexico, Cuba and Venezuela. The attack which caused the talks to be suspended took place on Tuesday in a rural area of Colombia's Arauca province, which borders Venezuela. The talks had been in crisis for months after the government decided to begin separate negotiations with a unit in the southwest of the country that had split from the rest of the ELN. Negotiations froze, with the ELN subsequently restarting kidnappings, an element of its arsenal it had given up during the talks. Since the end of the ceasefire, the ELN ramped up offensives against the military and police and also resumed bombings on Colombia's network of oil pipelines, contaminating the environment with subsequent oil spills. Colombia's military also restarted operations against the rebels. The decision to suspend the peace talks implies the reissue of arrest warrants for the ELN's top commanders, who are currently based in Venezuela and Cuba, according to the government. There was no immediate comment from the ELN. Sign up here. https://www.reuters.com/world/americas/colombia-government-calls-off-peace-talks-with-eln-rebels-2024-09-19/

2024-09-19 00:29

Steepening yield curve indicates upcoming rate cuts Dollar index hit lowest in more than a year Dollar strengthens versus yen ahead of key BOJ decision Sterling jumps after BoE NEW YORK, Sept 19 (Reuters) - The U.S. dollar slipped in choppy trading on Wednesday as markets grappled with the supersized 50 basis point interest rate cut, as well as the switch to an easing monetary policy stance delivered by the Federal Reserve. Investor expectations had largely shifted towards a dovish outcome in the days leading up to the Fed's move on Wednesday, with money markets pricing in around a 65% chance of a 50 basis point (bp) cut. But economists polled by Reuters were leaning towards a 25 bp cut. "The interesting thing is the half point cut, which was pretty much unexpected or at least only half and half yesterday, has not really given the dollar extra damage - which is quite surprising," said Joseph Trevisani, senior analyst at FXStreet in New York. The dollar index , which measures the greenback against a basket of six peers, was down 0.38% to 100.64 after reversing gains made in early trading. It slid to its lowest in more than a year of 100.21 in the previous session. The euro strengthened 0.4% to $1.1163. Against the yen , the dollar was 0.33% higher at 142.73 as markets anticipate that the Bank of Japan will leave interest rates unchanged on Friday. The dollar weakened 0.08% to 0.847 against the Swiss franc and dropped 0.34% to 7.070 versus the offshore Chinese yuan . "What it's really doing I think is giving permission, if you will, for the other central banks around the world, some of whom have started to cut rates already, to go further with their rate cuts," Trevisani said. Money markets priced in 72 bps of additional rate cuts in 2024 and 192 bps by September 2025. The U.S. Treasury yield curve, which measures the gap between yields on two- and 10-year Treasury notes and seen as an indicator of economic expectations, steepened and hit its highest since June 2022. It was last at a positive 13.4 basis points, indicating more upcoming rate cuts. Initial claims for state unemployment benefits dropped unexpectedly to 12,000 last week, according to Labor Department data on Thursday, suggesting labor market growth. Fed policymakers on Wednesday projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year and half of a percentage point in 2026. "The initial interpretation of the decision was that it was dovish and while it was basically even odds that it was going to happen, overall, on the surface, it's still a dovish move," said Eugene Epstein, head of trading & structured products North America at Moneycorp in Boston. "Everything reversed basically by the end of the day, so you can make the argument as a bit of buy the rumour, sell the fact. A lot of dovishness was already priced in." The pound hit its highest since March 2022 versus the dollar after the Bank of England's Monetary Policy Committee (MPC) voted 8-1 to keep rates on hold. Sterling was up 0.5% against the greenback at $1.3278 after reaching as high as $1.3314 . The Australian and New Zealand dollars drew support from domestic data surprises. Australian employment exceeded forecasts for a third straight month in August. The Aussie was up 0.77% to $0.6815. The kiwi , meanwhile, traded 0.58% higher at $0.6244, after data showed the New Zealand economy contracted by 0.2% in the second quarter. (This story has been refiled to add the missing word 'cuts' in the first bullet) Sign up here. https://www.reuters.com/markets/currencies/dollar-rebounds-after-fed-goes-big-rate-cut-2024-09-19/

2024-09-19 00:07

US central bank kicks off easing cycle Fed's policy rate lowered to 4.75%-5.00% range Policymakers see another 50 basis points of cuts in 2024 Fed Governor Bowman dissents; preferred smaller cut WASHINGTON, Sept 18 (Reuters) - The U.S. central bank on Wednesday kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction that Federal Reserve Chair Jerome Powell said was meant to show policymakers' commitment to sustaining a low unemployment rate now that inflation has eased. "We made a good strong start and I am very pleased that we did," Powell said at a press conference after the Fed, noting its increased confidence that the country's bout with high inflation was over, reduced its benchmark policy rate by 50 basis points to the 4.75%-5.00% range. "The logic of this both from an economic standpoint and from a risk management standpoint was clear." So clear in fact that Powell, who has championed policy-by-consensus since becoming Fed chief in 2018, saw the first dissent from a Fed governor since 2005 when Michelle Bowman voted against the decision in favor of a smaller quarter-percentage-point rate cut - evidence some analysts said of his motivation to start the Fed's easing cycle in a compelling way. Powell called the move a "recalibration" to account for the sharp decline in inflation since last year; he noted that the economy remained strong but the central bank wanted to stay ahead of and stave off any weakening in the job market; analysts saw a nod to what has been an overarching aim of his to avoid unnecessarily trading higher unemployment to reach the central bank's 2% inflation target. "A soft landing is within reach, which would seal his legacy as Fed Chairman," said Diane Swonk, the chief economist at KPMG. In addition to approving the half-percentage-point cut on Wednesday, Fed policymakers projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year, and half of a percentage point in 2026, though they cautioned that the outlook that far into the future is necessarily uncertain. The move marks a significant pivot in U.S. monetary policy and a recognition of the Fed's growing comfort with inflation continuing to ease to its target. It is currently about half a percentage point above it. Despite coming only about seven weeks before the U.S. presidential election, the Fed's policy decision elicited a fairly muted reaction, initially at least, from the presidential candidates. Vice President Kamala Harris, the Democratic presidential candidate, called the rate cut "welcome news" for Americans. "I know prices are still too high for many middle-class and working families," she said in a statement. Republican nominee Donald Trump, who as president first appointed Powell to lead the Fed, said the size of the cut suggested the economy may be in trouble. "To cut it by that much, assuming they're not just playing politics, the economy would be very bad," Trump told reporters. Powell, however, said the economy remained strong, with many job market indicators like unemployment claims and even the current 4.2% unemployment rate not at worrying levels. But he nodded to the same issues economists and analysts raise with inflation: That it takes time for changes in monetary policy to have an impact and that, between anecdotal information from companies and slowed hiring rates, officials felt they needed to preempt further labor market weakness just as others have argued for fast action to preempt inflation. "There is thinking that the time to support the labor market is when it is strong, and not when you begin to see layoffs," Powell said. 'WITH A BANG' The Fed had kept its policy rate in the 5.25%-5.50% range since last July, when it ended an 18-month rate-hike campaign that was meant to control a surge in inflation, which soared in 2022 to a 40-year high. Powell declined to declare victory on that front, but he did say inflation is now near the Fed's 2% goal, and labor conditions are consistent with the central bank's other goal of maximum employment. U.S. stocks gained following the release of the statement and updated quarterly economic projections before reversing course to close lower on the day. The U.S. dollar (.DXY) , opens new tab was slightly stronger against a basket of currencies, while yields on U.S. Treasuries rose. Rate futures traders moved to price in even more easing than projected by the Fed, with the policy rate now expected to be in the 4.00%-4.25% range by end of this year. "The Fed ended the pause with a bang. It's a strong signal that they cut by 50 basis points and expect another 50 basis points of cuts this year. This was controversial," said Brian Jacobsen, chief economist at Annex Wealth Management. Inflation, based on the Fed's preferred measure, is currently about half a percentage point above the 2% level, and the new economic projections now show the annual rate of increase in the personal consumption expenditures price index falling to 2.3% by the end of this year and down to 2.1% by the end of 2025.The unemployment rate is seen ending this year at 4.4% and remaining there through 2025. Economic growth is projected to be 2.1% through 2024 and 2% next year, the same as in the last round of projections issued in June. Sign up here. https://www.reuters.com/markets/rates-bonds/with-feds-rate-cut-hand-debate-swirls-over-how-big-move-2024-09-18/

2024-09-19 00:03

Fed cuts rates by 50 basis points Intuitive Machines soars after clinching NASA contract S&P 500, Dow hit intraday records Indexes down: Dow 0.25%, S&P 500 0.29%, Nasdaq 0.31% NEW YORK, Sept 18 (Reuters) - U.S. stocks closed with modest losses on Wednesday, well off their intraday highs, after the Federal Reserve cut interest rates by 50 basis points, the high side of estimates for its first cut in more than four years. Trading was choppy. Prior to the Fed announcement, the S&P 500 oscillated between modest gains and losses. The benchmark index rose as much as 1% after the announcement before paring gains and finally closing lower. The Dow and S&P 500 hit intraday highs before weakening. Citing a "greater confidence" that inflation was moving toward the central bank's 2% target, the Fed cut rates by half a percentage point, as it now focuses on keeping the labor market healthy. "The Fed ended the pause with a bang. It’s a strong signal that they cut by 50 basis points and expect another 50 basis points of cuts this year," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. "The Fed is projecting that by front loading the cuts they can stick the landing with the unemployment rate at 4.4% and inflation dropping to target quickly." Market expectations for the size of the rate cut had been volatile in recent days, pricing in about a 65% chance for a 25 basis point cut last week to a 57% chance for the larger 50 basis point cut earlier on Wednesday, according to CME's FedWatch Tool , opens new tab. The Dow Jones Industrial Average (.DJI) , opens new tab fell 103.08 points, or 0.25%, to 41,503.10, the S&P 500 (.SPX) , opens new tab lost 16.32 points, or 0.29%, to 5,618.26 and the Nasdaq Composite (.IXIC) , opens new tab lost 54.76 points, or 0.31%, to 17,573.30. Markets are now fully pricing in a cut of at least 25 basis points at the Fed's November meeting, with a roughly 35% chance for another 50 basis point cut. "It’s amazing to me how even when markets get what they seemingly want, they immediately want more," said Steve Sosnick, chief market strategist at Interactive Brokers in Greenwich, Connecticut. "It’s important to note that stocks are not rocketing ahead (at least not yet) after getting what they wanted. After seven straight up days, a lot of good news was priced in." Borrowing costs had been parked at their highest levels in over two decades since July 2023, when the central bank last hiked interest rates by 25 basis points to between 5.25% and 5.50% to combat inflation. After the rate cut announcement, Fed Chair Jerome Powell said the central bank's forecast for the path of interest rates did not imply the need for urgent action. Small cap stocks, seen as more likely to benefit from a lower interest rate environment, moved higher with the Russell 2000 (.RUT) , opens new tab outperforming its large cap brethren, as it shot up as much as 2.44% before closing up 0.04% on the day. Regional banks, some of which had been stressed by higher interest rates, also gained ground, with the KBW Regional bank index (.KRX) , opens new tab jumping as much as 3.53% before closing up 0.46%. Markets have rallied this year, with all three major indexes setting record highs on prospects of lower interest rates as inflation moderated and the jobs market showed gradual signs of cooling. Intuitive Machines (LUNR.O) , opens new tab surged 38.3% after clinching a $4.8 billion navigation services contract from NASA. Declining issues outnumbered advancers by a 1.14-to-1 ratio on the NYSE and by a 1.36-to-1 ratio on the Nasdaq. The S&P 500 posted 43 new 52-week highs and no new lows while the Nasdaq Composite recorded 165 new highs and 69 new lows. Volume on U.S. exchanges was 11.63 billion shares, compared with the 10.82 billion average for the full session over the last 20 trading days. Sign up here. https://www.reuters.com/markets/us/futures-tread-water-investors-brace-fed-rate-cut-2024-09-18/

2024-09-18 23:19

HONG KONG, Sept 19 (Reuters) - The Hong Kong Monetary Authority (HKMA) on Thursday cut its base rate , opens new tab charged via the overnight discount window by 50 basis points to 5.25%, tracking a move by the U.S. Federal Reserve. Hong Kong's monetary policy moves in lock-step with the United States as the city's currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar. HKMA said the U.S. interest rate cut will have a positive impact on the economy of the Asia financial centre and will provide some room for easing of local interest rates. "In Hong Kong, our financial and monetary markets have continued to operate in a smooth and orderly manner. Market liquidity condition has remained stable with the Hong Kong dollar exchange rate hovering within the convertibility zone," HKMA Acting Chief Executive Howard Lee told reporters. "The rate cut cycle has just begun, interest rates will remain at relatively high level in the foreseeble future. The public should carefully assess and continue to manage the interest rate risk when making property purchase, mortgage or other lending decisions," Lee added. Hong Kong major banks followed with HSBC cutting its best lending rate in the city by 25 basis points to 5.625% effective Sept. 20, and Bank of China (Hong Kong) said it would cut its Hong Kong prime rate to 5.625% from 5.875% effective Sept. 23. "Even though uncertainty about future U.S. interest rates still exists, the direction is becoming clearer. Hong Kong interest rates are expected to ease accordingly and that will help support Hong Kong economic growth," Hang Seng Bank's chief economist Thomas Shik said. On Wednesday, the U.S. central bank kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction and policymakers see another 50 basis points of cuts in 2024. "Lower rates are intuitively positive for real estate but will have an uneven impact across Asia property markets and stocks," Morgan Stanley said in a research note, adding falling mortgage rates would offer greater support to Hong Kong than Singapore. Sign up here. https://www.reuters.com/markets/asia/hong-kong-central-bank-cuts-interest-rate-tracks-fed-move-2024-09-18/

2024-09-18 23:08

WASHINGTON, Sept 18 (Reuters) - The U.S. nuclear power regulator said on Wednesday that inspections found issues at the Palisades nuclear reactor in Michigan that owner Holtec wants to restart, after a two-year closure, with $1.52 billion in U.S. financing. Holtec bought Palisades in 2022 with the intent to decommission it. But now it wants to reopen Palisades late next year amid a surge in U.S. power demand from artificial intelligence, electric vehicles and crypto currencies. It would be the first time a shuttered U.S. nuclear plant reopened. "Preliminary results identified a large number of steam generator tubes with indications that require further analysis and/or repair," a notice on the Nuclear Regulatory Commission's website said about the two steam generators at Palisades. More analysis, testing, and repairs would occur over the next few months, it said. Holtec said on its website that inspections of the steam generators identified "the need for additional maintenance activities." When asked about potential additional costs or delays, Patrick O'Brien, a Holtec spokesperson, said such issues are under evaluation but the company "doesn't expect anything significant time wise" and any extra costs "would be within our scope as we planned conservatively." The U.S. Loan Programs Office, part of the Department of Energy, issued Holtec the $1.52 billion conditional loan guarantee in March. The administration of President Joe Biden believes nuclear power is critical in the fight to curb climate change. Alan Blind, engineering director at the plant from 2006 to 2013, estimated on Wednesday that repairs to the steam generators would cost over $500 million and add two to three years to any restart. Edwin Lyman, a physicist and a nuclear safety expert at the Union of Concerned Scientists, said more needs to be known about the plant's condition. "The public deserves the unvarnished truth ... before more taxpayer and ratepayer dollars are poured down what could be a very deep rathole," he said. Sign up here. https://www.reuters.com/business/energy/us-regulator-says-michigan-nuclear-plant-needs-work-before-restart-2024-09-18/