Investing.com–The Reserve Bank of Australia (RBA) is now expected to start cutting interest rates from May next year, instead of February, Westpac said in a note, although the central bank is likely to cut rates aggressively.

Westpac said concerns over sticky inflation, a robust Australian job market and improving consumer sentiment could potentially delay any easing from the RBA.

“An earlier start in February or March is still possible, but it is no longer more likely than a May start date,” Westpac’s Chief Economist Luci Ellis wrote in a note.

The late start is also an uncertain scenario, if inflation does not decline as the RBA is currently forecasting, Ellis said.

The RBA held rates steady at a 12-year high of 4.35% in its November policy meeting, as expected, and said the policy would need to remain restrictive until the inflation was tamed.

The country’s consumer price inflation fell to 2.8% last quarter, within the central bank’s 2-3% target for the first time in three years, but core inflation remained elevated. Government subsidies on energy have helped ease headline inflation in recent months. But high housing and food prices, coupled with steady consumer spending, have kept underlying inflation elevated.

The minutes of the RBA’s latest meeting showed that the central bank needed to see a sustained decline in inflation before it could begin trimming rates. The RBA only expects inflation to fall within its 2% to 3% target range by 2026.

Still, Westpac expects the central bank to cut rates sharply once it begins an easing cycle. The delay in easing will lead to “front loaded” initial moves by the RBA, with consecutive cuts in late May and early July, Westpac’s Ellis said.

“The longer the RBA Board waits, the faster they will need to move thereafter, as it would then be more likely that they have hesitated too long,” she added.

“If employment growth slowed even moderately, things could unravel quite quickly,” Ellis said. Australia’s job market growth slowed in October after six straight months of outsized growth, although the sector still remained strong.

Westpac’s outlook for the RBA is more hawkish than other brokerages. ANZ expects the central bank to begin cutting rates by February 2025.

By Anant Chandak

BENGALURU (Reuters) – India’s business activity rose at its fastest pace in three months in November, helped by an improving services industry and record job creation, but output inflation spiked to a near 12-year high, a survey showed.

The findings are likely to add to economic growth in the ongoing festive quarter which is expected to pick up thanks to a rebound in private consumption, despite Asia’s third-largest economy reporting its highest retail inflation in 14 months.

HSBC’s flash India Composite Purchasing Managers’ Index, compiled by S&P Global, rose to 59.5 this month from October’s final reading of 59.1, taking the expansionary streak to 40 months.

The 50-level separates growth from contraction.

“Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations despite a marginal slowdown from its October final PMI reading,” noted Pranjul Bhandari, chief India economist at HSBC.

A PMI for the dominant-services sector rose to 59.2 from 58.5 last month, its highest since August. The manufacturing sector also continued to expand in November, although the pace slowed slightly and its index fell to 57.3 versus 57.5.

Overall domestic demand rose thanks to better sales in the services industry offsetting slower manufacturing orders growth, but overseas demand improved for both sectors with the latter’s exports accelerating to a four-month high.

That boosted the business outlook for the coming year as overall optimism rose to the highest since May, prompting companies to ramp up hiring.

Led by services firms, employment generation rose at the fastest pace since the survey began in December 2005, a positive indicator of economic health and consumer spending power.

However, rising inflationary pressures cast a shadow on the positive sentiment, with input costs increasing at the fastest pace in 15 months, forcing businesses to pass the burden to clients and resulting in output inflation spiking at the steepest pace since February 2013.

“Price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector,” added Bhandari.

The Reserve Bank of India (NS:BOI) has recently expressed concerns regarding quickening core inflation. That is likely to prompt the central bank to maintain a cautious stance and it could keep interest rates on hold at its meeting in early December.

A look at the day ahead in European and global markets from Ankur Banerjee

A series of manufacturing data will likely dominate markets’ attention on Friday, with the euro rooted near its lowest in more than 13 months, while bitcoin edged towards $100,000 on expectations of friendlier regulations in the United States.

India-listed shares of Adani Group firms slid and their dollar bonds remained under pressure for a second day following billionaire founder Gautam Adani’s indictment for fraud by U.S. prosecutors.

Monthly PMIs will be released around the world over the course of the day, helping investors to chart out how the various economies are doing and where global rates are headed, as well as how much further the dollar’s recent uptrend may have to run.

Adani’s company denied the accusations in Thursday’s indictment, which comes less than two years after U.S. short-seller Hindenburg Research accused the Adani group of improper use of tax havens and involvement in stock manipulation, which the conglomerate also denied.

Where that leaves market sentiment on Indian equities is anyone’s guess. When Hindenburg’s report came out in January 2023, India’s broader stock markets felt the heat for a few weeks before rebounding and racing on to a bull run.

The BSE Sensex has been sliding since it touched a record high in late September, as investors wary of rich valuations flee the market. The Adani news has caught the markets at a vulnerable moment.

As for bitcoin, there’s little else to say except that the markets and crypto enthusiasts everywhere are waiting with bated breath for the world’s biggest cryptocurrency to hit $100,000 for the first time, a landmark moment for the sector.

Anything remotely related to crypto has been on a tear since the U.S. election as investors bet that President-elect Donald Trump and his administration will bring in friendlier regulations.

And finally, investors have been taking a closer look at Nvidia (NASDAQ:NVDA)’s results and are feeling a bit better about them. Investors’ sky-high expectations may not have been met but, under the hood, everything looks good with demand holding strong for the firm’s AI chips.

That has stocks in Asia surging while futures indicate European shares are set for a higher open.

Key developments that could influence markets on Friday:

UK retail sales for October

Flash PMI Nov data for France, Germany, euro zone and UK

(By Ankur Banerjee; Editing by Edmund Klamann)

By Satoshi Sugiyama

TOKYO (Reuters) – The Bank of Japan will raise interest rates again at its December meeting as a strengthening economy and concerns over the depreciating yen prompt policymakers to act, according to just over half of economists in a Reuters poll.

The BOJ is also likely to keep pushing interest rates higher in the wake of Donald Trump’s Nov. 5 election victory, most economists said, as markets brace for a slew of inflationary policies under the new administration.

In the Nov. 13-21 poll released on Friday, 56% of economists, 29 of 52, said the BOJ would raise borrowing costs again by end-year, compared with 49% in a poll last month. The median prediction for the end-year rate was 25 basis points higher at 0.50%.

Analysts said the economy and prices moving on track with the BOJ’s outlook, the receding downside global economic risks and the yen’s depreciation would prod the Japanese central bank to tweak rates.

“If the BOJ does not act in December, there is a risk the yen will weaken further by the end of January when the next meeting is scheduled, and that the bank will fall behind in its response,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.

The weak yen – which had pushed up import costs and inflation – was among the factors that led to the BOJ’s decision to raise interest rates in July.

BOJ Governor Kazuo Ueda said this week the economy was progressing towards sustained wage-driven inflation and warned against keeping borrowing costs too low. He said the BOJ will “seriously” take into account the impact yen moves could have on the economic and price outlook.

About 90% of economists, or 44 of 49, forecast the BOJ would have lifted rates to 0.50% by end-March. Two who had predicted a hike to 0.50% by end-year expected the rate to be 0.75% by the end of the first quarter.

Among a smaller sample of 20 who provided monthly forecasts and anticipated either a rate hike next year or no further increase at all, 90%, or 18, chose January. That was up from almost three-quarters in October’s poll and September’s 60%.

Additionally, 96% of economists, or 24 of 25, expected Trump’s return to the White House would encourage the BOJ to raise interest rates, the poll found.

Respondents said the president-elect’s economic policy, including tax cuts and tariffs, would reignite inflation in the U.S. which would also stoke inflationary pressure in Japan.

“In reality, the BOJ would like to proceed with raising interest rates carefully, taking into account the impact on the economy and other factors,” said Mitsuo Fujiyama, senior economist at the Japan Research Institute.

“But with import inflation causing prices to rise again, it feels like they have no choice but to raise interest rates.”

The median of 26 economists who offered their view on what the BOJ’s terminal rate should be was 1.00%, with a range of 0.50% and 2.50%.

The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was on the cusp of durably achieving its 2% inflation target.

Japan’s economy expanded an annualised 0.9% last quarter, slowing from the previous three months on tepid capital spending though an unexpected pickup in consumption was a bright spot.

(Other stories from the Reuters global economic poll)

TOKYO (Reuters) – Consumer inflation in Tokyo for November likely surpassed the Bank of Japan’s 2% price target following a reduction in fuel subsidies and with an increase in food costs, a Reuters poll showed on Friday.

The core consumer price index (CPI) in Tokyo, a leading indicator of nationwide price trends, was expected to have accelerated to 2.1% in November from a year earlier, the median forecast of 17 economists showed.

That would follow a 1.8% rise in October, when it was below the central bank’s target for the first time in five months.

“The index’s year-on-year increase (in November) is expected to widen from the previous month, due to the resumption of growth in food prices in response to the rise in rice prices, and the diminishing effect of the government’s measures to counter rising prices,” said Shunpei Fujita, an economist at Mitsubishi UFJ (NYSE:MUFG) Research and Consulting.

Japan’s nationwide core CPI, which excludes fresh food but includes energy items, slightly slowed to 2.3% in October from 2.4% in September, data showed earlier on Friday.

The internal affairs ministry will release November Tokyo CPI data, which is among the key data due before BOJ’s December policy-setting meeting, on Nov. 29 at 8:30 a.m. Japan time (Nov. 28 at 2330 GMT).

Meanwhile, Japan’s industrial output likely expanded by 3.9% in October from the previous month, supported by an increase in chip-related manufacturing machinery and transport equipment production, the poll showed. That would follow September’s 1.6% rise.

The industry ministry will release the factory output data on Nov. 29 at 8:50 a.m. Japan time (Nov. 28 at 2350 GMT). It will also announce retail sales figures, which were expected to have jumped 2.2% in October from a year ago, at the same time.

Japan’s jobless rate was likely at 2.5% in October, edging up from September’s 2.4%, and the jobs-to-applicants ratio was expected to be steady at 1.24, according to the poll.

The jobs data will be published at 8:30 a.m. on Nov. 29.

BEIJING (Reuters) – A stable and sustainable development trend on trade and business matters between China and the United States will benefit both nations, China’s Vice Commerce Minister Wang Shouwen said on Friday.

Wang, responding to a question about a potential tariff hit from U.S. President-elect Donald Trump, said China would be able to “resolve and resist” the impact of external shocks.

Tariffs imposed by other countries will impact consumers of the importers, pushing up inflation, he said at a news conference.

SINGAPORE (Reuters) -Singapore on Friday upgraded its economic outlook for 2024 as third quarter gross domestic product growth beat expectations and initial estimates, helped by stronger semiconductor production and engineering demand.

GDP rose 5.4% year-on-year in the third quarter, government data showed, faster than the 4.1% official advance estimate released last month and a median forecast of 4.6% in a Reuters poll of economists.

The trade ministry also raised its GDP growth forecast for 2024 to 3.5% from a previous range of 2.0% to 3.0%. 

“We are not ruling out that the number could be higher than 3.5%,” Beh Swan Gin, permanent secretary at the trade ministry, said.

GDP for the July-September quarter was also higher than the annual growth of 3.0% in the second quarter.On a quarter-on-quarter, seasonally adjusted basis, GDP expanded 3.2% in the July to September period, higher than both the advance estimate of 2.1% and the second quarter growth of 0.5%.

Beh said the higher-than-expected Q3 GDP was due to demand for semiconductors that spilled over to the precision engineering industry with higher output of industrial machinery and semiconductor equipment.

“Global monetary easing and China’s fiscal stimulus will likely support growth going into 2025, despite the risk of an escalation in the U.S.-China trade war,” said Maybank economist Chua Hak Bin.

The trade ministry said it expects growth of 1.0% to 3.0% in 2025, adding that global economic uncertainties have increased, including uncertainty over the policies of the incoming U.S. administration.

“If tariff hikes happen…there will be renewed inflationary pressures, which could disrupt the pace of monetary policy easing and keep financial conditions tighter for longer in the U.S.,” said Beh.

The MAS left monetary policy settings unchanged last month in its last review of the year as inflation pressures continued to moderate and growth prospects improved. The next policy meeting is in January.

Maybank’s Chua said next week’s inflation data will be a key indicator to watch.

“If core and services inflation remains sticky, the MAS may not ease in January,” he said.

The MAS has said core inflation should ease to around 2% by the end of this year. Annual inflation was 2.8% in September.

By Lewis (JO:LEWJ) Krauskopf

NEW YORK (Reuters) – U.S. stocks are extending their lead over global peers and some investors believe that dominance could grow if President-elect Donald Trump can implement his economic platform without becoming mired in a full-blown trade war or ballooning the federal deficit.

The S&P 500 has gained over 24% in 2024, putting it well ahead of benchmarks in Europe, Asia and emerging markets. At 22 times expected future earnings, its premium to an MSCI index of stocks of more than 40 other countries stands at its highest in more than two decades, according to LSEG Datastream. 

Though U.S. stocks have outperformed their counterparts for more than a decade, the valuation gap has widened this year thanks to resilient economic growth and strong corporate earnings – particularly for the technology sector, where excitement over developments in artificial intelligence have boosted the shares of companies such as chipmaker Nvidia (NASDAQ:NVDA). 

Some market participants believe Trump’s agenda of tax cuts, deregulation and even tariffs can further fuel U.S. exceptionalism, outweighing worries over their potentially disruptive nature and inflationary potential. 

“Given the pro-growth tendencies of this new administration, I think it’s tough to fight the battle against U.S. equities, at least in 2025,” said Venu Krishna, head of U.S. equity strategy at Barclays (LON:BARC).

Signs of a growing U.S. bias were evident immediately after the Nov. 5 election, when U.S. equity funds received more than $80 billion in the week following the vote while European and emerging market funds saw outflows, according to Deutsche Bank (ETR:DBKGn).

Strategists at Morgan Stanley (NYSE:MS), UBS Global Wealth Management and the Wells Fargo (NYSE:WFC) Investment Institute are among those who recommend overweighting U.S. equities in portfolios or expect them to outperform next year.

EARNINGS ENGINE

A critical driver of U.S. strength is corporate America’s profit edge: S&P 500 company earnings are expected to rise 9.9% this year and 14.2% in 2025, according to LSEG Datastream. Companies in Europe’s Stoxx 600, by contrast, are expected to increase earnings by 1.8% this year and 8.1% in 2025.

“The U.S. continues to be the geographic region of the world that generates the highest earnings growth and the most profitability,” said Michael Arone, chief investment strategist at State Street (NYSE:STT) Global Advisors. 

The dominant role of massive technology companies in the U.S. economy and their heavy weightings in indexes such as the S&P 500 are helping drive that growth. The five largest U.S. companies – Nvidia, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) – have a combined market value of more than $14 trillion, compared with roughly $11 trillion for the entire STOXX 600, according to LSEG data.

More broadly, the U.S. economy is expected to grow by 2.8% in 2024 and 2.2% in 2025, compared with 0.8% this year and 1.2% next year for a group of about 20 countries using the euro, according to forecasts from the International Monetary Fund.

Trump’s plans to raise tariffs on imports could help the U.S. extend that advantage, despite the risk of some blowback, said Mike Mullaney, director of global markets research at Boston Partners, who favors U.S. stocks.

“If Trump throws on a 10% to a 20% tariff on European goods, they’re going to get hurt more on a relative basis than we are,” Mullaney said.

Republicans’ lock on power in Washington – which could make it easier for Trump to enforce his agenda – prompted Deutsche Bank’s economists to raise their 2025 U.S. growth forecasts to 2.5% from 2.2%.

While tax cuts and deregulation are expected to boost growth, relatively tight margins in U.S. Congress and the administration’s sensitivity to market reactions could limit the scope of the most “extreme” policies, such as tariffs, the bank wrote on Thursday.

Analysts at UBS Global Wealth Management, meanwhile, expect the S&P 500 to hit 6,600 next year, driven by advances in artificial intelligence, lower interest rates, tax cuts and deregulation. The index closed at 5,948.71 on Thursday.

Still, an all-out trade war with China and other partners could hit U.S. growth and stoke inflation. A scenario in which countries retaliate against far-reaching U.S tariffs could send the S&P 500 to as low 5,100 – though global stocks would also decline, UBS said.

Certain corners of the market could be particularly vulnerable to Trump’s policies: worries over plans for cutting bureaucratic excess bruised shares of government contractors last week, for example, while drugmakers fell when Trump picked vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services.

Broad tax cuts could also spark concerns about adding to U.S. debt. Deficit worries have helped drive a recent selloff in U.S. government bonds, taking the 10-year Treasury yield to a five-month high last week.

At the same time, the valuation gap between the U.S. and the rest of the world could become so wide that U.S. stocks start looking expensive, or international equities become too cheap to ignore. 

For now, however, the long-term trend is in favor of the U.S., with the S&P 500 gaining more than 180% against a rise of nearly 50% for Europe’s STOXX over the past decade. “Momentum is a great thing,” said Colin Graham, head of multi-asset strategies at Robeco. “If you’ve got something that keeps outperforming, then investors will follow the money.”

By Brigid Riley

TOKYO (Reuters) – The U.S. dollar stuck close to a 13-month high on Friday as investors assessed the outlook for the Federal Reserve’s interest rate path and uncertainty in Europe kept the euro on the back foot, while bitcoin eyed the $100,000 level.

The yen, meanwhile, held its ground against the greenback after domestic core inflation figures remained above the Bank of Japan’s (BOJ) 2% target in a sign conditions for further interest rate hikes were falling in place.

The dollar index edged down 0.05% to 107.01, not far off Thursday’s one-year high of 107.15, its highest level since Oct. 4, 2023, with little data this week to dent its march higher.

Data overnight showed U.S. weekly initial jobless claims unexpectedly dropped to a seven-month low but also indicated some slack as it is taking longer for the unemployed to find new jobs, giving the Fed cushion to cut rates again in December.

Global PMIs are due later in the day, although those figures should not “change the dial too much,” said Tony Sycamore, market analyst at IG.

“It’s just trying now to find what the catalysts are … (and) it’s obviously going to be does the Fed cut or not again” in December, Sycamore said.

U.S. PCE for October scheduled for release next Friday will be the focus.

The dollar has rallied around 3% so far this month on expectations that U.S. President-elect Donald Trump’s policies could reignite inflation and limit the Fed’s ability to cut rates.

Recent comments from Fed officials, including Chair Jerome Powell, have indicated the central bank may take a slower course in its rate cut path.

Expectations for the path of rate cuts have been scaled back recently, but remain somewhat volatile. Markets are pricing in a 57.8% chance of a 25-basis-point cut at the Fed’s December meeting, down from 72.2% a week ago, according to CME’s FedWatch Tool.

Among Trump policies on weighing on investors’ minds were the president-elect’s campaign pledges of tariffs, with Europe and China both likely in the firing line.

But factors such as the scale and sequencing of the incoming president’s policies remain an unknown, and likely will not come to light until after Trump is inaugurated in January.

The euro, which makes up a hefty portion of the dollar index, steadied at $1.0475 after falling to a 13-month low of $1.0461 on Thursday.

The euro has been one of the main casualties of the dollar’s post-election ascent. Recent escalations between Russia and Ukraine and political uncertainty as Germany, the bloc’s biggest economy, have further weighed.

Sterling traded at $1.25915, up 0.03% so far on the day.

Bitcoin had the $100,000 mark in its line of sight, holding flat at $98,080.92 after reaching a record high of $99,057 on Thursday.

The cryptocurrency has surged more than 40% since the U.S. election on expectations Trump will loosen the regulatory environment for cryptocurrencies.

The Japanese yen, which had been pushed back below 156 per dollar last week, received a boost as Japan’s core inflation in October held above the central bank’s 2% target to come in 2.3% higher from a year earlier, data showed on Friday.

“The renewed strengthening of underlying inflation coupled with the recent rebound in consumer spending and the renewed weakening of the yen strengthen the case for another BOJ rate hike next month,” Marcel Thieliant, head of Asia-Pacific at Capital Economics, wrote in a research note.

The dollar was last down 0.17% on the day at 154.27 yen.

BOJ Governor Kazuo Ueda on Thursday said that the bank will scrutinise data ahead its rate review next month, and “seriously” take into account the impact yen moves could have on the economic and price outlook.

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets. 

Risk assets in Asia are set to open positively on Friday after a show of fortitude on Wall Street saw U.S. stocks end a choppy session in the green, as local attention turns to the latest inflation figures from Japan.

Japanese consumer prices top the regional calendar, and investors also will be looking out for purchasing managers index data from Japan, Australia and India for the first glimpse into how these economies performed in November.

Annual core consumer price inflation in Japan is expected to have slowed to 2.2% in October from 2.4% in September, cooling for a second consecutive month on slower growth in energy prices, according to a Reuters poll.

The release comes a day after Bank of Japan Governor Kazuo Ueda said the central bank will “seriously” take into account the yen’s impact on growth and prices, remarks investors took as a sign the BOJ could soon raise interest rates.

The ultra low-yielding yen is one of the world’s worst-performing currencies against the dollar this year, putting upward pressure on the price of imports.

The dollar has risen 10% against the yen since the Fed cut rates in September, a counter-intuitive move explained by the surprising – and surprisingly steep – rise in U.S. bond yields. 

But the yen is ripe for a rebound. It has been sold off heavily, speculators are holding their biggest short position in four months, and the BOJ could be taking a more hawkish turn.

The Japanese currency rose on Thursday for only the second time in nine days, and another rise of around 0.3% on Friday would seal its best week in two months. 

Asian stocks are also consolidating, after getting slammed last week. On the whole, the global backdrop as Asia opens on Friday is still reasonably positive. 

The upward momentum behind the so-called ‘Trump trades’ that gathered steam before and immediately after the Nov. 5 U.S. presidential election has fizzled, but most of these bets still appear to be in play. Some more than others. 

Tesla (NASDAQ:TSLA) shares are up 7% this week and bitcoin is up 9%, within reach of breaking above $100,000 for the first time.

This could easily happen in Asia on Friday, after U.S. Securities and Exchange Commission Chair Gary Gensler confirmed he will leave his post in January. Gensler is widely seen as a hard-liner on cryptocurrency regulation.

Indian assets, meanwhile, are under heavy pressure on the news that Indian billionaire Gautam Adani has been indicted for fraud by U.S. prosecutors and arrest warrants issued for him for his alleged role in a $265 million scheme to bribe Indian officials.

Stocks are the lowest in five months, and the rupee has never been weaker. 

Here are key developments that could provide more direction to markets on Friday:

– Japan inflation (October)

– Malaysia inflation (October)

– Japan, Australia, India PMIs (November)