(Reuters) – Saudi Arabian Crown Prince Mohammed bin Salman told President Donald Trump that the kindgom seeks to expand its investments and trade relations with the United States over the next four years by at least $600 billion, the Saudi State news agency said early on Thursday.

By Bo Erickson

(Reuters) – Senate Finance Committee Chairman Mike Crapo on Wednesday said he is hoping a full Senate confirmation vote for U.S. President Donald Trump’s pick as Treasury secretary, Scott Bessent, could occur next week.

Bessent cleared Crapo’s committee by a 16-11 vote on Tuesday, including backing from two Democrats. But Crapo told Reuters Democrats were employing “a lot of delay tactics.”

Democrats – in the minority party – are able to slow-walk some confirmation votes through procedural maneuvers, and Senate Majority Leader John Thune said this could end up with Senate confirmation votes occurring over the weekend.

In the meantime, some Democrats are raising flags about Bessent using a tax loophole to reduce the Medicare taxes paid by his hedge fund by $910,000 over three years, which has been disputed by the Internal Revenue Service.

Bessent at his Jan. 16 confirmation hearing said that he would set aside funds to pay any taxes owed once the case is decided. He has pledged to shutter the fund, Key Square, to avoid conflicts of interest if his nomination is confirmed.

But Senator Elizabeth Warren, a Democrat, on Wednesday said Bessent “refuses to submit his own taxes for an audit and agree to pay what he owes. That’s a real problem for someone who would be in charge of the IRS.”

Confirmation hearings for other top economic posts, including Trump’s pick for Commerce Secretary, Howard Lutnick, and United States Trade Representative, Jamieson Greer, have yet to be scheduled by the Senate Commerce committee.

(In paragraph 8, corrects North American share of global EV market to 10% from 20%)

By Melanie Burton and Ernest Scheyder

(Reuters) -U.S. President Donald Trump’s rollback of electric vehicle targets may temporarily slow demand for lithium and other critical minerals, but is unlikely to hamper the mining industry amid surging global EV demand, analysts and industry leaders said.

Trump on Tuesday revoked predecessor Joe Biden’s 2021 executive order that sought to ensure half of all new vehicles sold in the U.S. by 2030 are electric. Automakers had been positioning for a jump in EV demand due largely to that Biden move.

Trump’s order caused shares of Japanese automakers, South Korean battery makers and Australian, U.S. and Chinese lithium miners to slip. But even if EV demand cools in the world’s second-biggest auto market, analysts and industry experts expect traction elsewhere to more than compensate.

Trump has planned other regulatory changes to cut off support for EVs and charging stations. He also aims to strengthen measures blocking imports of automobiles and battery materials from China.

“Every time people take away subsidies or benefits … it’s a dent to the demand scenario,” said analyst Glyn Lawcock at Barrenjoey, an Australian investment bank. “(But) ultimately demand will still grow even if the U.S. is a bit slower under Trump.”

Australian lithium producer Liontown Resources (ASX:LTR) said the global transition to EVs was underway, with or without the United States.

“Longer term, I just don’t think it will be an issue on demand,” Antonino Ottaviano, Liontown’s CEO, said on a Tuesday analyst call.

Much of the EV industry’s growth happens in China, accounting for 11 million sales or 65% of the market, compared with North America, which accounts for 10% of the market, Liontown executives said on the call.

Meanwhile, the rest of the world already accounts for 1.3 million EV sales and is growing at 27% year on year, a trajectory that will see it become more meaningful than the entire North American market in less than two years, the Liontown executives added.

That growth potential is something Chinese EV manufacturers are chasing given they are locked out of the U.S. market due to 100% EV tariffs imposed by Biden.

Grid-scale batteries that store days’ worth of electricity are rising in popularity across the world, for example. Critical metals are also used to build many consumer electronics as well as computer servers needed to power the artificial intelligence industry.

Albemarle (NYSE:ALB), the world’s largest lithium company, declined to comment on Trump’s order.

Arcadium, a lithium producer about to be bought by Rio Tinto (NYSE:RIO) and the International Lithium Association trade group, was not immediately available for comment.

Rio Tinto also declined to comment on Trump’s order, but its CEO Jakob Stausholm told the World Economic Forum on Tuesday that he is bullish on the white metal.

“Lithium demand will probably go up another five times over the next 15 years, so a lot more lithium projects will have to be built,” Stausholm told the forum in Davos, Switzerland, adding that he has owned an EV for more than nine years.

“It’s just a better car” than an internal combustion engine, Stausholm added.

David Klanecky, CEO of privately held battery recycler Cirba Solutions, expects U.S. demand for critical minerals to jump by 2030 due to the demand not just for EVs, but for myriad electronics.

Beyond any target rollbacks, miners said they believe measures to wean Western manufacturers off Chinese supplies will underpin support for their metals.

“We expect measures taken to build supply chain independence from China … to have a much greater impact than the rollback of a formal target for EV sales,” said Darryl Cuzzubbo, CEO of Australian rare earths developer Arafura.

“There is a tipping point looming for electric vehicles at which targets and incentives won’t be required to encourage take-up.”

On Wednesday, Capital Economics provided an analysis of South Africa’s economic activity data for November, indicating a robust end to the previous year, driven primarily by the mining and retail sectors. The firm predicts that South Africa’s GDP will grow by an above-consensus 2.3% in 2025.

Retail sales data released on Wednesday showed a continuation of the sector’s strong performance, with a month-on-month increase of 0.8% in November, and an impressive year-on-year growth of 7.7%, surpassing the London Stock Exchange Group (LON:LSEG)’s consensus forecast of 5.5%. The surge in sales was mainly attributed to general dealers and clothing retailers.

In contrast, the industrial sector, particularly manufacturing, experienced a downturn, contracting by 1.1% month-on-month in November, which erased the gains from October. The motor vehicles and basic metals sub-sectors were noted as particularly weak. The mining sector, despite a minor 0.2% month-on-month decline in output, due to reduced production in gold, iron, coal, and diamonds, still showed resilience.

Looking at the broader economic recovery, South Africa seems to be maintaining its momentum. On a three-month rolling basis, which is more reflective of quarterly GDP growth, the mining sector grew by 4%, and retail sales expanded by 1.4%. However, the manufacturing sector contracted by 0.2% over the same period. This mixed performance suggests that the GDP grew approximately 1% quarter-on-quarter in the final quarter of 2024, bouncing back from a 0.3% contraction in the third quarter.

Recent surveys, including the whole economy PMI and business confidence indicators, continue to signal robust economic activity. Nevertheless, the manufacturing sector’s challenges were highlighted by a decline in the ABSA/BER manufacturing PMI in December.

Capital Economics believes that the South African Reserve Bank (SARB) has room to implement further monetary policy easing to foster growth. The lower-than-expected inflation reading for December bolsters the firm’s prediction that the SARB will cut its repo rate by 150 basis points to 6.25% by the end of the year.

The forecast for 2025 is optimistic, with an expected GDP growth of 2.3%, aided by improvements in electricity and logistics, along with a rebound in agriculture. However, the firm cautions that sustained growth above 2% may be challenging due to ongoing fiscal discipline and broader structural issues.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

(Reuters) – U.S. credit card issuer Discover Financial posted a more than threefold increase in fourth-quarter profit on Wednesday, helped by a drop in provisions for credit losses and a rise in interest income.

The Federal Reserve’s decision to lower interest rates and hopes of a soft landing for the economy helped ease lenders’ concerns about potential credit defaults in 2025.

Discover’s provision for credit losses fell to $1.20 billion in the quarter ended Dec. 31 from about $1.91 billion in the year-ago period.

Strong consumer spending has helped credit card-focused lenders rake in a higher income from interest.

Riverwoods, Illinois-based Discover recorded net interest income of $3.63 billion for the fourth quarter, up nearly 4.7% from the same quarter last year.

“Discover’s fourth quarter results capped off a successful 2024 as loan growth, margin expansion, and credit improvement led to strong financial performance,” said interim CEO Michael Shepherd in a statement.

Capital One Financial (NYSE:COF), which is acquiring Discover for $35.3 billion in an all-stock deal, also recorded a jump in fourth-quarter profit on Tuesday, helped by higher interest income.

The merger between Capital One and Discover would form the sixth-largest U.S. bank by assets and a U.S. credit card behemoth.

Discover posted a net income of $1.29 billion, or $5.11 per share, in the October-to-December period, compared to $366 million, or $1.45 per share, in the year ago period.

Shares of the company, which jumped 54% in 2024, were up marginally in trading after the bell.

Investing.com — The Federal Reserve is set for its first policy meeting next week, but BofA believes the meeting is likely to be nothingburger as the central bank is likely to keep rates on hold.

“We view the January Fed meeting as mostly a placeholder. The Fed will most likely stay on hold,” BofA analysts said in a note.

The Federal Open Market Committee, or FOMC, is scheduled to meet on Jan. 28-29. The meeting is set to follow a hawkish rate cut in December, when the committee cut rates by 0.25% but also reined in its projections for future rate cuts to just two for 2025 from four previously.  

Recent economic data, particularly the stabilization of the labor market around full employment, has validated bets on fewer rate cuts ahead, BofA said.

While the Fed isn’t expected to deliver a rate cut in January, the central bank may  upgrade its view of the labor market in its monetary policy statement. 

At the press conference that follows the rate decision, Fed Chair Powell is likely to lay the ground work to ensure there is maximum flexibility for the March policy decision, the analysts said. 

With market participants pricing in “virtually no odds of a policy adjustment at this meeting,” BofA says, “investors are more focused on Trump policy changes and the economic impact versus the Fed right now.”

Beyond the clues on the path of interest, BofA flags guidance on the Fed’s balance sheet outlook as factor of interest, though concedes that expectations are “low given stable funding markets and little Fed focus on the issue.”

By Jamie McGeever

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

Whatever doubts investors may have surrounding the longer-term economic damage of U.S. President Donald Trump’s proposed tariff agenda, they are giving his deregulation, tech-friendly and AI-supportive policies a huge thumbs up. Stocks are flying.

With strong earnings from streaming giant Netflix (NASDAQ:NFLX) providing an extra tailwind, Wall Street’s sizzling performance on Wednesday should fuel a strong rise in risk appetite across Asia on Thursday. It’s unlikely that a moderate rise in bond yields and the dollar will get in the way of that.

The S&P 500 leaped to a fresh peak of 6,100 points on Wednesday and lifted the Nasdaq above the 20,000-point barrier to within a whisker of December’s record high of 20,204 points.

The tech and artificial intelligence fervor is intensifying again after Trump announced a private sector investment of up to $500 billion to fund infrastructure for AI. Trump said that ChatGPT’s creator OpenAI, SoftBank (TYO:9984) and Oracle (NYSE:ORCL) are planning a joint venture called Stargate, which will build data centers and create more than 100,000 jobs in the United States.

Billionaire investor Stanley Druckenmiller told CNBC this week that optimism surrounding the U.S. market and business outlook is reaching “giddy” levels in boardrooms. Judging by Wall Street’s boom, that giddiness is being mirrored across trading floors.

Another reflection of investors’ bullishness and hunger for income is the record demand seen at French, Spanish and UK debt sales over the last 24 hours. Remarkably, bids for the roughly $37 billion worth of debt on offer totaled around $400 billion.

A large part of that is seasonal, as fixed income investors deploy their allocations for the year in January. But still.

These are the global forces on Thursday likely to drive Asian markets, where investors also have the first estimate of fourth-quarter and full-year South Korean GDP data, Japanese trade figures, the latest inflation reading from Singapore and industrial production numbers from Taiwan.

Thursday is also the last full trading day before the Bank of Japan’s policy decision. Financial markets are increasingly confident that the BOJ will raise its short-term policy rate on Friday by a quarter of a percentage point to 0.5%, a level last seen during the Global Financial Crisis.

Given its history, the BOJ could well couch any tightening of policy in cautious terms, making it clear that policy ‘normalization’ will be carried out carefully and gradually. If the Fed delivered a ‘hawkish cut’ last month, the BOJ may be poised to deliver a ‘dovish hike’ on Friday.

Dollar/Yen is trading towards the lower end of the 155.00-159.00 range it has been in for the past month, the two-year Japanese Government Bond yield is buoyant, and the Nikkei 225 index is hovering just below the 40,000-point mark.

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

– South Korea GDP (Q4)

– Japan trade (December)

– World Economic Forum in Davos

Capital Economics, a research firm, has projected Wednesday that Egypt’s Gross Domestic Product (GDP) growth will accelerate in the upcoming fiscal years, outstripping consensus forecasts.

The firm anticipates a rise to 5.0% in the current fiscal year, with a further increase to 5.3% in FY2025/26.

Egypt’s economy has faced challenges over the past year, grappling with a devalued currency, soaring inflation rates, and stringent fiscal and monetary policies. However, recent indicators suggest that the nation is on the path to economic recovery, with expectations of stronger GDP growth than other analysts predict.

The outlook for Egypt’s economy is becoming increasingly positive. Factors contributing to this optimistic view include the ceasefire between Israel and Hamas and the Houthi’s commitment to reducing hostilities in the Red Sea, which are likely to enhance activities through the Suez Canal, thereby benefiting Egypt’s trade and logistics sectors. Additionally, as security concerns diminish, the country should see an uptick in tourist numbers.

Another beneficial development for Egypt’s economy is the depreciation of the Egyptian pound, which has enhanced the country’s external competitiveness. Evidence from the Purchasing Managers’ Index (PMI) suggests that this devaluation is bolstering external demand. Furthermore, inflation is expected to drop significantly in the near future, from an annual rate of 24.1% in December to below 10%. This anticipated decrease should alleviate the financial burden on households by increasing their real income, Capital Economics said.

The expected slowdown in inflation is also likely to lead to cuts in interest rates, which should encourage consumer spending and stimulate domestic credit demand.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Jarrett Renshaw, David Morgan and David Lawder

WASHINGTON (Reuters) – U.S. President Donald Trump is pushing a plan to explicitly use revenue from higher tariffs on imported goods to help pay for extending trillions of dollars in tax cuts, an unprecedented shift likely to face opposition from many of his fellow Republicans in Congress.

The U.S. collects less than $100 billion annually in trade penalties imposed on imported goods as a tool to protect and grow domestic industries. That money is rarely a topic in Washington’s routine budget battles because it makes up so little of the federal government’s revenue. 

Trump has threatened across-the-board import tariffs, but has yet to impose any. The president and his allies say he wants to use them much like the personal and corporate taxes that account for the vast majority of U.S. revenues, notching up tariffs to help pay for government programs and cover promised tax cuts. 

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources,” Trump said during his inaugural address on Monday.

Raising enough money in tariffs to make a dent on the U.S. budget would be a big ask; they have accounted for only about 2% of annual revenues in recent years.  

“Tariffs are going to be a really important part of the tax-cut discussion.” A 10% tariff is “about $350 to $400 billion in revenue. So you see the beauty of that in the negotiations,” Trump aide Peter Navarro told CNBC on Tuesday.

Republican budget hawks concerned about the reliability and durability of tariff revenue, along with the potential dangers trade wars pose for individual districts and voters, are likely to put up a fight, U.S. lawmakers and trade analysts say. 

U.S. Representative Ralph Norman, a South Carolina Republican, told Reuters that any push by Trump to pass tariffs through Congress as legislation would be an uphill climb.

“Everybody’s got their district and companies that are affected by tariffs, good and bad. I doubt he would think he could get it through,” Norman said.

“It is technically, mathematically possible to find some tariff policy that would offset the Trump tax cuts, but there is no way they would have the votes to do that,” said Bobby Kogan, senior director of federal budget policy at the left-leaning Center for American Progress. 

Asked how seriously Republicans are looking at tariff revenue as an offset for the Trump agenda, House of Representatives Majority Leader Steve Scalise told Reuters: “Trump’s alluded to doing tariffs, but we don’t know any details yet. He said expect something to come. But until we see it, it’s really hard to speculate.” 

The White House did not respond to requests for comment.

DEFICIT WORRIES

Importing companies pay tariffs on goods that come into the U.S., and most economists and business executives say importers are likely to pass the costs to consumers or be forced to accept lower profits. 

The House Ways and Means Committee, the main tax-writing panel in the lower chamber, included a 10% across-the-board tariff in its menu of options to pay for extending the tax cuts, according to a recent memo seen by Reuters. It estimated such a tariff regime would fetch $1.9 trillion over 10 years, according to the memo. Extending the tax cuts Trump passed during his first term and which expire this year would cost $4 trillion over 10 years, analysts estimate. 

Trump has also promised to stop collecting taxes on workers’ tips and payments to Social Security retirees, which would add hundreds of billions to the federal deficit without matching revenue or cuts.

Republicans are preparing to enact these plans through a parliamentary process called “budget reconciliation” that doesn’t require support from Democrats in the coming weeks. 

With a slim majority in the House and a 53-47 seat margin in the Senate, Trump needs to convince budget hawks within his party that his plans won’t add to the deficit. Democrats have been opposed to the vast majority of the Trump tax cuts.

    If they are not technically in the legislation, the tariffs would not likely be included in the official Congressional Budget Office scoring of the reconciliation bill. 

Counting tariffs as revenue would require Congress to vote on them as legislation and it would have a material impact on the budget, House Budget Committee Chairman Jodey Arrington, a Texas Republican, told Reuters. “So, it is a legitimate item that could be considered. But I’m not telling you that it’s being considered at this moment. In fact, it’s been discussed and debated, but there’s no final plan.”

Even with tariff revenue included, Republicans would likely have to impose massive cuts to popular government programs, such as Social Security and the Medicare health insurance plan for seniors, to pass a balanced bill.

The non-partisan Tax Foundation estimated Trump’s most extreme tariff proposals – a 20% universal tariff plus a 60% tariff on China’s exports to the U.S. would raise about $3.8 trillion over the 10-year budget window, falling short of the $4.3 trillion needed to fully offset the cost of making the expiring tax cuts permanent.  

‘HIGHLY INEFFICIENT’ 

Erica York, vice president of federal tax policy at the Tax Foundation, said it’s “highly unusual and unprecedented” to use tariffs for revenue.

“Tariffs are a highly inefficient way to raise revenue,” York said. “They create a larger burden on poorer households than they do on richer households, which means many lower- and middle-income households could be worse off under the proposed combination of tariffs and tax cuts.”

Relying on tariffs to balance a budget also makes little long-term sense because of how consumers react to them, other experts noted. 

Tariffs are intended to shift behavior, much like so-called “sin taxes” on cigarettes or alcohol, which means that if they were effective, they would reduce revenues over time, said Martin Muehleisen, a senior fellow at the Atlantic Council think tank.

“If tariffs are intended to shift domestic consumption to U.S. products, they would generate little revenue if successful. If they are mainly designed to raise revenues, they would be inflationary and reduce economic growth,” he said.

By Mike Peacock

, (Reuters) – Bond vigilantism has returned to Britain, raising the prospect that the government will be forced to consider politically toxic tax rises or public spending cuts to placate investors concerned about the country’s fiscal health. But Chancellor of the Exchequer Rachel Reeves could also get a helping hand from the Bank of England’s balance sheet.

In the first weeks of 2025, certain gilt yields spiked to highs last seen in 2008. While yields have since come off these highs, following softer-than-expected December inflation data, it is fair to assume the UK bond market could be in for a bumpy ride in the coming months.

Recent market gyrations primarily reflect the global jump in government bond yields, driven by uncertainty about the potentially inflationary policies that U.S. President Donald Trump’s second term might bring.

But gilts have been buffeted around more than most, suggesting investors may have UK-specific concerns, namely that the new Labour government’s policies will increase debt without doing much to improve growth.

While all this has been happening, the BoE has continued with its ‘quantitative tightening’ (QT) program, selling gilts after years of being the major buyer of UK government bonds. Unlike the Federal Reserve, the BoE isn’t just letting debt roll off its balance sheet but is actively selling.

The gilt market is worth around 2.6 trillion pounds ($3.17 trillion), and at its peak, the bank held nearly 900 billion pounds of it. If the BoE’s current QE plans continue unchecked, that number will drop to roughly 560 billion pounds by the end of September. 

The UK is expected to issue approximately 300 billion pounds worth of gilts this year and a similar amount in the following fiscal year. Meanwhile, the bank is planning to reduce its bond holdings by 100 billion pounds.

If the bank were to halt its QT program entirely, it would effectively cut the amount of gilts needing to be absorbed by the market by around 30%, which would very likely put downward pressure on yields.

That would be welcome news for Reeves, who already faces annual debt interest payments of 105 billion pounds, a figure that will rise if government bond yields climb, eating into the resources she has available to boost the economy.

But given the BoE’s messaging, a complete halt is unlikely. What’s more probable is that the bank could decide to slow the pace of divestment, mimicking the Fed’s passive approach – i.e., not reinvesting as bonds mature.

Roughly 87 billion pounds of gilts will mature this year, so this strategy could reduce the bank’s gilt sales by around 13 billion pounds over the next 12 months.

There is a problem, however.

One reason recent bond market jitters did not reach the chaotic levels seen during the 2022 UK market meltdown presided over by former prime minister Liz Truss is that Reeves has been clear that she respects the independence of the central bank and the Office for Budget Responsibility. Truss explicitly wanted to rein them in.

Any hint that this independence is being infringed now could unnerve investors.

So if the BoE were to act, it would have to show markets that it was doing so to uphold its mandate – not because of political or fiscal concerns.

One potential justification would be market instability, as the BoE is tasked with ensuring markets function properly. BoE Deputy Governor Sarah Breeden said earlier this month that the bank was monitoring the market closely, but there was currently no cause for concern.

A second motive could be impaired monetary policy transmission. For example, if the BoE cuts official rates when it meets in early February yet market interest rates continue to rise, this would tighten monetary conditions when the bank wants the reverse.

Simon French, chief economist at Panmure Liberum, noted that a change in the QT program “wouldn’t be controversy free, with political accusations…and claims the bank is helping finance a fiscal overstretch. But it is the right thing to do for the UK economy”.

The BoE was accused of deliberately aiding the government when massive fiscal spending coincided with an increase in quantitative easing during the Covid-19 pandemic, allegations the bank pushed back hard against. The following cycle of sharp rate hikes doused that debate, at least temporarily.

Having committed to its pace of bond sales, the BoE won’t be eager to change tack. But if gilt market volatility intensifies, it may not have a choice.    

(The views expressed here are those of the author.)

(Mike Peacock is the former head of communications at the Bank of England and a former senior editor at Reuters.)

($1 = 0.8195 pounds)

(This column has been corrected to fix the gilt market absorption amount and distinguish between bond sales and balance sheet roll-offs in paragraph 8)