SANTIAGO (Reuters) – Tighter external financing conditions could impact Chile’s households, businesses and mortgages, increasing default risks they might face, the central bank said on Wednesday.

In its Financial Stability Report for the second half of the year, the bank said households’ financial position continues to improve but remains below pre-pandemic levels.

It said the local banking system had enough guarantees and capital to withstand severe shocks. Despite that, the bank said the main risk to domestic financial stability was posed by external factors.

“Elevated levels of public and private debt in the world, along with high deficits, are the main worry,” the report said, noting this had led to high long-term interest rates.

It added that rising geopolitical tensions over the past few months could have a negative impact on stability. Those most impacted would be groups the bank considers “most vulnerable”.

On Tuesday the bank’s board voted unanimously to keep capital requirements for risk assets at the current level of 0.5%, a measure activated in May 2023 that obliges banks to set aside a cushion to absorb potential losses.

(This Nov. 18 story has been corrected to remove reference to increase in payments to the IMF next year in paragraph 25)

By Rodrigo Campos

NEW YORK (Reuters) – Investors who have been rewarded for their bets on Argentine President Javier Milei are doubling down on the country’s stocks and bonds even as they hit records, betting that an austerity crusade will pay further dividends.

Milei won the presidential election a year ago with a mandate to reshape South America’s second-largest economy, pledging to take a chainsaw to government spending and slam the brakes on printing more pesos.

A renegade campaign endeared him to Argentines fed up with the establishment, and with just enough legislative support to withstand a veto override, Milei pushed through a key reform bill that included steep spending cuts. The government recently marked its tenth consecutive monthly primary fiscal surplus. A tax amnesty has brought some $18 billion to local banks.

Milei’s swift initial move to cut spending and stop printing cash was “one that investors can very easily buy into,” said Graham Stock, emerging markets senior sovereign strategist at RBC Global Asset Management.

What is surprising, he said, “is that the population has bought into it, and that has meant that his popularity has held up pretty well. Given the scale of the spending cuts, it’s pretty remarkable that he remains as popular as he does.”

A survey closely watched by markets from the Torcuato Di Tella university showed confidence in government, a proxy for Milei’s standing, rebounded in October after a September slip. Going back to 2003, only Peronist Nestor Kirchner and center-right Mauricio Macri scored better than Milei at this point of their term.

Other surveys show Milei’s popularity and disapproval ratings at around 50-50.

Argentina is in the second year of a recession, with the International Monetary Fund estimating a 3.5% contraction in economic output this year. At the same time its dollar bonds have returned almost 90% this year, and the local stock market is up 125%.

But inflation remains at triple digits and the peso has weakened 19% this year, even if supported by currency controls, so most workers still struggle with the cost of living. More than half of Argentina’s 46 million people live in poverty.

THIS TIME IS DIFFERENT

Macri’s presidency also attracted investors to Argentina’s financial assets, with stocks hitting record highs starting in 2015 and buyers lining up for a 100-year bond issued in 2017. It ended in tears – and default – after the economy stalled and inflation surged, paving the way for the Peronists to return.

But Argentina bulls insist history is not about to repeat itself.

“I think there’s a lot of confidence that if there is a path towards normality, this is probably the only administration that could do it,” said Thomas Haugaard, portfolio manager of EM debt at Janus Henderson.

“I’m not saying that they will be able to do it, but there is a shot at it, and they have proven it without too much unrest on the streets.”

There have been some street protests, especially over cuts to university budgets and when an increase in pension pay was blocked. But the government’s focus on inflation has addressed a major popular concern. As monthly consumer prices decelerated in October, JPMorgan updated its end-2025 inflation target for Argentina at an annualized 29%, which would be the lowest since 2017.

“I think it comes down to how fast Milei will be able to get the turnaround,” said Gordian Kemen, head of EM sovereign strategy (West) at Standard Chartered (OTC:SCBFF) Bank. “Will he be able to generate enough jobs, enough well-being for the electorate before it comes to the midterm election?”

Argentina’s October 2025 midterms, which will decide half of the seats of the lower legislative Chamber of Deputies and a third of the Senate, will provide a key barometer of his chances of not just enacting his economic plan but becoming an established political force.

“I’m not saying that Milei has to be at peak popularity at all times. I’m just saying that you don’t want to see him become unpopular for some reason,” said Shamaila Khan, head of fixed income for Emerging Markets and Asia Pacific at UBS Asset Management.

“What we’re watching is that there is nothing that hinders or deviates from the policies that the country has been pursuing. The possibility that the country doesn’t need another restructuring is slowly starting to get priced in.”

Some investors are hoping Argentina will get an additional market boost from the president’s newfound alliance with U.S. President-elect Donald Trump, whom Milei met in Florida last week. He was the first foreign leader to meet the Republican since he won the election.

“There should be close policy alignment between the U.S. and Argentina, and that should translate into the U.S. supporting Argentina for various issues, including IMF renegotiations,” said Standard Chartered’s Kemen.

Argentina’s payments to the IMF total just over $3 billion in 2025, and increase annually to near $9 billion in 2028. That should not be a problem for a $600 billion economy, but building up dollar reserves remains an issue.

Yet investors take comfort from the approval of a $57 billion IMF program during the first Trump presidency.

“They have huge financing needs coming up. They need more money from the IMF and at some point they need market access,” said Janus Henderson’s Haugaard.

“In Argentina you’re getting more comfortable with the management of the country, but it is not ‘I buy Argentina, I put it in a drawer and I sleep’. This is, of course, something where dynamics can change quickly.”

PARIS (Reuters) – French far-right leader Marine Le Pen on Wednesday threatened to seek to topple Prime Minister Michel Barnier’s fragile coalition government if her National Rally (RN) party’s cost-of-living concerns were not incorporated into the 2025 budget.

Le Pen’s warning shot comes as she faces a major potential setback, with prosecutors seeking an obligatory five-year ban from public office for her alleged role in embezzling EU funds. She denies the allegations. If judges convict Le Pen and uphold the sought sentence, she would be barred from running in the 2027 presidential election which many believe she could win.

Some analysts have suggested Le Pen’s legal woes could accelerate her plans to bring down the government.

“We will not accept that the purchasing power of the French be once again hit. This is a red line and if this red line is crossed, we will vote no-confidence,” Le Pen told RTL radio.

Faced with a starkly divided parliament, Barnier has suggested using a tough measure – invoking article 49.3 of the constitution – to ram the budget bill through the legislature without a vote. That would inevitably trigger a no-confidence vote that the RN and the left could use to bring down the government.

Le Pen also said on Wednesday the RN opposed increasing the tax burden on households, entrepreneurs or pensioners and that so far these demands were not reflected in the upcoming budget.

Le Pen has made cost-of-living concerns a central plank of her electoral offer, which has traditionally focused on anti-immigrant and security issues. Inflation fears also helped propel U.S. President-elect Donald Trump to victory over Kamala Harris in this month’s U.S. election.

When asked about Le Pen’s threat, Foreign Minister Jean-Noel Barrot told CNews television: “Those who would topple the government will deprive the country of a budget and create disorder and chaos.”

Le Pen also said on Wednesday the RN would vote for far-left LFI party’s proposal to drop President Emmanuel Macron’s pension reform. Left-wing lawmakers in the lower house have said they would trigger a vote of no-confidence against the government.

To survive, Barnier needs the RN to abstain from the vote.

While some RN lawmakers have already brandished the threat of not cooperating, its head Jordan Bardella has said the decision will depend on whether the final cut of the budget reflects their demands.

By Vivek Mishra and Kevin Yao

BENGALURU/BEIJING (Reuters) – The United States could impose nearly 40% tariffs on imports from China early next year, a Reuters poll of economists showed, potentially slicing growth in the world’s second-biggest economy by up to 1 percentage point.

The poll, the first on China’s economy by Reuters since Donald Trump’s sweeping election victory on Nov. 5, also predicts that the President-elect will resist starting off with blanket 60% tariffs on Chinese goods.

Trump, who is due to take office in January, pledged during campaigning to slap hefty tariffs on Chinese imports as part of a package of “America First” trade measures, causing unease in Beijing and heightening growth risks for China.

Not only are the threatened tariff rates much higher than the 7.5%-25% levied on China during his first term, the economy is also in a much more vulnerable position given the prolonged property downturn, debt risks and weak domestic demand.

A poll of more than 50 economists by Reuters from Nov. 13-20 showed a strong majority, both in and outside mainland China, expects Trump to impose the tariffs by early next year, with a median estimate of 38% and projections ranging from 15% to 60%.

Most respondents said they do not expect blanket 60% tariffs on Chinese goods in early 2025 as this could accelerate inflation within the United States.

“We expect the new U.S. administration to bring back the original plan of Trump 1.0,” ANZ’s chief economist Raymond (NS:RYMD) Yeung said, estimating that the average tariff on Chinese goods could be raised by 32–37%.

Chinese policymakers, who have ramped up stimulus to spur growth since late September, face increased pressure next year to spur domestic demand to offset an expected drop in exports – a key growth driver this year, analysts say.

On the potential impact on China, the poll predicted that new U.S. tariffs would reduce China’s 2025 economic growth by around 0.5-1.0 percentage point.

For now, however, most of the economists polled have maintained their median growth forecasts for this year and 2025 at 4.8% and 4.5%, respectively, consistent with projections made before the U.S. elections. Growth is expected to slow further to 4.2% in 2026.

They are awaiting the Trump administration’s China trade policies, which could lead to potential downgrades in their outlooks.

“Exports will be a key pillar of growth as global demand holds up, though new U.S. tariffs could shave up to 1 percentage point off GDP growth,” said Mo Ji, chief China economist at DBS.

“Consumption will remain lacklustre due to wealth effects from falling property prices and rising unemployment. Infrastructure investment will drive a moderate fixed asset investment recovery, though private investment lags.”

MORE STIMULUS EXPECTED

A strong majority of economists, or 19 of 23 who responded in the poll, said the recent fiscal and monetary stimulus measures announced by the Chinese government have had little impact on the economy and more stimulus is needed. Only four said that these measures would boost economic growth.

Chinese authorities hope the burst of stimulus unveiled since late September would help the economy reach a government growth target of around 5% this year.

China is likely to unveil fresh stimulus measures in the coming weeks to help cushion the economy from any trade tensions with the United States, say analysts, who expect the economy’s slowing trajectory will continue despite policy support.

“We think the Chinese government still has time to monitor and react to the U.S. policy and its effect on China growth and then introduce policy responses at a later stage,” said Jian Chang, chief China economist at Barclays (LON:BARC).

Economists polled by Reuters have also lowered their consumer price inflation forecasts to 1.1% for next year and 1.4% for 2026, down from the previously expected 1.4% and 1.6% in the October survey.

The People’s Bank of China is expected to cut its key policy rate – the seven-day reverse repo rate – by 20 basis points to 1.30% early next year, with an additional 10 basis point reduction in the second half, according to the poll.

(For other stories from the Reuters global long-term economic outlook polls package:)

($1 = 7.2419 yuan)

FRANKFURT (Reuters) – The European Central Bank warned on Wednesday about a “bubble” in stocks related to artificial intelligence (AI), which could burst abruptly if investors’ rosy expectations are not met.

The warning came as part of the ECB’s twice-yearly Financial Stability Review, a laundry list of risks ranging from wars and tariffs to cracks in the plumbing of the banking system.

The central bank for the 20 countries that share the euro noted the stock market, particularly in the United States, had become increasingly dependent on a handful of companies perceived as the beneficiaries of the AI boom.

“This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble,” the ECB said. “Also, in a context of deeply integrated global equity markets, it points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed.”

The ECB noted investors were demanding a low premium to own shares and bonds while funds had cut their cash buffers.

“Given relatively low liquid asset holdings and significant liquidity mismatches in some types of open-ended investment funds, cash shortages could result in forced asset sales that could amplify downward asset price adjustments,” the ECB said.

Among other risks, the ECB flagged the euro area was vulnerable to more trade fragmentation – a key source of concerns for policymakers and investors since Donald Trump won the U.S. Presidential election earlier this month.

The President-elect had made tariffs a key element of his pitch to voters during the campaign and several ECB policymakers have said these measures, if implemented, would hurt growth in the euro area.

The ECB also noted euro area governments – particularly Italy and France – would be borrowing at much higher interest rates over the coming decade, strengthening the need for prudent fiscal policies.

By Padraic Halpin

DUBLIN (Reuters) – Parties vying to lead the next Irish government are luring voters with ambitious spending plans, banking on a continued boom in foreign multinational corporate tax revenues that could be threatened by the incoming U.S. administration.

With a strong economy, a population set to rise by up to 8% by 2030 and infrastructure provision 25% lower than many other high-income European countries, whichever party wins the Nov. 29 election will need to spend more just to keep up.

However the scale of the commitments and potential risks have become a theme of the campaign. An Irish Times headline on Sunday suggested “someone should take Simon Harris’s phone away before he bankrupts the country”, noting the prime minister’s nightly unveiling of “all sorts of goodies” on Instagram.

“The U.S. election has appreciably changed the risk and we seem to be going ahead as if nothing has changed but I think something very significant has changed,” said Professor John McHale, head of economics at the University of Galway.

The risk centres around the unique exposure of Ireland’s low-tax business model to the United States. Ireland’s recent big budget surpluses have been driven by a near seven-fold increase in corporate tax receipts over the last decade, mainly paid by U.S. firms.

PRECARIOUS POSITION

If enacted, President-elect Donald Trump’s pledge to slash corporate tax rates to Irish levels, incentivise industries to bring production back to the U.S and impose trade tariffs could jeopardise the continued growth in corporate tax receipts forecast by the Irish finance ministry.

Harris’ Fine Gael and outgoing coalition partner Fianna Fail – the favourites to lead the next government – have promised to hike spending by 5.5% to 7% a year to 2030, cut taxes and invest the remaining surplus in the country’s sovereign wealth fund.

The main opposition Sinn Fein party favours a higher level of spending growth and putting less money aside.

The plans suggest recent “fiscal slippage” will continue after the election, Goodbody Chief Economist Dermot O’Leary said, calling on parties instead to stick with a fiscal rule introduced in 2021 to cap spending increases at 5% a year.

The outgoing government broke its own rule in three of the four budgets since its introduction.

Not everyone agrees that the international risks should spell more caution, given Ireland’s improved financial balance sheet and debt dynamics.

“We have a good hand to deal at the moment and I think that’s reflected in some of the optimism you’re seeing in the policies,” said Kevin Timoney, chief economist at Davy Stockbrokers.

“We have this big infrastructure gap and we have money to try close it and that can help support the medium term picture. We don’t want to be laggards in some of these areas that are strategically important for the economy.”

Investing.com — Wall Street is seen trading slightly higher as investors await the release of results from chipmaker Nvidia, which could drive sentiment for the rest of the week. Comcast will also be in focus following a spinoff report, while UK inflation added to signs that the global disinflationary phase may have stalled. 

1. Nvidia expected to deliver 

Nvidia (NASDAQ:NVDA), the world’s most valuable company with a market cap of $3.6 trillion, is set to release its latest quarterly results after the close Wednesday.

The chipmaker’s results could well become a gauge for investors’ appetite for tech stocks and sentiment for equities broadly, given its chips are widely seen as the gold standard in the AI-space, and demand for all things to do with artificial intelligence has driven much of this year’s stock market gains.

Trade in options points to a nearly $300-billion swing in market value, which will make for a potentially volatile trading session ahead.

Expectations are running high following a 5% jump in the company’s stock price on Tuesday, with analysts expecting Nvidia to increase third-quarter revenue by more than 80%, to $32.9 billion.

The market is likely to get another “drop the mic performance” from the AI powerhouse, according to Wedbush analysts, with Nvidia at the center of what they call the “AI Revolution.”

Wedbush added “another $2 billion beat and $2 billion quarter guide higher is the recipe for success that the Street wants to see.”

2. Futures edge higher; Target to announce results

US stock futures edged higher Wednesday, as investors cautiously awaited the release of results from tech giant Nvidia. 

By 03:45 ET (08:45 GMT), the Dow futures contract was up 125 points, or 0.3%, S&P 500 futures climbed 12 points, or 0.2%, and Nasdaq 100 futures rose by 40 points, or 0.2%.

Wall Street closed in a mixed fashion Tuesday as investors digested the troubled situation in eastern Europe as well as more quarterly corporate earnings.

Nvidia releases its latest results after the close, and ahead of this retailers Target (NYSE:TGT) and TJX (NYSE:TJX) are due to provide their quarterly numbers.

Investors will also listen for commentary from Federal Reserve Governors Lisa Cook and Michelle Bowman, as well as Boston Fed President Susan Collins.

3. Comcast to spin off cable networks – report

Comcast (NASDAQ:CMCSA) will be in the spotlight Wednesday following a report that the media conglomerate is set to announce that it will proceed with a plan to spin off its NBCUniversal cable television networks.

The Wall Street Journal reported that the company has decided to spin off its network television unit, which includes channels such as MSNBC and CNBC, after last month raising the possibility as it navigates a broader shift away from traditional television and into streaming. 

The assets generated revenue of about $7 billion in the year to September 30, and are still profitable, although the advent of streaming has spurred a shift in consumers away from cable.

Comcast will keep the NBC broadcast television network, its film and television studios and its theme parks, as well as its Peacock streaming service.

The spin-off is expected to take a year to complete, the WSJ report said, and will be led by Mark Lazarus, who is currently the chairman of NBCUniversal’s media group. 

4. UK inflation surprises to upside

British inflation jumped by more than expected in October, moving back above the Bank of England’s 2% target and adding to recent signs that the global disinflationary pulse may have stalled.

Consumer prices rose by an annual 2.3% last month, a jump from September’s 1.7% increase in September, which was the first time the inflation rate had fallen below the BoE’s target since 2021, and above the 2.2% rise expected.

Inflation rose 0.6% on a monthly basis in October, the biggest month-to-month rise in the annual CPI rate since October 2022.

This rise comes before the impact of the first budget of Britain’s new government, which included higher taxes on companies, is felt. 

The Bank of England said the budget was likely to add to inflation next year, and Governor Andrew Bailey on Tuesday stressed the central bank’s message that borrowing costs are likely to come down only gradually.

5. Crude gains on heightened Russia/Ukraine tensions

Crude prices edged higher Wednesday, helped by concerns about escalating hostilities in the Ukraine war potentially disrupting oil supply from Russia.

By 03:45 ET, the US crude futures (WTI) climbed 0.5% to $69.58 a barrel, while the Brent contract rose 0.4% to $73.61 a barrel.

The US embassy in Kyiv was closed earlier Wednesday after a warning of a possible strike, and this comes a day after Ukraine used US missiles to strike Russian territory, much to Russian President Vladimir Putin’s chagrin.

Putin lowered the threshold for a nuclear strike as a response on Tuesday, and this threatens to drag the West further into the Ukraine war, potentially disrupting Russia’s oil infrastructure.

However, gains have been contained by data from the American Petroleum Institute showing US crude oil stocks rose by 4.75 million barrels in the week ended Nov. 15, far more than the small 100,000 barrel increase expected.

If this figure is confirmed by the official data, due later in the session, it would point to a reduction in demand in the world’s largest energy market as the driving season comes to a close. 

BERLIN (Reuters) – China has overtaken Germany in the use of robots in industry, an annual report published by the International Federation of Robotics (IFR) showed on Wednesday, underscoring the challenges facing Europe’s biggest economy from Beijing.

In terms of robot density, an important indicator for international comparisons of the automation of the manufacturing industry, South Korea is the world leader with 1,012 robots per 10,000 employees, up 5% since 2018, said the IFR.

Singapore comes next, followed by China with 470 robots per 10,000 workers – more than double the density it had in 2019.

That compares with 429 per 10,000 employees in Germany, which has had an annual growth rate of 5% since 2018, said IFR.

“China has invested heavily in automation technology and ranks third in robot density in 2023 after South Korea and Singapore, ahead of Germany and Japan,” said IFR president Takayuki Ito.

Germany has in the past relied heavily on its industrial base and exports for growth but is facing ever tougher competition from countries like China. It expects economic contraction for the second year running in 2024, making it the worst performer among the Group of Seven rich democracies.

JAKARTA (Reuters) – Indonesia’s central bank held interest rates unchanged on Wednesday, as expected, saying policy was focused on maintaining stability in the rupiah currency while making sure inflation stays within its target range.

Bank Indonesia (BI) kept the benchmark rate steady at 6.00%, as predicted by 25 of 34 analysts polled by Reuters.

The central bank also left the overnight deposit facility and lending facility rates at 5.25% and 6.75%, respectively.

By Yoshifumi Takemoto

TOKYO (Reuters) – Japan’s ruling coalition on Wednesday agreed with a key opposition party on the draft of an economic stimulus package, clearing a major hurdle for the $87 billion package designed to help cushion the blow to households from rising prices.

The agreement among the Liberal Democratic Party (LDP), its ruling coalition partner Komeito and the Democratic Party for the People (DPP) meant the package is now likely to be approved by the cabinet of Japanese Prime Minister Shigeru Ishiba on Friday.

The coalition camp now needs DDP’s cooperation after the Oct. 27 election left the LDP and Komeito leading a fragile minority.

The LDP and Komeito agreed to reflect some of DPP’s key policy initiatives, including raising the basic tax-free income allowance and lowering the gasoline tax, as “top priorities” in the package, a DPP executive said at a news conference.

The stimulus package will also provide 30,000 yen ($193) to low-income households that are exempt from residential taxes and 20,000 yen per child for households with families, sources familiar with the matter have told Reuters.

The parliament will start discussions next month on a supplementary budget to fund the package, which is reportedly worth about 13.5 trillion yen ($87 billion).

($1 = 155.4800 yen)