Investing.com — The Bank of France has proposed a reduction in a crucial regulated savings rate for the first time in half a decade. This move could potentially elevate profits for French banks.

The rate on a unique type of deposit, known as Livret A, should be decreased next month to 2.4% from the current 3%, according to the Bank of France Governor Francois Villeroy de Galhau. The decision was influenced by the recent dip in inflation and was communicated to the upper house of Parliament on Wednesday.

The decision to implement the French central bank’s recommendation now rests with Finance Minister Eric Lombard. Lombard had previously indicated in a local radio interview that the cut in the Livret A rate should be approximately 0.5 percentage points.

The Livret A savings accounts are extremely popular in France. The rate on these accounts has been steady at 3% since the beginning of 2022. As of the end of November, French consumers held €427 billion ($440 billion) in these accounts, as per data from La Caisse des Depots.

A reduction in the rate would assist in lowering the funding costs for French banks. These banks have largely been unable to capitalize on the surge in net interest income that has benefitted their peers in recent years.

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

Investing.com – Canada is facing pressure to hold a scheduled federal election “sooner than later” this year as threats from US President-elect Donald Trump’s strict tariff plans loom, according to analysts at Jefferies.

Following Prime Minister Justin Trudeau’s announcement that he will resign from the role earlier this month, Canada’s parliament has been prorogued — or suspended — until March 24.

However, this means that the federal election will likely not take place until May at the earliest, placing a politically-weakened Trudeau potentially in charge of overseeing Canada’s initial response to Trump’s trade stance.

The Jefferies analysts said in a note to clients that they expect the vote will be held in mid-May, flagging that investors face the dilemma of “assessing the potential outcomes” of the ballot without having official platforms for any of the major players.

“Objectively, the timing is quite poor as Canada faces an existential threat with the pending inauguration of President-elect Trump,” the Jefferies analysts said on Wednesday. 

Trump, who is set to return to the White House later this month, has vowed to slap a 25% levy on imports from Canada, sparking concerns among economists over a possible recession in the country. Canada sends roughly three-fourths of its exported goods and services to the US, Reuters has reported.

“Regardless of whether his announced 25% tariffs are real or simply an empty threat […], Canada is entering into critical negotiations with its most significant trading partner effectively leaderless,” the Jefferies analysts said.

Trudeau’s office said this week that he will hold a cabinet retreat to determine a response to Trump’s possible tariffs, adding that the leaders will “protect and defend Canadian interests” and “make unequivocally clear the mutually beneficial trade and security relationship the two countries share.”

Should Trump follow through with the imposition of the duties, Trudeau, who is set to step down in early March, has promised to issue countermeasures. He has also called for a united response from Canadian lawmakers.

Separately, Foreign Minister Melanie Joly has said Canada is not ruling out restricting energy exports to the US, although the proposal has received criticism from the premier of oil-producing region Alberta.

Barclays (LON:BARC) analysts projected that the snap elections held in Germany on February 23 will likely lead to the formation of a coalition government. The current political landscape in Germany is highly fragmented, suggesting that establishing a coalition could take several months.

According to recent polls, the most probable outcome is a government led by the CDU/CSU (conservatives) in partnership either with the SPD (social democrats) or the Greens (environmentalists), as all parties have excluded the possibility of working with the AfD.

The election manifestos have placed a strong emphasis on economic policies. The CDU/CSU’s strategy includes supply-side reforms, cuts in corporate and income taxes, and the repeal of certain laws implemented by the Scholz administration. On the other hand, the SPD and the Greens are advocating for the creation of a new public investment fund and more focused tax rebates for corporate investment.

These measures would be funded by a reform of the German debt brake and increased taxes for higher earners and wealthier segments of society.

Barclays analysts anticipate that the incoming coalition will adopt a pro-growth agenda, which is expected to encompass corporate and income tax reductions, along with tax rebates for private investments. Nevertheless, the specific details of these reforms, particularly regarding their financing and the stance on modifying the debt brake rule, remain uncertain, especially since the CDU/CSU has not divulged comprehensive information on these matters.

The analysts also expect that the new fiscal policy will not hinder German economic growth as it might have under the German Draft Budgetary Plan 2025, which was submitted to the European Commission in October 2024.

While the fiscal policy is not predicted to be as expansionary as the parties’ manifestos would imply, it is forecasted to have a slightly positive impact on growth for the years 2025 and 2026, bolstered by contributions from public investment.

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

Investing.com — The French government is targeting savings of €53 billion ($54.6 billion) to reduce the country’s deficit, as stated by Budget Minister Amelie de Montchalin. The plan includes a €32 billion cut in state expenditure and an increase of €21 billion in tax revenue.

De Montchalin, in a Wednesday interview with TF1 television, emphasized the government’s dedication to this fiscal discipline. “In this budget, we’re going to make an historic effort to reduce public spending,” she noted, adding that there would be no tax increase for the middle and working classes.

The budget minister also shared her expectation to finalize the delayed 2025 budget within the current month. The budget bill is scheduled for a Senate discussion this week and is set to return to the lower house for further deliberation next week.

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

Investing.com — Following the release of recent data that showed a decrease in UK inflation in December, traders are predicting more interest-rate cuts from the Bank of England this year. This information has helped alleviate concerns regarding continuous price pressures that have been negatively impacting UK assets.

For the entire year, the money markets are now suggesting 50 basis points of reductions, which equates to two quarter-point movements. This is an increase from the less than 40 basis points that were implied on Tuesday.

In response to this, Gilts saw a significant increase, counteracting a rise in yields which had previously resulted in borrowing costs reaching their highest in many decades. This had sparked worries about the government’s fiscal strategies.

However, the problems facing Chancellor Rachel Reeves still persist. This was evidenced by a 10-year bond sale on Wednesday, where the borrowing cost was 4.81%, the highest it has been since 2008.

Traders are also concerned that this period of calm may not last, as US inflation data is set to be released later on Wednesday. This could potentially trigger another global increase in yields.

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

By Gayatri Suroyo and Stefanno Sulaiman

JAKARTA (Reuters) -Indonesia’s central bank unexpectedly cut policy rates on Wednesday, resuming its monetary easing to prop up growth in Southeast Asia’s largest economy despite financial market volatility that has sharply weakened the rupiah currency.

Bank Indonesia (BI) cut the benchmark 7-day reverse repurchase rate by 25 basis points to 5.75%, its first cut since September. The benchmark is now at its lowest in over a year.

All 30 economists polled by Reuters had expected no change in rates, citing pressure on the rupiah as the U.S. dollar climbs. Traders believe the central bank has been selling dollars for weeks to slow the local currency’s slide.

The bank also trimmed its deposit facility rate and lending facility rate by 25 basis points each to 5.00% and 6.50%, respectively.

“This is the timing to lower rates so we can create a better growth story,” BI Governor Perry Warjiyo said after announcing the surprise cut.

BI will “monitor for space to further support economic growth”, he said, in a hint the central bank might take more measures to stimulate the economy.

The main factor behind the cut was signs of weaker-than-expected economic growth in the final quarter of 2024, Warjiyo said, adding that the low inflation outlook through to 2026 has provided room for policy easing.

While uncertainties regarding U.S. monetary policy remained, BI was better able to gauge the impact on the Indonesian economy, he said.

Economic growth in 2024 is expected to be slightly below the midpoint of BI’s forecast range of 4.7%-5.5%, the bank said, while revising down its 2025 growth outlook to 4.7%-5.5% from 4.8%-5.6% previously, due to expectations of softer household consumption and weaker exports.

The central bank cut interest rates for the first time in more than three years in September, but had then held policy steady at subsequent meetings to anchor the rupiah, which has been under pressure amid uncertainty about U.S. policy under President-elect Donald Trump.

The rupiah slid to a six-month low of 16,335 per dollar after the rate cut, while the benchmark stock index rallied and was up 1.8% as of 0850 GMT.

“What had been our main concern was global uncertainty and its impact on the exchange rate,” the governor said.

“We have assessed that the current exchange rate is relatively stable and in line with fundamental value going forward,” he added.

Indonesia’s inflation has been moderate, with December’s annual rate of 1.57% close to the bottom end of BI’s 1.5% to 3.5% target range.

Radhika Rao, an economist at DBS, said the surprise decision signalled a shift in focus towards growth, which was in contrast with BI’s previously more cautious comments about the currency.

The shift might apply more pressure on the rupiah, however.

“Clearly the BI is grappling with dual objectives of supporting the economy and the depreciation of rupiah. The decision to cut rate inevitably put pressure on the rupiah, which will be on the backfoot now,” said Lloyd Chan, currency analyst at MUFG Bank.

“Gradual tariff hikes by the incoming Trump administration could lead to some reprieve for the rupiah,” he said.

BERLIN (Reuters) – Germany can only hope for a tangible economic recovery once there is clarity on the economic, financial and geopolitical outlook, the economy ministry said in its monthly report on Wednesday, after annual data showed a 2024 recession.

Global production of industrial products is modest as is the outlook for German trade, the report warned.

“As the year progresses, however, inflation-dampening factors such as the moderate price trend at upstream economic levels, the after-effects of restrictive monetary policy and lower wage settlements are likely to gain the upper hand,” it added.

By Lisa Baertlein and Ellen Zhang

LOS ANGELES/BEIJING (Reuters) – U.S. imports from China finished the year strong after some companies stockpiled shipments of apparel, toys, furniture and electronics ahead of President-elect Donald Trump’s plan to impose new tariffs that could revive a trade war between the world’s economic superpowers.

Trump, who has threatened to slap tariffs of 10% to 60% on goods from China, takes office on Jan. 20. During his first term, Trump mainly targeted Chinese parts and components. Economists and trade experts predict his next wave of tariffs could apply to finished goods.

“There has thus been an uptick in the exports of final goods from China to the U.S., as importers aim to front-run possible tariffs on consumer items,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.

Chinese trade officials on Monday said December exports surged to record levels and cited concerns about escalating trade protectionism in the U.S. and Europe.

The equivalent of 451,000 40-foot containers of goods from China landed at U.S. seaports in December, a year-over-year increase of 14.5%, according to trade data supplier Descartes Systems Group (NASDAQ:DSGX).

That capped a year when U.S. imports of bedding, plastic toys, machinery and other products from China rose 15% from 2023, according to Descartes.

While some U.S. retailers have rushed in goods to avoid the cost hit from potential new tariffs, teasing out the true effect on overall import gains is difficult because importers keep such data private. Further complicating the analysis, resilient U.S. shoppers have been fueling demand and some importers brought in safety stocks to protect against disruptions from Houthi attacks on shipping near the Suez Canal trade shortcut and a labor dispute at seaports on the U.S. East Coast and Gulf of Mexico.

Trump also has vowed to tariff goods from many other countries, including North American neighbors Mexico and Canada.

As a result, several categories of U.S. imports from all geographic sources posted meaningful gains during the fourth quarter, according to S&P Global Market Intelligence.

Textiles and apparel jumped 20.7%; leisure products, chiefly toys, gained 15.4%; home furnishings increased 13.4%; and household appliances and consumer electronics posted gains of 9.6% and 7.9%, respectively, according to S&P.

Consumer staples categories such as household and personal care as well as food and beverages, rose 14.2% and 12.5%, S&P said.

Investing.com – US stock futures are steady ahead of the publication of a crucial US inflation report and the release of quarterly earnings from several banking giants. Economists predict that a gauge of consumer price growth that could play into the outlook for Federal Reserve monetary policy accelerated slightly in December. Meanwhile, with a post-election stock market surge possibly easing, investors are looking to the results from JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS) and other lenders to help reignite the rally.

1. Futures steady

US stock futures hovered around the flatline on Wednesday, as investors prepared for the release of key US inflation data and a slew of earnings from major Wall Street lenders.

By 03:29 ET (08:29 GMT), the Dow futures contract, S&P 500 futures and Nasdaq 100 futures were mostly unchanged.

The main averages logged a mixed close following a choppy session on Tuesday, with the tech-heavy Nasdaq Composite slipping and the 30-stock Dow Jones Industrial Average and benchmark S&P 500 ending higher. A softer-than-expected reading of US producer price growth fueled an initial rise in equities, but the report was not enough to materially impact the outlook for the Federal Reserve’s interest rate path.

Traders were paying particularly close attention to a jump in airfare prices, which contribute to a crucial measure of inflation favored by Fed rate-setters.

2. CPI ahead

Attention now turns to the release of a gauge of consumer prices, which could provide further clarity around the state of inflation.

Economists estimate that the headline consumer price index increased by 0.4% month-on-month in December, slightly faster than a pace of 0.3% in the prior month. Compared to a year earlier, CPI is seen at 2.9%, up from 2.7% in November.

Stripping out items like food and fuel, the so-called “core” figure is projected to come in at 0.3% on a monthly basis and 3.3% year-on-year, matching November.

Heading into the report, concerns have swirled around nagging inflation, particularly after last week’s blockbuster employment data. President-elect Donald Trump’s plans to impose strict tariffs on allies and adversaries alike have also fueled the worries around price pressures.

US government bond yields have touched multi-month highs in recent days, weighing on the attractiveness of stocks, as investors have dialed back bets that the Fed will roll out interest rate cuts this year. The central bank slashed borrowing costs by a full percentage point in 2024.

While bond investors may have been encouraged by the soft producer prices print, some analysts have flagged that even a CPI number in line with forecasts may not be enough to stem the bearish sentiment.

3. Bank earnings

Several major lenders are due to report their latest quarterly returns on Wednesday, with investors eyeing them as a potential source of life for a waning post-election stock market rally.

JPMorgan Chase, Goldman Sachs, and Citigroup (NYSE:C), as well as asset management giant BlackRock (NYSE:BLK), are set to announce their numbers prior to the opening bell on Wednesday.

Investment banking and trading revenues will likely be a focal point, especially following a surge in stocks after Trump’s election victory that was fueled by hopes on Wall Street for a new era of looser regulations and lower taxes. A dip in corporate borrowing costs could buoy top-line results as well.

Analysts have also predicted that the Fed’s rate cuts may have bolstered net interest margins, or the difference between what a lender pays out for deposits and makes from borrowing.

4. US to push TSMC, Samsung to tighten China chip supplies – Bloomberg

The US is planning more regulations aimed at limiting the flow of advanced chips made by TSMC and its peers into China, Bloomberg News reported on Wednesday, adding to a flurry of restrictions imposed by the Biden administration.

The proposed measures will encourage manufacturers such as TSMC (TW:2330), Samsung Electronics Co Ltd (KS:005930), and Intel Corporation (NASDAQ:INTC) to more carefully scrutinize their customers for ties to blacklisted Chinese organizations, Bloomberg said.

The report comes just days after the US introduced additional restrictions on the export of cutting-edge artificial intelligence chips, in a continued effort to cut China off from advances in the fast-growing technology.

5. Crude gains

Oil prices advanced Wednesday, helped by a drop in US crude stockpiles as well as fears that new sanctions on Russian oil exports will disrupt global supplies.

By 03:30 ET, the US crude futures (WTI) rose by 0.5% to $76.75 a barrel, while the Brent contract added 0.4% to $80.27 per barrel.

Prices slipped on Tuesday after the US Energy Information Administration predicted oil would come under pressure over the next two years as supply would outpace demand.

That said, the market has found some support from a report from the American Petroleum Institute late Tuesday that showed a decline in crude stockpiles in the US, the world’s biggest oil consumer.

Traders also continue to focus on the Russian oil sanctions, amid uncertainty around how much Russian supply will be lost in the global market and whether alternative measures can offset the shortfall.

By Sinead Cruise and Lawrence White

LONDON (Reuters) – Britain’s banks are accepting smaller profit margins and bigger risks on UK mortgage lending as stress in sterling money markets stretches into a second week, industry sources said, with appetite to lend greater than worries about higher funding costs.

The cost for banks of hedging their mortgage lending via products known as swaps has risen as a spike in UK government borrowing costs to multi-decade highs has kindled fears Britain may struggle to meet its fiscal rules.

While investors are demanding bigger returns to hold UK sovereign debt, major banks are for now still willing to lend through the malaise without immediately passing on higher costs to customers seeking home loans, the industry sources said.

One source at a major UK lender said the mortgage market remained very competitive and banks were prepared to swallow lower asset margins and wider liability margins on lending to keep activity levels high.

Lloyds Banking Group (LON:LLOY), NatWest, HSBC, Barclays (LON:BARC) and Britain’s biggest building society Nationwide are continuing to jostle for a bigger slice of Britain’s mortgage market, with such assets typically providing consistent income streams to offset bank balance sheet liabilities, including interest-bearing deposit accounts.

British house prices dropped unexpectedly by 0.2% in December for the first time since March, figures from mortgage lender Halifax showed. Prices ended the year 3.3% higher, a lower annual rise than the 4.2% forecast in a Reuters poll of economists.

Some analysts say those falls could stimulate housing market activity this year, but other data show borrowers remain worried about possible hikes in the cost of mortgage debt.

According to a Barclays Property Insights report published this week, consumers’ confidence in their ability to afford their rental and mortgage payments dropped three percentage points to 52% in December, the lowest level in 2024.

Rachel Springall, finance expert at Moneyfacts, said lenders still needed to make efforts to entice new business.

“There are millions of borrowers due to come off fixed deals, so remortgage activity will be booming in 2025,” she said.

CALM CONVICTION

Banks use swaps to manage the risks of their mortgage lending. The price of two-year swaps has risen to 4.6%, the highest since July 2024, while five-year swaps have risen to 4.52%, the highest since November 2023.

Average two and five-year mortgage rates have only inched up 0.02% each since Friday, data from Moneyfacts as at Jan. 14 showed, with average 5-year mortgages at 5.27% compared to 5.25% on Jan. 1.

News of the banking sector’s sanguine approach to mortgage lending will be welcomed by Prime Minister Keir Starmer and finance minister Rachel Reeves, as they battle to meet fiscal targets and reassure international investors the UK is still a safe, rewarding bet.

The annual rate of inflation slowed last month to 2.5%, official data showed on Wednesday, soothing markets and providing some relief for policymakers.

Sustained gradual increases in swap rates have chipped away at profit margins on mortgages but lenders continue to compete hard for business, despite the rising cost of funds, said David Hollingworth, Associate Director at L&C Mortgages.

“The inflation figures today will help give a bit more positivity and a further element of stability into mortgage rates as it will firm up the hopes for a cut in base rate next month,” he said.

HSBC cut mortgage rates on Jan. 6 by up to 0.47% for existing customers, and also made further downward changes on Jan. 13 to select products.

“We frequently review mortgage rates, and a number of factors are taken into account when setting them, but we remain focused on continuing to provide competitive rates,” a spokesperson for the bank told Reuters.