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(Reuters) – U.S. stock index futures fell on Friday after Federal Reserve Chair Jerome Powell said there was no need to reduce interest rates in a hurry, pushing up bond yields and pressuring rate-sensitive equities.

In a speech on Thursday, Powell pointed to ongoing economic growth, a solid job market, and inflation above the Fed’s 2% target as reasons the central bank can afford to be careful as they determine the pace and scope of rate cuts going forward.

U.S. Treasury yields rose broadly after Powell’s comments, while Wall Street’s main indexes closed lower.

“Fed Chair Powell telegraphed news that markets didn’t want to hear but news that was clearly manifest in the last CPI report, that the Fed cannot yet declare victory in its campaign to quell inflation,” said Quincy Krosby, chief global strategist for LPL Financial (NASDAQ:LPLA).

Traders increased bets that the Fed will keep rates on hold at its December meeting – pricing in a 37.6% chance, compared with 14% a month ago, according to the CME FedWatch tool. They now expect only about 73 basis points of total easing by the end of 2025, per LSEG calculations.

All three major U.S. stock indexes are set for weekly losses, as a sharp post-election rally has fizzled out with market focus shifting to the state of the economy and potential inflation risks under a second Donald Trump presidency.

Stocks of vaccine makers lost ground after the President-elect selected Robert F Kennedy Jr, who has spread misinformation on vaccines, to head the Department of Health and Human Services.

BioNTech (NASDAQ:BNTX), Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) all fell more than 2% in premarket trading, while Pfizer (NYSE:PFE) dipped 0.4%.

At 5:30 a.m. ET, Dow E-minis were down 205 points, or 0.47%, S&P 500 E-minis were down 38.5 points, or 0.64%, and Nasdaq 100 E-minis were down 185.5 points, or 0.88%.

Futures tracking the more rate-sensitive, small-cap Russell 2000 dropped 0.3%.

Megacaps stocks also fell. Nvidia (NASDAQ:NVDA) edged 0.5% lower, Apple (NASDAQ:AAPL) dropped 1% and Alphabet (NASDAQ:GOOGL) was down 0.6%

Powell’s comments come after both consumer and producer prices data this week pointed to persistent inflation.

Friday’s October retail sales data, due at 8:30 a.m. ET, will provide more signals on how consumers have coped with rising prices.

Import and export prices as well as industrial production data are also on deck through the day, while remarks from New York Fed President John Williams are also expected.

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ABUJA (Reuters) – Nigeria’s inflation rate rose for the second straight month in October, advancing to 33.88% in annual terms from 32.70% in September, data from the statistics agency showed on Friday.

Inflation quickened sharply in the second half of last year after President Bola Tinubu devalued the country’s naira currency and cut subsidies to try to lift economic growth and shore up public finances.

It started to ease in July this year as the impact of the naira devaluation began to fade, before a series of petrol price increases again spurred inflationary pressures, exacerbating the worst cost-of-living crisis in decades in Africa’s most populous nation.

The central bank has hiked interest rates five times this year to try to get inflation under control. It holds another rate-setting meeting later this month.

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By Amanda Cooper

LONDON (Reuters) – The pound headed for its biggest weekly loss since January on Friday, under pressure from weak UK economic data and a surging dollar that is getting a lift from investors’ conviction that Donald Trump’s policies will drive up U.S. growth and inflation.

Britain’s economy contracted unexpectedly in September and growth slowed to a crawl over the third quarter, data showed on Friday.

Sterling was unchanged on the day at $1.26795, around its lowest since May and set for a 2% decline this week, its largest weekly loss since January.

President-elect Trump has vowed to levy hefty tariffs on the imports of some of the United States’ biggest trading partners, while at the same time cutting taxes at home and loosening a raft of regulations on anything from energy to cryptocurrencies.

The likely impact is a rise in U.S. inflation and a possible boost to domestic growth, which has sent the dollar to its highest in around a year and eroded the pound’s erstwhile strength against the U.S. currency.

Sterling has turned negative on the year against the dollar for the first time since July, down 0.4%. For most of 2024, it’s been the best-performing major currency, on the grounds that UK interest rates will take longer to fall meaningfully than U.S. ones.

With the Federal Reserve looking increasingly likely to cut rates only gradually, given the outlook for a high-inflation, high-growth macro backdrop, the dollar could have more yield appeal than the pound.

Money markets show traders think the Bank of England is expected to cut UK rates to around 2% by next December, compared with a projected 3.84% from the Fed.

“We believe that if UK economic data continues to disappoint, the BoE may become more focused on reviving growth,” BBVA (BME:BBVA) strategist Roberto Cobo said.

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BERLIN (Reuters) – The leader of Germany’s Social Democratic Party (SPD) sees a “good starting point” for reforming the nation’s spending cap, known as the debt brake, and said that such a move wouldn’t have to wait until the formation of a new government.

Referring to signs of willingness for reform from the centre-right opposition, Lars Klingbeil told the Handelsblatt newspaper: “That’s a good starting point for continuing straight away.”

Opposition leader Friedrich Merz of the conservative Christian Democrats (CDU) has said he could be open to reforming the debt brake, which limits Germany’s public deficit to 0.35% of gross domestic product, in certain circumstances.

Merz has been tipped to succeed the SPD’s Olaf Scholz as chancellor in snap elections set for Feb. 23, with the CDU currently leading in the polls.

“We don’t have to wait until there is a new government in April, May or June, when we don’t even know whether we will have the necessary majorities in the Bundestag (lower house of parliament) with a two-thirds majority,” Klingbeil told the business paper’s podcast in comments published on Friday.

Any reform of the debt brake would require a two-thirds majority because it is enshrined in the country’s constitution.

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BRUSSELS (Reuters) – Increased protectionism of U.S. trade policy would be extremely harmful to both the United States and to Europe, European Economic Commissioner Paolo Gentiloni said on Friday.

U.S. President-elect Donald Trump has floated the idea of a tariff of 10% or more on all goods imported into the United States, which is Europe’s main trading partner.

“The level of integration between our economies is such that EU-U.S. trade relations are a stabilising economic and political force,” Gentiloni told a press conference.

“Despite trade disputes and regulatory divergences, both regions maintain a shared interest in upholding high standards, fair competition and stability in global markets,” he said.

“And in this context, a possible protectionist turn in the U.S. trade policy would be extremely harmful for both economies,” he said, adding the European Commission, which is in charge of EU trade policy, would work with the next U.S. administration to advance a “strong transatlantic agenda” and ensure that international trade channels remain open while making them more secure.

Gentiloni said the countries most affected by the potential increase in U.S. tariffs would be Germany and Italy because they exported the most to the United States. Tariffs would compound the problems manufacturers in the two EU countries were already facing, he said.

Tariffs could also have a negative impact on the U.S. economy itself by stoking inflation, with all its consequences, Gentiloni said.

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BRUSSELS (Reuters) – Euro zone economic growth will pick up in 2025 and 2026 and inflation will continue to slow, the European Commission forecast on Friday, but noted risks to global trade from U.S. protectionism and to energy prices from the Middle East.

U.S. President-elect Donald Trump has floated the idea of a 10% or more tariff on all goods imported into the U.S, which is Europe’s main trading partner.

“Geopolitical risks and policy uncertainty have further increased. In addition to the risks related to the wars in Ukraine and the Middle East, a further increase in protectionist measures by trading partners could weigh on international trade,” the Commission said in it regular economic forecast.

“With its structural dependence on energy imports and high degree of openness, the EU is especially vulnerable,” it said.

The Commission expects the economy of the 20 countries that share the euro to grow 0.8% in 2024 and accelerate to 1.3% in 2025 and 1.6% in 2026.

Europe’s biggest economy Germany, after two years of contracting output in 2023 and 2024, is to growth 0.7% in 2025 and 1.3% in 2026, the Commission forecast. Growth in second biggest France is to slow to 0.8% in 2025 from 1.1% seen in 2024 before rebounding to 1.4% in 2026.

At the same time consumer inflation, which the European Central Bank wants to keep at 2% over the medium term, is to decelerate to 2.1% next year from 2.4% expected in 2024 and slow further to 1.9% in 2026, the Commission said.

The aggregated euro zone budget deficit, which under EU rules every country should keep below 3% of GDP, is to shrink to that threshold level for the whole euro zone this year and then continue down to 2.9% in 2025 and 2.8% in 2026.

Aggregated euro zone public debt, however, will continue to rise from 89.1% of GDP expected this year to 89.6% next year and 90.0% in 2026, the Commission forecast.

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By Uditha Jayasinghe

COLOMBO (Reuters) – Sri Lankan President Anura Kumara Dissanayake’s sweeping coalition election win this week underlined widening support for his leftist policies, but he faces the test of steering the nation’s recovery from a financial crisis with an inexperienced set of lawmakers.

Dissanayake’s coalition, the National People’s Party (NPP)had just three seats in the previous parliament but scored a landslide victory in Thursday’s general election, winning a two-thirds majority in the 225-member house.

With the massive mandate, the South Asian nation of 22 million handed him legislative power to push through his plans to fight poverty in the country and will look to him to deliver them out of the country’s worst financial crisis since independence from the British in 1948.

Dissanayake, who comes from a small farming household in the southern city of Thambuttegama and is a physical science graduate, defeated political elites to secure his presidential term in September.

And his coalition, made up mostly of new political entrants, pulverised candidates from the Samagi Jana Balawegaya party of opposition leader Sajith Premadasa and experienced lawmakers backed by previous President Ranil Wickremesinghe.

However, his promises to slash taxes and introduce stronger welfare support for millions of poor could clash with the completion of a $25 billion debt restructuring programme and taking forward a $2.9 billion International Monetary Fund (IMF).

“The president has a huge mandate now to carry through the reforms but also huge expectations from the people,” said Bhavani Fonseka, a researcher at Colombo’s Centre for Policy Alternatives.

“This is unprecedented, we haven’t seen this kind of victory before. People voted for a change.”

Despite his manifesto outlining plans to adopt a homegrown approach to Sri Lanka’s economic woes, Dissanayake has taken a more conciliatory approach since coming to power.

He said any changes to the contours of the IMF programme would be undertaken in consultation with the fund and that he is committed to ensuring repayment of debt. His government has continued engaging with the IMF and took forward a preliminary agreement with bondholders reached earlier in September.

A third review of the IMF programme was delayed due to the parliamentary election. The new government is expected to step up talks with the IMF and fiscal goals set under the programme are likely to be included in a budget to be presented to parliament early next year.

“We think it is unlikely that Dissanayake is emboldened by this sweeping victory to unveil a market-unfriendly set of policies that might be truer to his Marxist roots,” Tellimer Insights said in an analyst note.

“All of his actions and rhetoric so far… have demonstrated his acknowledgement that there is little alternative but to continue down the path of policy course correction.”

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By Gloria Dickie and Simon Jessop

BAKU (Reuters) – A group of conflict-affected countries is pushing at COP29 to double financial aid to more than $20 billion a year to combat the natural disaster and security crises facing their populations, a letter seen by Reuters showed.

The group is one of several pitching at the climate talks in Azerbaijan this week for funds to better prepare for the impacts of extreme weather as countries seek to agree a new annual target on financing.

Island nations, for example, argue climate change threatens their very existence as seas rise, while rainforest nations say they need more money to protect their vast carbon sinks.

Countries mired in conflict and its aftermath say they have struggled to access private investment, as they are seen as too risky. That means U.N. funds are even more critical to their populations, many of whom have been displaced by war and weather.

In response, the COP29 Azerbaijan Presidency on Friday will launch a new ‘Network of Climate-vulnerable Countries’, including a number of countries that belong to the g7+, an intergovernmental group of fragile countries, which first sent the appeal.

The network aims to advocate as a group with climate finance institutions; build capacity in member states so they can absorb more finance; and create country platforms so investors can more easily find high-impact projects in which to invest, said think tank ODI Global, which helped the countries create the network.

Burundi, Chad, Iraq, Sierra Leone, Somalia, Timor-Leste and Yemen have already joined the initiative, but all 20 members of the g7+ have been invited.

“My hope is it will create a real platform for the countries in need,” said Abdullahi Khalif, chief climate negotiator for Somalia on the sidelines of the Baku talks.

The move follows a letter sent by the g7+ to the United Nations, World Bank Group, International Monetary Fund and COP presidencies last month, and shared exclusively with Reuters, asking for more support.

In it, the group demanded an explicit commitment in any final deal on finance at COP29 that would double financing to help them adapt to climate change to at least a collective $20 billion per year by 2026. 

While 45 of the world’s least developed countries have their own U.N. negotiating group, which includes some of the g7+ countries, conflict-affected states face distinct struggles, advocates said. 

“A flood situation in South Sudan or Somalia creates more catastrophe than it would in any other developing country,” said Habib Mayar, g7+ deputy general secretary, who helped coordinate the letter. 

A child born in South Sudan, which has been mired in war since 2013, was 38 times more likely in 2022 to be internally displaced by climate-related disasters than a European or North American child, according to UNICEF data. 

Yet conflict-affected countries received only $8.4 billion in climate funding in 2022 — about a quarter of what was needed, according to a 2024 analysis by ODI Global.

“It’s clear that climate funds aren’t doing enough to support the world’s most climate vulnerable people,” said Mauricio Vazquez, ODI Global’s head of policy for global risks and resilience, said.

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By Shashwat Chauhan

(Reuters) -Europe’s STOXX 600 fell on Friday, dragged by technology and healthcare stocks, keeping the index on track for its fourth successive weekly drop.

The pan-European STOXX 600 benchmark index slipped 0.5%, hovering near a three-month low hit earlier this week.

The technology sub-index dropped 1.7%, with chipmaker ASML (AS:ASML) among top decliners, after U.S. firm Applied Materials (NASDAQ:AMAT) forecast first-quarter revenue below estimates, a sign of sluggish demand for the chipmaking equipment outside of AI-powered chips.

Healthcare stocks shed 2.1%, with Bavarian Nordic (CSE:BAVA) sliding 17% after the Danish biotech firm posted a lower-than-expected core profit for the third quarter, 2025 orders below expectations.

European vaccine makers came under pressure after U.S. President-elect Donald Trump said he has selected Robert F. Kennedy Jr., an environmental activist who has spread misinformation on vaccines, to lead the Department of Health and Human Services.

Sanofi (NASDAQ:SNY) fell 2.9%, while GSK lost 2.2%.

The Swiss benchmark, which houses the bulk of European healthcare firms, declined 0.8%.

European equities were rocked this week as investors fretted over U.S.-China relations after Trump was expected to tap a China hawk to be his secretary of state, while some downbeat earnings throughout this week also compounded losses.

A lower close on Wall Street overnight also weighed on sentiment, after Federal Reserve Chair Jerome Powell said the U.S. central bank does not need to rush to lower interest rates.

“The post-election rally paused for breath, with the latest Fed comments on the economy stopping the surge in its tracks,” said Richard Hunter, head of markets at online investment platform interactive investor.

Elsewhere, Britain’s economy contracted unexpectedly in September and growth slowed to a crawl over the third quarter.

Consumer prices in France rose 1.6% year on year in October, revising slightly up its preliminary reading of 1.5%, while Italian EU-harmonised consumer prices (HICP) rose 0.3% month on month in October and were up 1.0% from a year earlier.

Among individual stocks, Evotec jumped close to 20% after Halozyme Therapeutics (NASDAQ:HALO) said it has proposed to buy the German drug developer for about 2 billion euros ($2.11 billion).

Generali (BIT:GASI) advanced 5.5%, after Italy’s top insurer beat estimates for nine-month profits despite a 930 million euro hit from natural disasters.

($1 = 0.9471 euros)

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By Naomi Rovnick

LONDON (Reuters) – Big global investors are exiting popular trades that bet on U.S. President-elect Donald Trump’s tax and tariff policies boosting Wall Street and wreaking damage abroad and swooping in on some of the Nov. 5 election’s biggest market victims.

After U.S. stocks and the dollar bounced on Trump’s growth agenda and trade war fears pressured Chinese, European and emerging market assets, money managers are hunting for bargains in places where pessimism may have gone too far.

“The thesis that Trump is good for the U.S. and bad for the rest of the world is a very common narrative,” said John Roe, head of multi-asset funds at Legal & General (LON:LGEN) Investment Management, which manages 1.2 trillion pounds ($1.52 trillion) of investments.

He said this had convinced him to buy non-U.S. assets that may have been excessively sold – like European car-makers and the Mexican peso – and close pre-election positions that profited from sterling and Chinese tech stocks falling.

European auto stocks touched their lowest in almost two years on Wednesday while the Mexican peso has fallen more than 2.5% versus the dollar this month and sterling is down some 5% against the greenback since end-September.

Shaniel Ramjee, a multi-asset co-head at Pictet Asset Management, which runs 254 billion Swiss francs ($285.43 billion) of client funds, said he had increased holdings of Chinese stocks and Brazilian bonds since the election.

“There will be a really good opportunity in assets that have weakened ahead of and after the election, we see a lot of value,” he said.

Investors are now questioning the popular market view that Trump will aggressively pursue policies that exacerbate U.S. inflation and derail Federal Reserve rate cuts, given voter anger about living costs and consumer price rises.

TOO FAR?

Since the eve of the election, U.S. stocks have risen more than 4% while European equities have fallen about 1% and emerging market shares are at two-month lows.

“The news flow (for non-U.S. markets) is so negative right now that any kind of good news could move things quickly,” Morningstar European equity strategist Michael Field said.

The euro, down about 3% since Trump’s win, hit a one-year low of $1.052 this week and 10-year U.S. Treasury yields jumped 14 basis points (bps) to 4.47%, as traders bet on higher U.S. interest rates and inflation.

Europe is mired in pessimism, exacerbated by the collapse of Germany’s government and fears for exporters, with Volkswagen (ETR:VOWG_p) shares trading at about 3.3 times forecast earnings and European chemical producers down 11% since late September.

Most investors surveyed by Bank of America last week had an underweight stance on Europe, meaning they expected the region’s markets to trail the United States and Asia.

But Edmond de Rothschild Asset Management chief investment officer Benjamin Melman said he would keep his European exposure at market-neutral levels instead of joining the selling.

“That is brave in this environment,” he said, while noting that European Central Bank rate cuts could stimulate bank lending and business activity.

He had also bought Chinese equities since the U.S. election, he said.

INFLATION NATION?

Barclays (LON:BARC) economists said while Trump’s threatened 60% import tax would shave two percentage points off Chinese economic growth, the tariffs would likely be much lower and implemented gradually.

Pictet’s Ramjee said investors were too focused on Trump’s proposed import taxes and underestimated the political risk of tariffs increasing consumer prices.

“I think Trump will be very focused on making sure he doesn’t cause an inflation spike,” he said.

Ramjee said he had backed out of U.S. Treasuries before the election but would buy again if yields, which move inversely to prices, kept rising.

Craig Inches, head of rates and cash at Royal London Asset Management, which runs almost 170 billion pounds, said he had taken profits on a pre-election bond trade that benefited from U.S. inflation expectations rising.

UK government bonds, prices of which have declined alongside Treasuries, now looked “exceedingly cheap”, Inches said.

Marlborough CIO Sheldon MacDonald expected Trump’s tax and spend agenda to boost U.S. growth and global trade, limiting blows to overseas nations from tariffs.

“What’s good for the U.S. tends to be good for the rest of the world,” he said, adding that because Wall Street stocks were expensive he favoured Britain’s exporter-heavy FTSE 100, which has fallen about 1.3% since Nov. 5.

($1 = 0.7881 pounds)

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