WASHINGTON (Reuters) – A measure of U.S. business activity raced to a 31-month high in November, boosted by hopes for lower interest rates and more business-friendly policies from President-elect Donald Trump’s administration next year.

S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 55.3 this month. That was the highest level since April 2022 and followed a reading of 54.1 in October.

A reading above 50 indicates expansion in the private sector. The PMI at face value implied that economic growth probably accelerated in the fourth quarter. So-called hard economic data like retail sales, however, suggest the economy was maintaining a solid pace of growth this quarter, with weakness in housing and sluggish manufacturing continuing.

The economy grew at a 2.8% annualized rate in the July-September quarter. The Atlanta Federal Reserve is currently estimating fourth-quarter gross domestic product rising at a 2.6% pace.

“The rise in the headline flash PMI indicates that economic growth is accelerating in the fourth quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “The prospect of lower interest rates and a more pro-business approach from the incoming administration has fueled greater optimism, in turn helping drive output and order book inflows higher in November.”

The services sector accounted for much of the increase in the PMI, though the decline in manufacturing leveled off.

The survey’s measure of new orders received by private businesses rose to 54.9 from 52.8 in October. Price increases slowed further, with the gauge of average prices paid by businesses for inputs falling to 56.7 from 58.2 last month.

Businesses were also not pushing through significantly higher prices amid growing resistance from consumers.

A measure of prices charged by businesses for their goods and services dropped to 50.8, the lowest level since May 2020, from 52.1 in October.

That offers hope inflation could resume its downward trend after progress stalled in recent months, and allow the Federal Reserve to continue cutting interest rates. The U.S. central bank initiated its policy easing cycle with an unusually large half-percentage-point cut in its policy rate in September.

The Fed delivered another 25 basis points reduction this month, which lowered its benchmark overnight interest rate to the 4.50%-4.75% range. The Fed hiked rates by 525 basis points in 2022 and 2023 to curb inflation.

Businesses, however, showed hesitancy boosting their workforces despite being the most confident in 2-1/2 years.

The survey’s measure of employment was little changed at 49.0. Services sector employment continued to decline, but manufacturing recovered.

The survey’s flash manufacturing PMI inched up to 48.8 from 48.5 last month. The results were in line with economists’ expectations. Its flash services PMI rose to 57.0, the highest reading since March 2022, from 55.0 in October. That was well ahead of economists’ expectations for a reading of 55.2.

WASHINGTON (Reuters) – The European Union is prepared to react to any renewed trade tensions with the United States that may emerge under President-elect Donald Trump’s second administration, the EU’s ambassador to the U.S., Jovita Neliupšienė, said on Friday.

Neliupšienė, speaking to reporters during a press briefing, did not specify actions to respond to Trump’s vow to impose tariffs of 10%-20% on all U.S. imports, including from the EU. She said that the U.S. will need to cooperate with the EU and other allied trading partners to effectively confront China’s non-market economic practices.

FRANKFURT (Reuters) – Friday’s unexpectedly weak survey on the health of the German economy merely confirm the country’s predicament and discussion on the possible size of the next ECB interest rate cut needs to wait, Bundesbank chief Joachim Nagel said on Friday.

“They are more or less confirming the overall picture that the German economy is stagnating this year, and the start next year will be complicated for sure,” Nagel said about fresh PMI data.

He added that new economic projections from the ECB due just before the Dec. 12 policy meeting will be crucial in deciding policy, so the discussion abut the exact move should wait, even if it was clear that more rate cuts are coming over the next year.

(Reuters) -Honeywell said on Friday it would sell its personal protective equipment business to Protective Industrial Products for about $1.33 billion in cash.

The PPE business is part of the company’s industrial automation segment and the deal is expected to close in the first half of 2025.

The diversified industrial giant is facing a push from activist investor Elliott Investment to split its aerospace and automation businesses.

In September, Canadian retail sales saw an increase of 0.4%, reaching $66.9 billion, with gains observed across six of nine subsectors. Food and beverage retailers spearheaded this growth.

Core retail sales, which exclude sales from gasoline stations and fuel vendors as well as motor vehicle and parts dealers, rose by 1.4% in the same month. When measured by volume, retail sales experienced an uptick of 0.8%.

The third quarter of the year reported a 0.9% rise in retail sales, and a more pronounced increase of 1.3% when considering volume alone.

After a dip in August, core retail sales rebounded in September, led by a 3.0% rise at food and beverage retailers. Supermarkets and other grocery stores, not including convenience stores, saw a significant recovery with a 3.3% boost in sales after August’s 1.9% fall. Contributing to this sector’s performance were beer, wine, and liquor stores, which, after a three-month slump, marked a 4.4% increase in receipts.

Building material and garden equipment and supplies dealers also reported a 3.0% surge in sales for September.

The only subsector to record a decline in core retail sales was that of clothing and related accessories, which saw a 0.8% drop.

Conversely, gasoline stations and fuel vendors witnessed the most notable decrease in retail sales, down by 2.3% for the fifth consecutive month. However, in volume terms, these sales actually went up by 3.2%.

Motor vehicle and parts dealers also faced a downturn, with a 0.7% decrease in sales, primarily due to lower sales at new car dealers, followed by used car dealers and other motor vehicle dealers. Nonetheless, automotive parts, accessories, and tire retailers reported a positive shift with sales climbing 4.2%.

Retail sales rose in five Canadian provinces in September, with Alberta leading the way with a 2.3% increase, largely fueled by motor vehicle and parts dealers. Quebec saw a modest 0.6% growth, with the Montréal area experiencing a 0.3% uptick. Ontario, however, encountered a slight retrenchment in retail sales by 0.1%, with Toronto’s sales remaining flat.

E-commerce retail sales in Canada also experienced growth, with a seasonally adjusted increase of 3.3% to $4.1 billion in September, making up 6.2% of the total retail trade. This is a slight rise from the 6.0% share recorded in August.

Looking ahead, an advance estimate by Statistics Canada indicates a potential 0.7% rise in retail sales for October. However, this preliminary figure is subject to revision, being based on 58.9% of the survey responses, compared to the 88.9% average final response rate over the past year.

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

FRANKFURT (Reuters) – Europe and the U.S. will both take a growth hit if there is a new trade war and inflation could also rise, increasing pressure on EU leaders to kick start long-delayed economic integration to insulate the bloc, Bundesbank President Joachim Nagel said on Friday.

Nagel joins a long list of policymakers arguing that tariffs proposed by U.S. President-elect Donald Trump are likely to hurt all parties involved, a message that has yet to resonate with the incoming U.S. administration.

“Implementing such tariffs would re-ignite international trade conflicts and further impair our multilateral order,” Nagel said in a speech in Frankfurt.

“Combined with other plans, they might inflict significant GDP losses in the United States and abroad,” Nagel said. “And they would probably lead to rising inflation rates – on both sides of the Atlantic.”

Europe must now come together and subordinate national interests to the common cause, creating an economic framework that protects the European model of prosperity, Nagel argued.

Necessary steps include a true banking union with a joint deposit guarantee scheme and a solution to the “doom loop”, created by the links between sovereigns and banks, Nagel said.

Another necessary step is setting up a true capital markets union, which would channel European savings to firms and regions in the biggest need of capital, Nagel added.

In a recent speech at the European Banking Congress in Frankfurt am Main, Joachim Nagel, President of the Deutsche Bundesbank, emphasized the importance of collaboration between Germany and France for a robust Europe. Alongside his French colleague, François Villeroy de Galhau, Nagel highlighted the necessity of a united Europe to confront current challenges. The central bankers also expressed relief that the era of high inflation has ended, shifting their focus to long-term economic and inflationary impacts.

Nagel recalled the optimism following the end of the Cold War, contrasting it with the current strength of autocratic regimes and the resurgence of military aggression, citing Russia’s attack on Ukraine. He pointed out the vulnerability of liberal values within democracies, noting the European Union’s scapegoating by populists, which hinders further integration.

Addressing Europe’s economic challenges, Nagel mentioned the risks of unilateral trade dependencies revealed by events like the pandemic and geopolitical tensions, advocating for more diversified supply chains. He also brought up the labor scarcity due to demographic changes and the financial demands of the digital and green transitions, which largely depend on private investment. The recent US elections were mentioned as a potential challenge to Europe politically and economically.

Nagel stressed the incomplete fulfillment of the Single Market and financial integration, citing the need to implement proposals from the Letta and Draghi reports. He called for progress on the banking union, including a joint deposit guarantee scheme and addressing the “doom loop” between sovereigns and banks. The capital markets union was also mentioned as an area needing advancement, especially in light of the new EU legislative session and the urgency added by the US election outcomes.

Regarding trade policy, Nagel expressed concern over potential tariffs from the incoming US administration, which could reignite trade conflicts and affect global GDP and inflation rates. He advocated for a prudent European response that upholds a rules-based, multilateral trading system.

In conclusion, Nagel urged for collective action to build a resilient and prosperous Europe, capable of overcoming its multiple challenges through unity and cooperation.

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

The Eurozone has experienced a downturn in business activity in November, with both the services and manufacturing sectors contracting. The HCOB Flash Eurozone Composite PMI Output Index, which is a measure of the overall health of the economy, fell to 48.1, marking a 10-month low and indicating contraction. This figure was down from October’s reading of 50.0, which signals no change in activity levels. The services sector, which had been expanding, joined manufacturing in contraction, with its PMI Business Activity Index dropping to 49.2 from 51.6 in October, also reaching a 10-month low.

Manufacturing continued to struggle, with the Manufacturing PMI Output Index decreasing to 45.1, a slight decline from 45.8 in October, and the overall Manufacturing PMI falling to 45.2 from 46.0, both reaching a two-month low. The data, collected between November 12 and November 20, reflects the second contraction in three months for the Eurozone.

The decline in output is attributed to diminishing demand, as new orders have decreased for the sixth consecutive month, and at the fastest rate in 2024. This reduction was more pronounced in manufacturing, but the services sector also saw a significant drop in new business. The decline in new business from abroad, including intra-Eurozone trade, was the largest since the end of last year, with new export orders decreasing sharply.

Confidence in the future of the Eurozone economy has also waned, with business sentiment falling to its lowest level since September 2023. The drop in optimism was most notable in the service sector, where it reached a two-year low. In France, pessimism was recorded for the first time in over four years, while German companies showed a slight improvement in confidence compared to October. Nonetheless, the rest of the Eurozone maintained a strong positive outlook for the coming year, despite a slight decrease in optimism.

Employment across the Eurozone was marginally reduced for the fourth month in a row, with a marked decrease in manufacturing jobs, the most significant since August 2020. In contrast, the services sector saw an increase in employment, the fastest in four months. Germany reported a fall in staffing levels, while France and the rest of the Eurozone saw an increase.

Prices in the Eurozone have continued to rise, with input cost inflation accelerating to a three-month high in November, although it remains below the average for the year. Services input prices have surged, counterbalanced by a reduction in manufacturing input costs. Output prices also increased at a faster rate than in October but were still below the average for the year. Germany, France, and the rest of the Eurozone all reported increases in output prices.

Inventories and supply chains were also affected, with manufacturing firms reducing their purchasing activity at the fastest rate in 2024. Stocks of purchases and finished goods were lowered more than in the previous month, and suppliers’ delivery times remained broadly stable.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the situation, noting the challenges faced by the Eurozone’s economy amidst political uncertainties in France and Germany, as well as the impact of the U.S. presidential election. He highlighted the unexpected drop in the services sector and the stagflationary environment, with declining activity and rising prices. De la Rubia also mentioned the possibility of a rate pause by the European Central Bank (ECB) in December, although a 25-basis point rate cut is more likely to be supported by the majority.

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

(This Nov. 19 story has been corrected to fix the description of ILX to ‘development finance specialist,’ not ‘blended finance specialist,’ in paragraph 22)

BAKU (Reuters) – As officials from around the world strive this week to reach a deal on funding for poorer countries to tackle climate change, investment manager Rob Drijkoningen is the sort of person they’re hoping will help get them there.

Drijkoningen is head of emerging market debt at U.S. asset manager Neuberger Berman, which holds $27 billion in sovereign and corporate debt from developing countries. He should be a natural partner for multilateral development banks (MDBs) looking to find private sector investors for projects to slow climate change or cope with its effects.

Boosting private sector investment is, for rich nations, a crucial part of clinching a deal at the COP29 climate talks in Azerbaijan this week on a global commitment for annual funding to fight climate change – dubbed the New Collective Quantified Goal. 

Development banks committed to increase their lending to poorer countries to $120 billion a year by 2030. They also pledged to bring in an additional $65 billion annually in private sector cash to those nations. 

But Drijkoningen, after speaking with the European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD) about potential deals this year, decided there were too many hurdles to investment. 

Development banks, he said, are not willing to open their books and share enough information about investments’ risks. Nor do they allow private investors to pick and choose the projects that interest them. For asset managers already facing limited appetite from clients for long-term infrastructure assets in developing nations, those obstacles make investment unappealing. 

“We would need to get a true sense of a level playing field: of getting equal access to information so that we can appropriately assess the merits,” Drijkoningen said. “That’s a cultural issue that I doubt we have come close to changing.”

Cash-strapped Western governments are pinning their hopes on a massive increase in private sector investment to reach the $2 trillion-plus needed annually to help poorer countries move to greener energy and protect against the impacts of extreme weather. 

After a resounding win by climate denier Donald Trump in this month’s U.S. presidential election, worries are rising that the financing gap will steadily widen if Washington – and its dollars – pulls out of the global climate fight.

An ongoing, two-year reform of multilateral institutions like the World Bank – aimed at overhauling the way they lend to make more use of their money – helped drive a 41% increase in the mobilisation of private sector funds to low income countries in 2022 across 27 development banks, a report this year showed. 

The head of the EBRD, Odile Renaud-Basso, told Reuters the bank was working hard to provide more information to the private sector, but there were some limits to what could be made public.

But a Reuters analysis of lending data and interviews with two dozen development banks, climate negotiators, private sector investors and non-profits showed that change at multilateral lenders needs to accelerate significantly if the private sector is to fulfil its hoped-for role.

The analysis of total aggregate lending last year provided by 14 of the world’s top development banks showed that for each dollar invested across all markets just 88 cents of private money was sucked in. 

And that fell to just 0.44 cents of private money to poorer countries. Here, the banks made climate finance commitments of $75 billion and mobilised $33 billion of private investment.

A report by a group of independent experts for the G20 group of industrialised nations last year on how to strengthen multilateral development banks said the target that needed to be hit was $1.5 to $2 for every $1 of lending.  

SLOW PROGRESS

Governments – which bankroll development banks – are pushing them to go reform faster. That should result in a more ambitious funding target in Baku – and help countries to skirt a politically contentious discussion on increasing the banks’ capital.

The EBRD now delivers $3.58 of private money for every $1 it invests across its portfolio, up from $2 dollars three years ago. IDB Invest – the private sector arm of the Inter-American Development Bank (IDB) – has also embarked on an overhaul of its business, helping to increase IDB Group’s mobilised private capital fivefold from 2019 to 2023 to $4.4 billion. 

There are various ways for multilateral lenders to pull in private sector cash. The most established one is parceling up parts of their own loans and selling them to private investors, freeing up money to lend again. These so-called B-loans have been around for more than six decades. 

But Nazmeera Moola, chief sustainability officer at asset management firm Ninety One, said that a raft of issues – including long lead times and returns that were sometimes unattractive – had diminished the appeal of these assets. 

Meanwhile, many large institutional investors, such as pension funds or insurance companies, think of direct investing through corporate or project finance lending in emerging markets as “scary stuff”, she added. 

Harmen van Wijnen, chair of the board of Dutch pension fund ABP, which has invested 1 billion euros in B-loan funds managed by development finance specialist ILX, said that taking the leap into unfamiliar risks – like project finance in emerging markets – would need to be mitigated by guarantees from multilateral lenders. 

Some MDBs are already providing guarantees or structures that help reduce the risks, for example by hedging the risk of a collapse in the local currency. 

At COP29, some banks have flagged new initiatives including a move by the United States to guarantee $1 billion of existing loans to governments by the Asian Development Bank so it can lend a further $4.5 billion to climate-friendly projects.

The EBRD’s Renaud-Basso told Reuters it was also looking to guarantee sovereign lending to free up more money, without providing further details. 

Guarantees aside, the reluctance of some development banks to play the junior partner in project lending, amid pressure to land big deals and maximise their own returns, was leaving them in competition with private sector investors, according to half a dozen sources in the industry.

Gianpiero Nacci, EBRD Director for Sustainable Business and Infrastructure, said that while MDBs were starting to change their culture and structures to make them more focused on attracting private sector investment, it was a “work in progress”.

“We’re increasingly incentivising our banking teams to focus on mobilization,” he said, noting the EBRD is introducing internal targets beyond its own direct investment.   

Given the scale of the climate challenge, some development experts are choosing to go it alone, among them Hubert Danso, chief executive of Africa Investor, a platform that connects private investors with green infrastructure projects on the continent.

“We have an MDB market failure which is incapable of crowding in the private capital required,” he said.

CULTURAL HURDLES

In an August document, the Organisation for Economic Cooperation and Development (OECD), which tracks the climate finance efforts of multilateral institutions, found lack of data was a “major obstacle” to raising private investment to the required levels.  

The previously unpublished report, reviewed by Reuters, said a shortfall in transparent data was leading to private investors mispricing investment risk. 

“For efficiency of markets, data is critical,” said Haje Schutte, a deputy director at the OECD. “There is an ethical and fairness dimension to that: these public sector institutions have a role to beyond their institutional self-interests.”    

Some development banks are worried about sharing their proprietary information and require the OECD to sign non-disclosure agreements, Schutte said. 

Alert to the criticism and following an investor consultation, MDBs have increased the credit risk data shared in a database called GEMs, originally designed to be used for information exchange between the banks themselves.

Since March, some data on recovery rates for public as well as private lending has been made available and, in October, more historic data was offered. But some investors are demanding more granular risk information. 

Erich Cripton, a director at Canadian pension fund CDPQ Global, which has over $300 billion in assets under management, said investors have been pushing for MDBS to publish more data in the GEMS database.

He said the released data reflected the MDBs preferred creditor status meaning that for a private investor, the risk was higher. 

For Nadia Nikolova, lead portfolio manager at Allianz (ETR:ALVG) Global Investor, who has raised over $3.5 billion in development finance and impact credit strategies, the lack of information hampers her ability to raise and invest capital in developing economies.  

“Institutional investors have a fiduciary duty to invest money responsibly,” she said. “If I don’t have that information, I can’t price the risk.” 

Abdullahi Khalif, Somalia’s chief climate negotiator, acknowledged on the sidelines of the COP29 talks that investing there was riskier than in industrialized economies, but added those who did so had opportunities for good returns in areas including renewable energy and irrigation.

“The only private sector that can come is a private sector that is really looking forward to taking the risk.”

ZURICH (Reuters) – The Swiss National Bank will continue to target low inflation as the touchstone of its monetary policy, Chairman Martin Schlegel said on Friday, underlining continuity with predecessor Thomas Jordan who stepped down in September.

Schlegel stressed keeping inflation within a range of 0-2% – which the central bank calls price stability – as a key factor for the Swiss economy’s strong performance in recent years.

After a post-pandemic spike, inflation has returned to the target range over the last 17 months, and fell to its lowest level in more than three years in October.

The downward trend has stoked market expectations of more interest rate cuts by the SNB this year and into 2025 to head off deflationary risks.

“The Swiss economy has performed well by international comparison,” Schlegel told an event in Zurich.

“The SNB has contributed to this performance by maintaining price stability despite significant deflationary and inflationary risks,” he said. “Going forward, the SNB will continue to contribute to favourable economic conditions in Switzerland by ensuring price stability.”

The comments echo Jordan’s consistent messaging on inflation during his 12-year stint in charge.

Schlegel, who began his career at the SNB in 2003 and worked as a researcher for Jordan, was widely seen as the bank’s continuity candidate.

He said the SNB needed a flexible inflation target due to Switzerland being strongly affected by global economic trends. He also noted it has a safe-haven currency, which tended to appreciate during downturns.

Schlegel said the SNB’s main tools were its policy interest rate, as well as currency market interventions.

The SNB’s target range allowed the central bank to respond flexibly to shocks and decide how to act, Schlegel said.