Stock Markets
Analysis-ECB dents traders’ hopes for October rate cut
By Yoruk Bahceli and Naomi Rovnick
(Reuters) – Traders pared back their bets on back-to-back rate cuts from the European Central Bank for the rest of the year on Thursday, as policymakers provided little clarity on how willing they were to double down on monetary easing.
Sources also told Reuters shortly after the ECB meeting that ended on Thursday that a further rate cut at the central bank’s next meeting in October was unlikely barring a major deterioration in the outlook for growth.
The bank earlier cut rates for the second time this cycle, reducing its key deposit rate to 3.50% as expected, but it reiterated that services inflation remains high and it would keep rates sufficiently restrictive for as long as necessary.
ECB chief Christine Lagarde said the rate path was not predetermined and that the central bank would decide rates meeting by meeting, with no pre-commitments.
Traders pared back bets on another 25 bps cut then to around 20%, from over 30% prior to the meeting.
For the whole year, in addition to Thursday’s move, they now expect 33 bps of cuts, down from 36 bps earlier on Thursday.
“Lagarde did exactly what she wants to do – not rock the boat in markets,” said Danske Bank chief analyst Piet Christiansen.
“It seems like she’s happy with the current market pricing of roughly 25 basis points (cuts) per quarter for now.”
Euro zone government bond yields shot up as traders curbed their rate cut expectations.
Germany’s two-year yield, sensitive to those changes, rose nearly 10 bps on the day in its biggest daily jump in nearly a month.
The euro, edged higher, last trading up 0.25% at $1.10393, European stocks ended Thursday in positive territory.
DIVERGENCE
With traders much more confident in back-to-back rate cuts from the U.S. Federal Reserve starting next Wednesday, focus was on how ECB divergence from its Atlantic peer would impact markets.
Traders expect around 100 bps of Fed rate cuts this year starting with a 25 bps move, meaning they also see a jumbo 50 bps cut at one of three meetings.
By the end of next year, traders reckon the Fed will have delivered 10 25-basis-point cuts while the ECB will deliver six.
With the currency impact the main channel through which Fed moves would impact the ECB’s thinking, analysts said the ECB would have to be mindful of euro strength.
A stronger currency could bring an unwelcome tightening in financial conditions for the bloc’s sluggish economy.
One factor that could help raise the stakes for the ECB’s October meeting could be an “aggressive” Fed decision next week, said Danske Bank’s Christiansen, though markets see around a 20% chance of a 50 bps cut now.
Yet despite fewer cuts on the card from the ECB, analysts see little gain ahead for the euro. A Reuters poll recently forecast it would rise to just $1.11 by end-February and $1.12 in a year, not far from a peak it touched in August.
Anyone long the euro would be “relying on an essentially pro-growth environment where the rest of the world is outperforming the U.S.,” said James Athey, fixed interest fund manager at Marlborough.
Some investors said euro zone government bonds, which have underperformed U.S. Treasuries with yields falling less this summer, had more potential to rally.
“The safest part (of the bond market) is in Europe,” said Mario Baronci, multi-asset fund manager at Fidelity International.
“If you look at the U.S. curve the market has discounted about 250 bps of cuts in a couple of years. It’s a lot. So, I prefer to be in Europe.”
And as the ECB revised down its growth expectations for this year and next, citing weaker domestic demand, but still saw inflation reaching its 2% target in the second half of 2025, some investors focused on the risk that the ECB could be too slow to ease policy.
Indeed, the bloc’s recovery has been sluggish and Germany’s economy shrank in the second quarter.
“If the ECB is slow to cut rates, the economy is not going to get the boost it needs,” said Principal Asset Management’s chief global strategist Seema Shah.
“From a fundamental perspective, Europe is not as interesting a proposition for investing as other parts of the world,” said Shah, whose firm is underweight European equities.
Stock Markets
Consumers Energy Expanding Community Solar Program with 30-Acre Solar Project in Jackson County
JACKSON, Mich., Sept. 19, 2024 /PRNewswire/ — Consumers Energy plans to break ground next spring on Blackman Solar, a new 30-acre community solar array in its home Jackson County that will provide local clean energy to customers through its Solar Gardens program.
Consumers Energy this week received approval from Blackman Township for the community solar project, which is slated to start generating electricity by the end of 2025.
“Blackman Solar is a great example of a partnership with a community to develop a project that delivers reliable, clean energy as well as local tax and economic benefits,” said David Hicks. Consumers Energy’s vice president of renewable energy development. “We’re grateful for the reception we’ve received from Blackman Township leaders and are excited to continue developing solar projects like this on our path to a carbon-neutral electric grid.”
Blackman Solar will generate power for Consumers Energy’s Solar Gardens community solar program, in which customers choose to support new solar projects without having to own solar arrays.
The new community solar facility will be the fourth that Consumers Energy owns and operates, joining other Solar Gardens projects in Cadillac, at Western Michigan University and at Grand Valley State University. Blackman Solar will include nearly 5,000 solar panels and will generate up to 2.5 megawatts of renewable electricity for 2,500 future Solar Gardens customers.
Blackman Solar also will provide new capacity to expand Consumers Energy’s income-qualified Solar Gardens program MI Sunrise. MI Sunrise is an efficient, easy, cost-effective way for municipalities, nonprofits and tribal governments to deploy federal grant dollars, providing access to clean, reliable renewable energy and measurable financial benefits to offset energy bills.
“Blackman Solar will help meet increased demand for community solar and offers shared solar infrastructure, accessibility and inclusivity, as well as financial and environmental benefits for all customers,” Hicks said.
Consumers Energy is committed to Michigan’s clean energy future. The energy provider is closing its final three coal-burning units next summer, one of the nation’s most aggressive timetables. The company is developing solar projects as part of its Clean Energy Plan to be carbon-neutral by 2040.
Consumers Energy is Michigan’s largest energy provider, providing and/or electricity to 6.8 million of the state’s 10 million residents in all 68 Lower Peninsula counties. Consumers Energy’s Clean Energy Plan calls for eliminating coal as an energy source in 2025, achieving net-zero carbon emissions and meeting 90% of customers’ energy needs through clean sources, including wind and solar.
For more information about Consumers Energy, go to ConsumersEnergy.com.
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MEMPHIS, Tenn., Sept. 19, 2024 /PRNewswire/ — First Horizon (NYSE:) Corp. (NYSE: FHN or “First Horizon“) is proud to announce that First Horizon Bank is now the Official Bank of the University of Louisiana at Lafayette Ragin’ Cajuns.
This five-year agreement expands First Horizon’s long-term commitment to the University and includes a Ragin’ Cajun Visa (NYSE:) Debit card, prominent in-venue signage, entertainment and hospitality opportunities along with participation in game day fan activations and experiences, including the new Cajun Village.
“This is an exciting time to expand our partnership with ULL and ULL athletics,” said Jerry Prejean, President of Acadiana for First Horizon. “With more than $2.5 million invested in recent years towards academic and athletic excellence, First Horizon is proud to deepen our relationship with the University and work together as two long-standing community leaders dedicated to making Acadiana a great place to call home.”
“As opportunities have grown for businesses to support Ragin’ Cajuns athletics, First Horizon Bank has been right there growing with us every step of the way,” adds Brian Bille, General Manager of LEARFIELD-based Ragin’ Cajuns Sports Properties. “Jerry’s commitment to our community has never wavered, and I’m excited to help First Horizon build affinity with our fans through this enhanced partnership, and encourage our fans to add the all-new Ragin’ Cajuns branded debit card to their wallet.”
About First Horizon
First Horizon Corp. (NYSE: FHN), with $82.2 billion in assets as of June 30, 2024, is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. Headquartered in Memphis, TN, the banking subsidiary First Horizon Bank operates in 12 states across the southern U.S. The Company and its subsidiaries offer commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, and mortgage banking services. First Horizon has been recognized as one of the nation’s best employers by Fortune and Forbes magazines and a Top 10 Most Reputable U.S. Bank. More information is available at www.FirstHorizon.com.
Investing.com — Oil prices jumped Thursday, riding on a wave of risk-on sentiment as the Federal Reserve’s outsized interest rate cut on Wednesday eased worries that a slowing US economy would further dent crude demand.
At 2:06 p.m. ET (1906 GMT), rose 1.6% to $74.80 a barrel and rose 1.8% to $71.12 a barrel.
Jobless claims rise by less than expected
The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, with coming in at 219,000 in the week ended on Sept. 14, compared with an upwardly revised 231,000 in the prior week.
Economists had forecast a consensus figure of 230,000.
This figure was better than expected, and has allayed to a degree concerns over the health of the US economy, particularly after the Federal Reserve started its latest rate-cutting cycle on Wednesday, trimming interest rates for the first time since March 2020 by a hefty 50 basis points to a range of 4.75% to 5%.
While lower rates usually bode well for economic activity, the Fed’s aggressive cut sparked some concerns over a potential slowdown in economic growth.
While Fed Chair Jerome Powell helped soothe some of these concerns, he also said that the Fed had no intention of returning to an era of ultra-low interest rates, and that the central bank’s neutral rate was likely to be much higher than seen in the past.
His comments indicated that while interest rates will fall in the near-term, the Fed was likely to keep rates higher in the medium-to-long term.
US inventories fall, but product stockpiles up
Government data released on Wednesday showed a bigger-than-expected, 1.63 million barrel draw in .
While the draw was much bigger than expectations for a draw of 0.2 mb, it was also accompanied by builds in and inventories.
The builds in product inventories sparked increased concerns that U.S. fuel demand was cooling as the travel-heavy summer season wound to a close.
Looking ahead, some expect further draws in domestic crude stocks as exports reaccelerate.
“We look for a significant rebound in exports across crude and products this week. Among products, our preliminary expectations point to draws in gasoline (-1.5 MM BBL) and distillate (-3.7 MM BBL) with a build in jet (+0.5 MM BBL),” Macquarie said in a recent note.
Crude deficit could boost Brent
Still, prices could be bolstered in the near-term by demand possibly outstripping supply in the fourth quarter, according to analysts at Citi.
A reported decision by the Organization of the Petroleum Exporting Countries and its allies to delay the beginning of a tapering in voluntary output cuts, along with ongoing supply losses in Libya, is predicted to contribute to a oil market deficit of around 0.4 million barrels per day in the final three months of 2024, the Citi analysts said.
They added that such a trend could offer some temporary support to Brent “in the $70 to $75 per barrel range.”
Meanwhile, the benchmark could be further boosted by a potential rebound in recently tepid demand from top oil importer China, the analysts said.
But they flagged that they still anticipate “renewed price weakness” in 2025, with Brent on a path to $60 per barrel due to an impending surplus of one million barrels per day.
(Peter Nurse, Ambar Warrick contributed to this article.)
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