Boeing weighing new 787 Dreamliner production cut: sources


(Reuters) – Boeing Co is weighing another production cut of its 787 Dreamliner, but may not have to take that step depending on the size and timing of orders from China stemming from a recent U.S. trade agreement, people briefed on the matter said Friday.

Earlier this month, U.S. airplane leasing firm Air Lease Corp Chief Executive Officer John Plueger said Boeing could be forced to cut production of its 787 Dreamliners to 10 aircraft per month, amid a drought of orders from China. Boeing shares were down 0.3% in mid-day trading Friday.

Bloomberg News reported the potential production cut earlier.

Boeing is also reviewing other global economic factors in deciding whether to again cut production including trade issues and travel demand, the sources said.

Boeing said Friday it maintains “a disciplined rate management process taking into account a host of risks and opportunities. We will continue to assess the demand environment and make adjustments as appropriate in the future.”

Boeing, which has been hurt by the grounding of its single-aisle 737 MAX planes, said last year it expects to lower the production of its 787 Dreamliners in late 2020 to 12 aircraft per month, from 14 currently, following some order cancellations and weak demand.

China, a major buyer of the 787, hasn’t been buying airplanes from Boeing recently, and “it’s hard to see the rate of 12 being sustainable” beyond 2020 without China in the marketplace, Plueger said at a Bank of America conference earlier this month.

Reporting by Tim Hepher and David Shepardson



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BOE Rate Cut Hangs in Balance Amid Signs of Election Bounce By Bloomberg



(Bloomberg) — A closely watched measure of U.K. economic activity unexpectedly surged to the highest level since 2018 in January, leaving the prospects for a Bank of England interest-rate cut next week hanging in the balance.

IHS Markit’s flash for output across the whole economy jumped to 52.4 as firms cited reduced political uncertainty in the wake of Boris Johnson’s decisive election victory. That’s up from 49.3 last month.

The Purchasing Managers Indexes had emerged as a key factor in the debate over BOE easing this month, providing the most up-to-date assessment of the economy after the Conservatives’ win on Dec. 12. While the reading was higher than forecast and above the level many economists said was enough to stave off a rate cut, traders were still pricing in a greater-than 50% chance of a move after the release and the was little changed.

The data was “marginal above the level of 52, where one could expect the Bank of England starting to become more reluctant to cut,” said Mikael Olai Milhoj, a Danske Bank analyst. A cut is “still a real possibility but a close call as things stand.”

One reason why the debate over the need for easing may not be over is that BOE officials have also indicated that reports from their agents — a cross-country network that holds confidential conversations with businesses and community organizations — could prove critical. Investors and forecasters will be in the dark about that intelligence until the decision is announced, when the accompanying Monetary Policy Report will include a section summarizing the feedback.

Markit said the Friday’s composite figure, which was up from 49.3 last month and came in well above the 50.7 median-estimate of economists, was consistent with a quarterly growth rate of about 0.2%. That’s good news for Johnson as he prepares to officially take the U.K. out of the European Union next week.

“It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut, with policy makers taking a wait and see approach as they assess the performance of the economy in the post-Brexit environment,” said Chris Williamson, Markit’s chief business economist.

While a January rate cut was seen as unlikely at the start of 2020, a spate of weak data, along with dovish comments from policy makers, boosted speculation a move was coming. Bets moderated slightly this week after some more positive releases.

Two of the BOE’s nine officials have already voted for easing, while a number of others, including Governor Mark Carney, have indicated they would be paying close attention to the data before making up their minds.

“We think it’s a close call,” said Ned Rumpeltin, European head of foreign exchange at Toronto-Dominion Bank. “But ultimately we think the sum total of what we’ve seen in the UK’s recent data overall will be enough to motivate a cut next week.”

The PMIs, like a report earlier this week from the Confederation of British Industry, showed optimism among firms had jumped following the election, with Markit’s measure reaching the highest since June 2015. They also suggested the pickup may translate into real growth, with measures of new work rising strongly.

The flash readings, based on 85% of responses, showed a gauge for the U.K.’s dominant services sector alone jumped to a 16-month high of 52.9, from 50 last month. Meanwhile an index for manufacturing reached 49.8, up from 47.5 in December and approaching the 50 level that separates expansion from contraction. Final readings will be released in the first week of February

The PMIs have previously come under criticism for being overly sensitive to political developments, while Carney said last year that they can be a misleading indicator of economic output in times of extreme uncertainty.

For example, in the immediate aftermath of 2016’s Brexit vote, they presented a far gloomier picture of the economy than ultimately came to pass, a phenomenon that repeated itself last year.





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UK business perks up after election, weakening case for rate cut: PMIs By Reuters



By Andy Bruce

LONDON (Reuters) – British companies are enjoying their best month in more than a year, a survey showed on Friday, the strongest evidence yet of a post-election boost to the economy that could deter the Bank of England from cutting interest rates next week.

The ‘flash’ early readings of the IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) showed Britain’s vast services sector returned to growth in January for the first time since August, while a downturn in manufacturing eased.

Britain’s performance bettered the euro zone’s for the first time since December 2018, as the PMI suggested the world’s fifth-largest economy looked on track to grow around 0.2% in quarterly terms after it slowed to a crawl late last year.

Earlier signs of weakness in the labor market had prompted two BoE rate-setters to vote for lower borrowing costs at the end of last year. Three others, including Governor Mark Carney, have hinted recently that more economic stimulus might be needed.

But Friday’s figures are likely to prompt investors to curb bets that the BoE will cut rates next Thursday, corroborating earlier signs that uncertainty among businesses and consumers has been tempered by Prime Minister Boris Johnson’s landslide victory last month.

The composite PMI, which combines manufacturing and services indexes, rose to 52.4 from 49.3, the highest reading since September 2018 and easily beating the 50.6 consensus forecast in a Reuters poll of economists.

The services PMI rose in January to 52.9 from 50.0, also its highest level since September 2018 and well above the consensus forecast in a Reuters poll of 51.0.

Service-sector optimism hit its highest in nearly five years this month, chiming with other business surveys from the Confederation of British Industry and Deloitte.

“It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait-and-see approach as they assess the performance of the economy in the post-Brexit environment,” IHS Markit chief business economist Chris Williamson said.

Still, the services PMI remained at levels historically associated with additional stimulus from the BoE and a long way below the survey’s long-run average of 54.8.

The reading for British factories was also better than expected, rising to 49.8 from 47.5, the highest level since April.

While the PMI signaled the ninth month of contraction for manufacturing, which accounts for 10% of economic output, new orders increased for the first time since April.

“The uplift in sentiment about the outlook hints at even better growth to come, but confidence needs to continue to rise to ensure this solid start to the year has legs,” Williamson said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



UK consumers cut back on spending again, adding to economic gloom By Reuters



By William Schomberg and Andy Bruce

LONDON (Reuters) – British consumers failed to increase their spending for a record fifth month in a row in December, adding to signs of economic weakening that might prompt the Bank of England to cut interest rates this month.

Official data on Friday showed sales volumes fell by 0.6% from November, defying the median forecast for a rise of 0.5% in a Reuters poll of economists.

Sales in monthly terms have not risen since July, the longest such run since records began in 1996, the Office for National Statistics said, adding that food sales fell by the most in three years.

Sterling weakened and British government bond prices rose as investors increasingly bet on the Bank of England cutting rates on Jan. 30, at the end of its next meeting.

Two of its nine policymakers voted in November and December for a cut and three others, including Governor Mark Carney, have said lower borrowing costs might be needed soon.

Friday’s figures are the first hard data that suggest a bounce in consumer sentiment since Conservative Prime Minister Boris Johnson’s landslide election win on Dec. 12 might not have fed through into actual spending.

“December’s outright fall in retail sales, despite a potential boost from the lateness of Black Friday, does not bode well for GDP growth in December and could nudge the Monetary Policy Committee closer still to cutting rates at the end of the month,” said Thomas Pugh, an economist at Capital Economics.

“But the election and the removal of some uncertainty could represent a turning point for the economy. Indeed, there are signs that sentiment has already turned up. As a result, January might not be quite as bad.”

Allan Monks, a JP Morgan economist, said the weak picture of the economy in late 2019 meant surveys of businesses for January due next week would have to send a very clear signal of an imminent improvement to prevent a rate cut on Jan. 30.

Annual growth in retail sales volumes dropped to 0.9%, below all forecasts in the Reuters poll.

The also ONS revised down its sales data for November. In the fourth quarter as a whole, it found that volumes fell by 1.0%, their worst performance since early 2017.

The survey period ran from Nov. 24 to Dec. 28, including the Black Friday and Cyber Monday sales promotions and the Dec. 12 election.

The election outcome eliminated the risk of a disruptive no-deal Brexit as soon as Jan. 31, and there have been some signs of a bounce in confidence among consumers and companies since then.

But a hit to trade remains possible at the end of 2020, when Johnson insists a post-Brexit transition period will end, regardless of whether he can negotiate a trade deal with the European Union before then.

Consumer demand has been a strong point of the economy since voters decided to leave the EU three-and-a-half years ago. But more recently it has started to soften, despite low unemployment and modest inflation, which have boosted household incomes.

An industry group, the British Retail Consortium, said last week that sales in 2019 as a whole had fallen for the first time since its records began in 1995.

Retailers reported a subdued Christmas season while Sainsbury’s (L:) and Marks & Spencer (L:) have said they are not expecting a bounce in consumer spending in 2020.



Pound Falls After Weak U.K. Retail Boosts Prospect of Rate Cut By Bloomberg



(Bloomberg) — Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

The slipped after U.K. data unexpectedly fell in December, increasing the chances that the Bank of England may cut a key interest rate this month.

Sterling dropped 0.2% to $1.3049 and declined against all its Group-of-10 peers as the volume of goods sold in stores and online fell 0.6% in December, confounding expectations of a 0.6% increase. Money markets are pricing a 75% chance of a rate cut on Jan. 30, compared with 62% on Thursday.

Markets are now turning their attention to impending purchasing managers’ indexes for further signs of the BOE’s direction.

“Clearly, there is a chance for a decent rebound of the PMIs next week and this may stay the BOE’s hand,” said Valentin Marinov, a strategist at Credit Agricole (PA:) SA. “That said, following this week’s weaker CPI and retail sales, the bar for stable rates is getting very high.”

Traders had been speculating that the central bank will cut rates at Mark Carney’s last monetary policy decision as BOE governor after a flurry of dovish comments from policy makers. The yield on 10-year U.K. government bonds was down three basis points at 0.61%, falling a sixth day and on course for its longest streak since August.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Bank of England’s Tenreyro joins rate cut talk By Reuters



By William Schomberg and David Milliken

LONDON (Reuters) – Bank of England policymaker Silvana Tenreyro said she would be inclined to back an interest rate cut in the coming months if growth does not pick up, adding to suggestions that the central bank is edging towards pumping more stimulus into the economy.

Governor Mark Carney, who steps down in March, surprised markets on Thursday by saying from a “risk management” perspective there could be a case for cutting rates if the economic weakness seen in late 2019 persists into 2020.

Tenreyro sounded a similar note on Friday, saying the economy was more likely to undershoot than overshoot the BoE’s last forecast from November, the latest version of which will be published alongside the BoE’s next rate decision on Jan. 30.

Britain’s economy lost momentum after the 2016 Brexit referendum and slowed to a crawl in late 2019, although tentative signs of a pick-up in sentiment appeared after Prime Minister Boris Johnson won an unexpectedly big majority in a Dec. 12 election.

“If uncertainty over the future (EU) trading arrangement or subdued global growth continue to weigh on demand, then my inclination is towards voting for a cut in Bank Rate in the near term,” she said at an event hosted by the Resolution Foundation think tank.

Financial markets priced in a roughly 50% chance of a quarter-percentage-point rate cut by the middle of the year after Carney’s remarks, and following Tenreyro’s remarks the probability of a move rose to around 60% .

Two of the nine BoE Monetary Policy Committee members voted to cut rates to 0.5% from 0.75% in November and December.

However, Tenreyro did not seem poised to vote for a rate cut at the BoE’s next meeting. Asked how soon she might back a loosening in policy, she said she first wanted to see how businesses and households reacted to Brexit developments.

“A key input in the decision is how uncertainty unwinds going forward, and how that impacts on demand,” she said. “I am talking about the coming months, on the possibility of further stimulus.”

Britain’s economy grew just 1.2% in the third quarter, its joint weakest pace since 2012. But the job market remains strong, a point Tenreyro highlighted, and business surveys conducted since Johnson’s election victory have shown a pick-up in business morale.

Earlier on Friday, Deloitte said its quarterly survey of chief financial officers at major British companies showed the biggest rebound in the survey’s 11-year history.

Other executives, notably in the car industry, are already focusing on the risk that Johnson cannot negotiate a long-term trade deal to avoid EU tariffs during the narrow 11-month window he has set himself after Britain leaves the EU on Jan. 31.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Occidental to cut Western Midstream stake to reduce debt


(Reuters) – Occidental Petroleum Corp (OXY.N) said on Monday it would cut its majority stake in pipeline operator Western Midstream Partners LP (WES.N) to less than 50% in 2020, to reduce its debt that grew significantly with the Anadarko Petroleum Corp deal.

FILE PHOTO: The logo for Occidental Petroleum is displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 30, 2019. REUTERS/Brendan McDermid

Occidental’s shares rose about 4% on the news, having lost over 30% in value since the $38-billion offer for Anadarko was made public on April 24, 2019.

Occidental is working to pare $40 billion of debt it took on with the Anadarko deal, and changes to ownership would ease a sale or spin-off of Western Midstream.

The restructuring would also allow Occidental to no longer show the gas pipeline and processing business’s debt as its own.

The net long-term debt for Occidental was $47.6 billion as of Sept. 31, 2019.

The deal, which has been called “hugely overpriced” by activist investor Carl Icahn, continues to weigh on Occidental’s shares, which still trade at levels it touched during the financial downturn of 2008.

Inherited as part of the Anadarko takeover, the sale of the Western Midstream stake is a key part of Occidental’s target to raise a total of $15 billion from asset sales by mid-2020.

Occidental has raised about $10.5 billion through sales of properties, including a liquefied natural gas project in Mozambique and oil production elsewhere in Africa.

Western Midstream currently trades at a market value of over $9 billion.

The restructuring of the Western Midstream agreements will put Occidental back on track to hive off the business, something it tried to do unsuccessfully last year.

“I don’t view the plans to reduce its ownership level to below 50% in 2020 as surprising. It’s likely just a first step towards monetizing more of its ownership position over time,” said Jennifer Rowland, an analyst with Edward Jones.

Occidental on Sunday gave up over 9 million shares, or a 2% stake in Western Midstream’s general partner, and allowed limited partners to remove Occidental and appoint a new general partner. (bit.ly/39Nbnoi)

Occidental fully owns the general partner stake, which effectively controls Western Midstream, a master limited partnership, and around 55% of the pipeline operator’s limited partner units.

Western Midstream’s limited partner units rose 3.6% to $21.54 on Monday.

Reporting by Shariq Khan and Arunima Kumar in Bengaluru; Editing by Shinjini Ganguli and Shounak Dasgupta



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Emerging central banks cut rates for 11th month in December By Reuters


© Reuters. Heading south: Emerging central banks cut rates for 11th month in December

By Karin Strohecker and Ritvik Carvalho

LONDON (Reuters) – Emerging market policymakers continued their easing cycle in December, joining major central banks in efforts to shore up their economies.

Interest rate moves by central banks across a group of 37 developing economies showed a net six cuts last month after a net eight cuts in November.

December marks the 11th straight month of net cuts – the longest easing cycle for emerging market central banks since 2013.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



China rate switch to ease funding costs, but banks not ready to pass cut along By Reuters



By Kevin Yao and Cheng Leng

BEIJING (Reuters) – China’s move to change the way banks price loans could help ease funding costs, especially for struggling small firms, although lenders are expected to try to limit the hit to their earnings by not fully passing the cut along.

The country’s banking stocks fell as much as 1.5% on Monday, led by Industrial Bank Co Ltd (SS:), after news of the benchmark switch over the weekend that is expected to affect the pricing of outstanding loans worth trillions.

China’s blue-chip CSI300 Index (), however, rose more than 1% to an eight-month top as investors expect the policy to reduce corporate borrowing costs.

On Saturday, the People’s Bank of China (PBOC) said it will use the loan prime rate (LPR) for pricing existing floating-rate loans starting March 1, extending a reform unveiled in August when the LPR was first applied to new loans.

The revamped LPR, introduced by the PBOC in August, is down 16 basis points and is at 4.15%, while the previous benchmark one-year lending rate has been at 4.35% since October 2015.

“This is an important measure to further push banks toward giving up some profits in favor of the real economy,” said Wang Yifeng, senior analyst at Everbright Securities.

“But since banks have more say in loan pricing, there’ll be resistance,” said Wang, who estimated overall loan pricing would fall about 10 basis points (bps) in 2020.

The switch marks a major move by China to support the economy amid a trade war with the United States.

For nearly two years, policymakers have been trying to cut funding costs for small and private firms that are vital for economic growth and jobs, but have needed to tread cautiously for fear of hurting banks and fanning financial risks.

NEW ANCHOR FOR LOANS WORTH TRILLIONS

Bankers have expressed concerns about the impact on their earnings from the move to a lower rate.

A loan manager at a mid-sized bank said the lender would not lower the rate in the near term.

“For the time being, we will still charge clients based on the previous benchmark rate of 4.35%. The only difference is that we will follow the LPR of 4.15% and add on a risk premium of 20 bps,” said the manager, who was not authorized to speak with media and declined to be identified.

“I think most of the banks will do the same.”

Under the reform, existing floating-rate loans will be shifted to LPR-based pricing over March-August. Nearly 90% of new loans are already benchmarked against the LPR, while existing loans are still priced against the old benchmark.

Outstanding local-currency loans were at 151.97 trillion yuan ($22 trillion) at end-November. The PBOC has not given details of floating and fixed loans, but analysts estimate about 40% of loans would be hit by the switch in the coming months.

ANALYSTS EXPECT MORE EASING

While easing Sino-U.S. trade tensions could relieve pressure on exports, analysts say more policy loosening is needed to cope with weak demand at home and abroad to shore up China’s economic growth that has slowed to the weakest in nearly thirty years.

The PBOC is expected to again cut bank reserve requirements, currently at 13% for major banks, as early as in January to help boost credit and lower banks’ funding costs.

Under the rate regime unveiled in August, the LPR is linked to the medium-term lending facility (MLF), a key policy rate applied to PBOC loans to lenders.

Analysts expect the central bank to cut the MLF by 20-30 bps in 2020, paving the way for a lower LPR.

“We expect PBOC to cut reserve requirement by 100-150 bps along with potential OMO (open market operations) rate cuts in 2020, which will help lower banks’ funding cost,” analysts at Citibank said.

The new loan pricing measure will not affect mortgage rates before 2021, the PBOC said, which analysts said could encourage banks to lend more to home buyers.

Mortgages account for about a quarter of all lending in China, but Beijing is wary of moves that could fuel overheating of the property market.

Beijing has said it will not use the property market to stimulate growth, but analysts expect some marginal easing in coming months.



Bank of Russia Delivers Fifth Rate Cut as Inflation Plunges By Bloomberg



(Bloomberg) — The Bank of Russia delivered a fifth consecutive bout of monetary easing, cutting the key rate by 25 basis points as the inflation rate continued to fall below target.

The bank lowered its benchmark interest rate to 6.25%, according to a statement published on Friday, taking the total reduction this year to 150 basis points. The move was forecast by 26 out of 33 economists in a Bloomberg survey. Four had predicted a hold and three expected a deeper move.

The cuts have so far failed to stoke inflation, which fell well below the bank’s 4% goal last month, while economic growth has also lagged behind the government’s goals. Easing is eroding one of the highest real yields in emerging markets, potentially drawing a line under a rally that spurred $16 billion of inflows into ruble government bonds this year.

Russia is following central banks in Turkey and Ukraine in reducing borrowing costs this week after the Federal Reserve signaled it is in no rush to reverse its three recent rate cuts. Optimism about a trade deal between the U.S. and China is helping to create a rosier backdrop for emerging-market central bankers.

Governor Elvira Nabiullina will hold a news conference at 3 p.m. Moscow time.

Key Insights

  • Annual inflation slowed for an eighth straight month to 3.5% in November. The Economy Ministry forecasts a further drop to 2.5%-2.7% as soon as January.
  • Spending on a six-year government infrastructure program was meant to get underway this half, but bureaucrats have been cautious about releasing funds.
  • Analysts at Goldman Sachs Group Inc (NYSE:). warned earlier this month that the central bank is underestimating the potential for price growth to slow dramatically and will come under pressure to revise down its 4% target.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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