Author: Reuters

By Brigid Riley

TOKYO (Reuters) – The U.S. dollar was trading in a tight range on Thursday as traders digested less dovish remarks from policymakers overnight and looked ahead to fresh economic data from the United States.

Attention was also on inflation data out of China in the Asian morning amid concerns about deflation in the world’s second-largest economy.

Overnight, several Fed speakers gave a range of reasons for feeling little urgency to start easing policy in the United States soon or to move quickly once they do.

“For the moment, policy remains well positioned, as we carefully assess the evolving data and outlook,” Boston Fed President Susan Collins said, adding that she believes it will be “appropriate to begin easing policy restraint later this year.”

The market is pricing in an 18.5% chance the Fed will begin to cut rates in March, down significantly from the start of the year, according to CME Group’s FedWatch Tool shows. Traders see a nearly 60% chance of a 25 basis point cut in May.

The greenback slipped overnight after rising above its 100-day moving average on Monday and Tuesday for the first time since late November, propelled by Friday’s surging U.S. jobs data.

The dollar index, a measure of the U.S. currency against six major peers, was last hovering around 103.77.

Given the repricing in markets over the past month, the dollar around 104 “looks spot on,” said Tony Sycamore, market analyst at IG.

The dollar will need a fresh push to test resistance levels around 104.60 and 104.80, with the Consumer Price Index for January released on Feb. 13 the likely first opportunity, he added.

The euro clung around $1.0775 per dollar, holding above its lowest level since Nov. 14 at $1.0722 hit on Tuesday.

Sterling was mostly flat at $1.2631.

The Japanese yen, meanwhile, strengthened 0.07% versus the greenback at 148.05 before comments by the Bank of Japan’s deputy governor later in the day.

Elsewhere in Asia, traders awaited the latest consumer and producer price figures out of China on Thursday, which will show whether the economy is any closer to escaping the clutches of deflation.

Forecasts suggest mixed signals, with year-on-year consumer price deflation expected to have intensified in January but month-over-month prices up at the fastest pace in a year. Annual producer price is forecasted to come in negative.

Still, “core inflation should continue to hold up amid stronger services demand, and new infrastructure-led spending,” said Wei Liang Chang, currency and credit strategist at DBS.

“We expect the Chinese authorities to favour maintaining stability in the yuan going into the Lunar New Year holidays, with dollar/onshore yuan likely to remain within the 7.18-7.22 range for now.”

The offshore Chinese yuan was down 0.11% to $7.2036 per dollar ahead of the data.

In cryptocurrencies, bitcoin rose 0.51% to $44,416.00.

(Reporting by Brigid Riley; Editing by Lincoln Feast)

By Dawn Chmielewski and Lisa Richwine

LOS ANGELES (Reuters) -Walt Disney CEO Bob Iger hit back at activist investors on Wednesday with a slew of announcements, including a splashy investment in “Fortnite” maker Epic Games and plans to launch an ESPN streaming service in 2025.

Iger revealed the plans after Disney’s board of directors authorized a $3 billion share repurchase program for the current fiscal year, and declared a dividend of 45 cents a share, a 50% increase from the dividend paid in January.

Together they helped drive up Disney’s stock nearly 7% to $106.05 in after-hours trading.

Iger said Disney would take a $1.5 billion stake in Epic Games. The two companies would work together to create a “huge Disney universe” where consumers can interact with characters and stories from Disney, Pixar, Marvel, Star Wars and Avatar, he said.

“This marks Disney’s biggest entry ever into the world of games and offers significant opportunities for growth and expansion,” Iger said in a statement.

The partnership signals another attempt at interactive entertainment for Disney, which in 2016 shut down its Disney Interactive Studios, publisher of the toys-come-to-life game series “Infinity,” and announced it would instead license its characters to outside game companies.

Iger also offered details about the long-anticipated streaming launch of the flagship ESPN sports network, which would be bundled with Disney+ and Hulu, and integrate features such as ESPN Bet, fantasy sports and e-commerce. He said it is likely to launch in August 2025.

A day earlier, Disney announced it would form a joint venture with Fox and Warner Bros Discovery to launch a streaming sports service that would combine their broad portfolios of professional and collegiate sports rights as well as their networks, including ESPN, Fox Sports 1 and TNT,

“We believe there are a number of sports fans out there that want to watch sports on television, but didn’t want to sign up to the big cable and satellite bundle,” Iger said on a post-earnings conference call.

Disney posted earnings of $1.22 per share, excluding certain items, ahead of analysts’ consensus forecast of 99 cents per share for October through December.

Quarterly revenue was comparable to a year ago, at $23.5 billion, but short of projections of $23.6 billion.

Disney said it cut $500 million in costs across its business during the quarter, and that it remains on track to meet or exceed $7.5 billion in savings by the end of the current fiscal year.

The company is under pressure from activist investor Nelson Peltz, who is seeking Netflix-like profit for its streaming business, better performance of its movies at the box office, and more details about its plans to make ESPN a dominant digital platform.

“Just one year ago, we outlined an ambitious plan to return the Walt Disney Company to a period of sustained growth and shareholder value creation,” Iger said in a statement. “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era of growth for our company.”

The company’s Experiences unit, which includes its theme parks and consumer products, posted record revenue, operating income and operating margins.

Disney reaffirmed guidance that its streaming business would reach profitability by September. It reduced streaming operating losses to $138 million in the quarter, a dramatic improvement over a year ago, when it lost nearly $1 billion. The average monthly revenue per Disney+ user, outside of India, rose 14 cents.

The Disney+ streaming service shed 1.3 million subscribers, nearly double the loss of 700,000 that analysts forecast, after an October price increase.

The company forecast it would gain 5.5 million to 6 million Disney+ subscribers in its second quarter, with positive momentum in per-user revenue.

The Entertainment unit’s streaming business, which also includes Hulu and Disney+ Hotstar in India, reported revenue of $5.5 billion, just above forecasts, and marking a 15% improvement from a year ago.

Overall revenue for the Entertainment segment, which encompasses Disney’s traditional TV business, streaming and film, dropped 7% from a year earlier to $9.98 billion.

The results were dragged down by lower ad revenue at ABC and lower fees from the continued losses of cable subscribers, partially offset by reduced programming costs associated with the Hollywood strikes. The weak box office performance of “The Marvels” and “Wish” dragged content sales and licensing to a loss.

Disney’s sports division, which includes ESPN, the ESPN+ streaming service and Star in India, reported an operating loss of $103 million from a deepening loss at Star in India.

Theme park results were buoyed by the opening of the World of Frozen attraction at Hong Kong Disneyland and Zootopia at Shanghai Disney Resort. Higher attendance at those parks helped offset a drop at Walt Disney World in Orlando, Florida. The unit reported revenue of $9.1 billion and operating income of $3.1 billion.

(Reporting by Dawn Chmielewski and Lisa Richwine in Los AngelesAdditional reporting by Akash Sriram and Pushkala Aripaka in BengaluruEditing by Peter Henderson, Kenneth Li and Matthew Lewis)

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Billionaire hedge fund manager William Ackman is launching a new investment portfolio in the U.S., according to a regulatory filing which suggests the fund will mimic his existing hedge fund but offering lower fees and quicker access to capital.

Pershing Square USA will be listed on the New York Stock Exchange and available to anyone who can invest in the U.S., including pension funds, endowments and retail investors who are normally excluded from hedge funds.

A pool of potential capital could come from Ackman’s 1.2 million followers on the social media platform X where he discusses various issues as well as smaller endowments which could not write the big checks his original hedge fund required.

Hedge fund investors noted the lower fees and quick access to money could quickly make the new fund popular on Wall Street where high fees and regulatory hurdles have discouraged some investors from choosing hedge funds.

A spokesman for Ackman declined to comment beyond the filing and Ackman did not return a call for comment.

There will be no minimum investment, and the fund will charge a flat 2% fee every year after the first year. That compares with the performance fees of between 15% and 30%routinely charged by hedge funds.

Investors will also be able to get their money out quickly compared to the years it takes to fully redeem assets from Ackman’s legacy hedge fund.

The new format is expected to be considerably more popular with some investors than the old hedge fund. For years, state pension funds and other institutions have pulled out of Ackman’s fund for a number of reasons.

While the filing does not say how much money the fund is expected to raise, its fee schedule for underwriters says how much the banks will be paid if the fund raises as much as $20 billion, suggesting demand could be very high.

Ackman’s Pershing Square Capital Management currently oversees $18 billion in assets, the bulk in a fund that is publicly listed in Europe.

Ackman, 57, recently ventured beyond telling companies how to run their businesses to focusing on antisemitism on college campuses. His campaign was a factor in the resignation of Harvard University’s president.

The new fund will be structured as a closed-end fund that raises money through an initial public offering and then its shares will trade on the exchange. It will be managed by Ackman, Ryan Israel, the firm’s chief investment officer, and other members of the investment team.

Recent rule changes also now allow funds to use derivatives more. These are tools that have netted Ackman’s investors big gains over the past years through bets on credit markets during COVID and on interest rates last year.

Pershing Square Capital Management generally invests in roughly a dozen stocks and is currently invested in Chipotle Mexican Grill, Universal Music Group and Google parent Alphabet.

As Ackman’s returns surged over the last years, interest in him and his funds has grown. The investor returned an average 31% gain a year over the last five years.

But his investment career has been studded with some notable losers as well, including a bet that Herbalife’s stock price would fall and that Valeant’s stock price would keep climbing.

(Reporting by Svea Herbst-Bayliss, editing by David Ljunggren and David Gregorio)

By Dawn Chmielewski and Lisa Richwine

LOS ANGELES (Reuters) – Walt Disney handily beat Wall Street’s earnings expectations on Wednesday, lifted by record results at its theme parks and continued cost-cutting efforts, as it announced an investment in Fortnite-maker Epic Games.

Even before the company’s investor call, CEO Bob Iger announced in a CNBC interview that the company would take a $1.5 billion stake in Epic and work with the company to create a “huge Disney universe.”

“This marks Disney’s biggest entry ever into the world of games and offers significant opportunities for growth and expansion,” Iger said in a statement.

Disney described an online world in which consumers will be able to play, watch, shop and engage with characters and stories from Disney, Pixar, Marvel, Star Wars and Avatar.

The announcement signals another attempt at interactive entertainment for Disney, which in 2016 shut down its Disney Interactive Studios, publisher of the toys-come-to-life game series “Infinity,” and announced it would instead license its characters to outside game companies.

Shares of Disney were up 7% in after-hours trading.

Disney’s board of directors also authorized a $3 billion share repurchase program for the current fiscal year, and declared a dividend of 45 cents a share, payable on July 25 to shareholders of record on July 8. That represents a 50% increase from the dividend paid in January.

The company posted earnings of $1.22 per share, excluding certain items, ahead of analysts’ consensus forecast of 99 cents per share for October through December.

Quarterly revenue was comparable to a year ago, at $23.5 billion, but short of projections of $23.6 billion.

Disney said it cut $500 million in costs across its business during the quarter, and that it remains on track to meet or exceed $7.5 billion in savings by the end of the current fiscal year.

The company is under pressure from activist investor Nelson Peltz, who is seeking Netflix-like profit for its streaming business, better performance of its movies at the box office, and more details about its plans to make ESPN a dominant digital platform.

“Just one year ago, we outlined an ambitious plan to return the Walt Disney Company to a period of sustained growth and shareholder value creation,” Iger said in a statement. “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era of growth for our company.”

The company’s Experiences unit, which includes its theme parks and consumer products, posted record revenue, operating income and operating margins.

Disney reaffirmed guidance that its streaming business would reach profitability by September. It reduced streaming operating losses to $138 million in the quarter, a dramatic improvement over a year ago, when it lost nearly $1 billion. The average monthly revenue per Disney+ user, outside of India, rose 14 cents.

The Disney+ streaming service shed 1.3 million subscribers, nearly double the loss of 700,000 that analysts forecast, after an October price increase.

The company forecast it would gain 5.5 million to 6 million Disney+ subscribers in its second quarter, with positive momentum in per-user revenue.

The Entertainment unit’s streaming business, which also includes Hulu and Disney+ Hotstar in India, reported revenue of $5.5 billion, just above forecasts, and marking a 15% improvement from a year ago.

Overall revenue for the Entertainment segment, which encompasses Disney’s traditional TV business, streaming and film, dropped 7% from a year earlier to $9.98 billion.

The results were dragged down by lower ad revenue at ABC and lower fees from the continued losses of cable subscribers, partially offset by reduced programming costs associated with the Hollywood strikes. The weak box office performance of “The Marvels” and “Wish,” compared with the strong results a year ago from “Black Panther: Wakanda Forever” and “Avatar: The Way of Water,” dragged content sales and licensing to a loss.

Disney’s sports division, which includes ESPN, the ESPN+ streaming service and Star in India, reported revenue of $4.8 billion, a gain of 4% from a year ago, but an operating loss of $103 million attributable to a deepening loss at Star in India.

Theme park results were buoyed by the opening of the World of Frozen attraction at Hong Kong Disneyland and Zootopia at Shanghai Disney Resort. Higher attendance at those parks helped offset a drop at Walt Disney World in Orlando, Florida. The unit reported revenue of $9.1 billion and operating income of $3.1 billion.

(Reporting by Dawn Chmielewski and Lisa Richwine in Los Angeles; Additional reporting by Akash Sriram and Pushkala Aripaka in Bengaluru; Editing by Peter Henderson, Kenneth Li and Matthew Lewis)

(Reuters) – Microsoft is launching Microsoft 365 Copilot tool for employees as it looks to get more developers to use artificial intelligence, Business Insider reported on Wednesday.

The company has been running pilot tests to up the usage of AI tools among its community of developers and was planning a wider release of Microsoft 365 to its teams for the first time, the report said, citing an internal message.

Microsoft did not immediately respond to a Reuters request for comment.

The company’s investment and partnership with OpenAI, along with rapidly growing cloud business thanks to customers looking to build AI applications, has made Microsoft the world’s most valuable company, surpassing Apple.

The Copilot tool is Microsoft’s generative AI assistant, built using OpenAI’s large language models. The Microsoft 365 Copilot product is an iteration of the tool in the company’s productivity suite which includes Word, Outlook and Teams.

In November, Microsoft started selling Copilot, an AI assistant that can summarize an email inbox or craft a slide show, for $30 per month.

(Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar)

By Georgina McCartney

HOUSTON (Reuters) -Oil prices rose for a third consecutive day on Wednesday, boosted by a larger-than-expected fall in U.S. fuel stocks, and rising tensions in the Middle East.

Brent crude futures settled 62 cents higher, or 0.79% at $79.21 a barrel as of 2:40 pm ET (1940 GMT). U.S. West Texas Intermediate crude climbed 55 cents, or 0.75% to $73.86.

U.S. gasoline stocks fell by 3.15 million barrels last week compared with analysts’ estimates for a build of 140,000 barrels, according to the U.S. Energy Information Administration (EIA). Distillate stocks fell 3.2 million barrels, compared with estimates for a 1 million barrel draw.

Crude stocks, however, posted a larger-than-expected build of 5.5 million barrels as production recovered after a cold snap, while U.S. refiners stepped up maintenance. Analysts had estimated a smaller build of 1.9 million barrels.

“This is the kind of report you would expect out of the post freeze-in with refineries not in any hurry to come back,” Bob Yawger, director of energy futures at Mizuho Bank.

Refinery utilization shrank 0.5% to 82.4%. On the U.S. Gulf Coast, the deep freeze knocked off 15% of refining capacity, pressuring utilization rates to their lowest level since September 2021, according to EIA data.

On the supply side, the EIA cut its 2024 outlook for domestic oil output growth on Tuesday, putting it far lower than the 2023 increase and predicting it would not reach December 2023’s record levels until February 2025.

As ever, the market is keeping an eye on developments in the Middle East.

Israeli Prime Minister Benjamin Netanyahu said total victory in Gaza was within reach, rejecting the latest offer from Hamas for a ceasefire to ensure the return of hostages still held in the besieged enclave.

The remarks dismissing the latest offer by Hamas for a ceasefire in Gaza show he intends to pursue conflict in the Middle East, senior Hamas official Sami Abu Zuhri told Reuters.

Traders are also tracking the Iranian-backed Houthi rebels’ attacks on shipping in the Red Sea that have disrupted traffic through the Suez Canal, the fastest sea route between Asia and Europe and one that carries nearly 12% of global trade.

Elsewhere, Federal Reserve Bank of Boston President Susan Collins said if the economy met her expectations the central bank will likely be able to lower rates at some point later this year, potentially lending support to crude futures.

“There is confusion in the markets from mixed signals out of the Federal Reserve … they are now waiting too long to ease, adding an additional element of risk back into the market,” said Timothy Snyder, economist at Matador.

In the longer term, the International Energy Agency (IEA) said India is expected to be the largest driver of global oil demand growth between 2023 and 2030, narrowly taking the lead from top importer China.

That comes as struggling large economies, including China’s, dent confidence in the global oil demand outlook.

(Reporting by Paul Carsten in London and Arathy Somasekhar and Georgina McCartney in Houston and Muyu Xu; Editing by Paul, Christian Schmollinger, Louise Heavens, David Evans, Barbara Lewis, Nick Macfie, David Ljunggren and David Gregorio)

By Georgina McCartney

HOUSTON (Reuters) -Oil prices rose for a third consecutive day on Wednesday, boosted by a larger-than-expected fall in U.S. fuel stocks, and amid rising tensions in the Middle East.

Brent crude futures gained 48 cents to $79.07 a barrel as of 1:35 pm ET (1835 GMT), while U.S. West Texas Intermediate crude climbed 42 cents to $73.73.

U.S. gasoline stocks fell by 3.15 million barrels last week compared with analysts’ estimates for a build of 140,000 barrels, according to the U.S. Energy Information Administration (EIA). Distillate stocks fell 3.2 million barrels, compared with estimates for a 1 million barrel draw.

Crude stocks, however, posted a larger-than-expected build of 5.5 million barrels as production recovered after a cold snap, while U.S. refiners stepped up maintenance. Analysts had estimated a smaller build of 1.9 million barrels.

“This is the kind of report you would expect out of the post freeze-in with refineries not in any hurry to come back,” Bob Yawger, director of energy futures at Mizuho Bank.

Refinery utilization shrank 0.5% to 82.4%. On the U.S. Gulf Coast, the deep freeze knocked off 15% of refining capacity, pressuring utilization rates to their lowest level since September 2021, according to EIA data.

On the supply side, the EIA cut its 2024 outlook for domestic oil output growth on Tuesday, putting it far lower than the 2023 increase and predicting it would not reach December 2023’s record levels until February 2025.

As ever, the market is keeping an eye on developments in the Middle East. Israeli Prime Minister Benjamin Netanyahu said total victory in Gaza was within reach, rejecting the latest offer from Hamas for a ceasefire and renewed a pledge to destroy the Palestinian Islamist movement.

Traders are also tracking the Iranian-backed Houthi rebels’ attacks on shipping in the Red Sea that have disrupted traffic through the Suez Canal, the fastest sea route between Asia and Europe and one that carries nearly 12% of global trade.

Elsewhere, Federal Reserve Bank of Boston President Susan Collins said if the economy met her expectations the central bank will likely be able to lower rates at some point later this year, potentially lending support to crude futures.

“There is confusion in the markets from mixed signals out of the Federal Reserve … they are now waiting too long to ease, adding an additional element of risk back into the market,” said Timothy Snyder, economist at Matador.

In the longer term, the International Energy Agency (IEA) said India is expected to be the largest driver of global oil demand growth between 2023 and 2030, narrowly taking the lead from top importer China.

That comes as struggling large economies, including China’s, dent confidence in the global oil demand outlook.

(Reporting by Paul Carsten in London and Arathy Somasekhar and Georgina McCartney in Houston and Muyu Xu; Editing by Paul, Christian Schmollinger, Louise Heavens, David Evans, Barbara Lewis, Nick Macfie and David Ljunggren)

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Billionaire investor William Ackman is offering a new hedge fund to U.S.-based retail investors, allowing Main Street to tap into his double digit performance gains previously reserved for Wall Street clients.

Ackman’s Pershing Square Capital Management said in a regulatory filing on Wednesday that the firm is launching Pershing Square USA, an investment vehicle that will be listed on the New York Stock Exchange.

There will be no minimum investment, the fund will charge a flat 2% fee every year after the first year and it will be available to retail investors who lack the net worth needed to invest in hedge funds.

The news could generate fresh buzz for the 57-year old fund manager who recently ventured beyond telling companies how to run their businesses to focusing on antisemitism on college campuses. He also pushed for the ouster of three university presidents over their handling of free speech in the wake of the Oct. 7 Hamas attack on Israel.

The new fund will be structured as a closed-end fund that raises money through an initial public offering and then its shares will trade on the exchange. It will be managed by Ackman, Ryan Israel, the firm’s chief investment officer, and other members of the investment team.

Previously Ackman’s funds were available only to high-net worth individuals, institutions and foreign investors who could put money into London-listed Pershing Square Holdings.

The filing does not say how much money the fund hopes to raise. Pershing Square Capital Management currently oversees roughly $18 billion in assets.

Ackman can launch the new fund since he structured the fees in a way to avoid U.S. regulators’ rules against charging retail investors the kind of incentive fees that hedge fund investors pay when the fund performs well.

Recent rule changes also now allow funds to use derivatives more. These are tools that have netted Ackman’s investors big gains over the past years through bets on credit markets during COVID and on interest rates last year.

As Ackman’s returns surged over the last years, interest in him and his funds has grown. The investor returned an average 31% gain a year over the last five years.

But his investment career has been studded with some notable losers as well, including a bet that Herbalife’s stock price would fall and that Valeant’s stock price would keep climbing.

(Reporting by Svea Herbst-Bayliss, editing by David Ljunggren)

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. trade deficit widened slightly in December, but contracted by the most in 14 years in 2023 as imports declined and exports jumped to a record high.

The report from the Commerce Department on Wednesday also showed the United States’ rising status as a major oil producer, with the inflation-adjusted value of petroleum exports surging 15.9% to a record high in December. The nation is now a net oil exporter and has reduced its dependence of foreign oil, helping to shrink the current account deficit.

Economists expected trade, which contributed to gross domestic product growth last year, to remain mostly supportive to the economy in 2024, though Red Sea shipping disruptions and drought in the Panama Canal posed risks.

“We look for net trade to remain a positive contributor to first-quarter growth,” said Matthew Martin, a U.S. economist at Oxford Economics. “The largest risk resulting from disruptions to global shipping is likely higher prices for goods, but longer lead times to receive goods could lead to either over- or underbuilding of inventories, which presents risks to our near-term outlook for imports.”

The trade deficit increased 0.5% to $62.2 billion, the Commerce Department’s Bureau of Economic Analysis said. Data for November was revised higher to show the trade gap shrinking to $61.9 billion instead of $63.2 billion as previously reported.

December’s trade shortfall was in line with economists’ forecasts. While it was close to the assumptions made by the government in its advance fourth-quarter GDP estimate published last month, November’s data was revised higher. Economists said the inflation adjusted or so-called real trade deficit was now smaller than the government had assumed.

They expected that trade’s contribution to GDP would be raised from the 0.43 percentage point estimated last month. On the bases of the December trade report, they anticipated that overall fourth-quarter GDP growth would be boosted to about a 3.6% annualized rate from the 3.3% pace reported in January when the government publishes its second estimate later this month.

“On the whole, the trade data for the fourth-quarter now look stronger than was anticipated with respect to GDP that quarter,” said Daniel Silver, an economist at JPMorgan in New York.

RECORD HIGH EXPORTS

The trade gap narrowed 18.7% in 2023, the largest drop since 2009, to $773.4 billion. It represented 2.8% of GDP, down from 3.7% in 2022. Trade added more than half a percentage point to the economy’s 2.5% growth last year.

Exports increased 1.2% to a record $3 trillion last year, propelled by capital goods, automotive vehicles, parts and engines as well as consumer and other goods. Imports slumped 3.6% to $3.8 trillion amid decreases in industrial supplies, which include petroleum, and consumer goods.

Exports ended the year on a strong note, rising 1.5% to $258.2 billion in December. Goods exports shot up 1.8% to $171.2 billion. Industrial supplies and materials exports increased $3.3 billion, amid rises in nonmonetary gold, other petroleum products and crude oil.

Consumer goods exports advanced as did those of foods, feeds and beverages. Services exports climbed $0.8 billion to a record $87.0 billion, lifted by travel, transport and financial services.

Imports picked up, increasing 1.3% to $320.4 billion in December. Goods imports rose 1.5% to $260.3 billion. There were gains in imports of consumer goods, mostly pharmaceutical preparations, and cell phones and other household goods.

Industrial supplies and materials imports also rose, but capital goods fell as did imports of automotive vehicles, parts and engines. Imports of services increased $0.5 billion to $60.1 billion amid a rise in transport. Travel services declined. The services surplus in December was the highest on record.

Economists were not too concerned about the decline in capital goods imports, which on face value would suggest weaker business investment and is over time associated with recession.

“Recessions are normally marked by sharp contractions in import volumes and, as yet, there is no sign that this is unfolding,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

The real goods trade deficit declined 1.4% to $82.8 billion in December. Real dollar exports of petroleum rose to a record $17.3 billion from $15.0 billion in November.

Real dollar exports of foods, feeds and beverages were the highest since June 2022, while those of automotive vehicles, parts and engines hit a 1-1/2-year low.

“The outlook for trade flows going forward is likely one of moderation given expectations of slower demand and growth going forward, both domestically and abroad,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

By Ron Bousso

LONDON (Reuters) – Big Oil firms are handing shareholders more money than ever and are promising more going forward in an attempt to reassure investors of their discipline and resilience in the face of an uncertain outlook for fossil fuels.

The top five Western oil and gas firms – BP, Chevron, Exxon Mobil, Shell and TotalEnergies – returned to shareholders over $111 billion in dividends and share repurchases in 2023, according to Reuters calculation.

That was slightly higher than the $110 billion they returned in 2022, when the group’s profits soared to a record $196 billion after energy prices soared following Russia’s invasion of Ukraine. Net profits dropped sharply in 2023 to $123 billion. All five companies have reported results over the past week.

“During a time of geopolitical turmoil and economic uncertainty, our objective remained unchanged: safely deliver higher returns and lower carbon,” Chevron CEO Mike Wirth told investors last Friday.

Investors such as pension funds have traditionally held on to oil majors’ shares because of their steady, long-term dividends.

But the rise of the tech sector, a sharp drop in oil majors’ performance last decade due to excessive spending and oil price volatility as well as the growing environmental concerns have led to a decline in interest in the sector.

The energy sector accounted for 4.4% of the overall weighting of the S&P 500 index by the end of January, down from around 14% in the last decade, according to S&P data.

COMPLETE PREDICTABILITY

The group has revealed a clear transatlantic divide in strategies in recent years, with Chevron and Exxon focusing on growing oil production while BP, TotalEnergies and Shell invest a higher proportion of capital in low-carbon and renewables.

But the messaging to investors on returns was largely identical in recent days – stick with us and we’ll pay you.

“We’re very much focused on ensuring we have a compelling distribution to our shareholders,” Shell Chief Financial Officer Sinead Gorman told investors last week, vowing “complete predictability” over returns.

Shell, Chevron and TotalEnergies increased their dividend in the fourth-quarter results, while BP increased the rate of its buybacks. Exxon returned $32 billion to shareholders last year, the sector’s highest.

“Oil and gas is investors’ least favourite sector so spending gazillions on large mega-projects for cash flows in 5 years time with uncertain demand trends is very hard to stomach for many investors,” Berstein analyst Oswald Clint said.

“Inside the companies, they absolutely remember the sins of the past investment cycles and are pretty determined not to repeat those,” he added.

The sector is expected to make minimal spending increases in 2024, according to Tobias Wagner, Vice President, Senior Credit Officer at Moody’s Investors Service.

The increased discipline is a result of a few factors including investors’ demands for returns as well as an uncertain energy demand outlook, he said.

“Companies are being more selective and investments face greater hurdles in terms of returns, emissions and regulations.”

“The credit quality of the sector has improved with more upgrades than downgrades in recent years also reflecting discipline in maintaining balance sheet strength and flexibility,” Wagner said.

(Reporting by Ron Bousso; editing by David Evans)