By Johann M Cherian and Ankika Biswas

(Reuters) – Wall Street’s main indexes were muted on Monday, with investors gearing up for two crucial inflation reports during the week for clues on the interest-rate cut outlook, while Nvidia surpassed Amazon in market value for the first time in two decades.

Nvidia crossed above Amazon.com in market capitalization, as the euphoria around artificial intelligence catapulted the chipmaker to the fourth-most valuable U.S. company. Their shares were up 0.5% and 0.1%, respectively.

Megacaps with greater exposure to AI have spearheaded a Wall Street rally, also riding on hopes of imminent rate cuts and an upbeat outlook from businesses.

The latest milestone in a four-month rally among Wall Street’s main indexes was the S&P 500 closing above the psychological 5,000-point level on Friday. The Nasdaq briefly surpassed the 16,000 mark for the second straight session on Monday, bringing it closer to its all-time high hit in November 2021.

“We are at hefty levels and the real question out there is how much longer can this market continue to rally without any new serious catalyst on the way,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“We’ll begin to shift towards the macro news with CPI that could set the stage whether the market continues to rally.”

Traders await January’s Consumer Price Index (CPI) and Producer Price Index (PPI) this week to determine the timeline for monetary policy easing this year. Other data through the week also include industrial production, retail sales and preliminary University of Michigan consumer sentiment.

With growing data reflecting a robust economy, central bankers have effectively pushed back against traders’ bets for early rate cuts. The odds for at least a 25-basis-point rate reduction in May have dropped to 61%, from over 95% at the start of 2024, as per the CME FedWatch Tool.

Remarks from Federal Reserve officials including Richmond President Thomas Barkin and Minneapolis chief Neel Kashkari, scheduled through the day, will be scrutinized for any hints on the timing for rate cuts.

At 9:51 a.m. ET, the Dow Jones Industrial Average was up 21.04 points, or 0.05%, at 38,692.73, the S&P 500 was up 1.20 points, or 0.02%, at 5,027.81, and the Nasdaq Composite was up 5.72 points, or 0.04%, at 15,996.38.

Among other movers, Diamondback Energy jumped 7%, helping energy to top the 11 S&P 500 sectors with a 0.8% gain, after announcing a $26-billion deal to buy the largest privately held oil and gas producer in the Permian basin, Endeavor Energy Partners.

Citigroup slipped 0.8% after Reuters reported U.S. regulators have asked the lender for urgent changes to how it measures default risk of trading partners and its own auditors have found a plan to improve internal oversight to be lacking.

Joby Aviation gained 3.5% as the electric-powered aircraft maker signed an agreement to launch air taxi services in the Emirate by early 2026.

Advancing issues outnumbered decliners by a 3.18-to-1 ratio on the NYSE and by a 2.36-to-1 ratio on the Nasdaq.

The S&P index recorded 25 new 52-week highs and no new lows, while the Nasdaq recorded 93 new highs and 13 new lows.

(Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Maju Samuel)

(Reuters) – Wall Street’s main stock indexes had a muted start on Monday with investors awaiting a bunch of data reports including two inflation prints, that could clear out some uncertainty on the timing for interest rate cuts this year.

The Dow Jones Industrial Average fell 14.93 points, or 0.04%, at the open to 38,656.76. The S&P 500 opened higher by 0.22 points, or 0.00%, at 5,026.83, while the Nasdaq Composite dropped 10.05 points, or 0.06%, to 15,980.62 at the opening bell.

(Reporting by Johann M Cherian in Bengaluru; Editing by Maju Samuel)

By Susanna Twidale

LONDON (Reuters) -The value of traded global markets for carbon dioxide (CO2) permits reached a record 881 billion euros ($948.75 billion) in 2023, marking a 2% increase on the previous year, analysts at LSEG said on Monday.

Many countries and regions have launched emissions trading systems (ETS) to put a price on carbon dioxide (CO2) emissions and incentivise companies to invest in low carbon technology and help meet climate targets.

Around 12.5 billion metric tons of carbon permits changed hands in the world’s emissions markets, similar to 2022, but record prices in several markets such as Europe and North America pushed up the overall value, the LSEG Carbon Market Year in Review 2023 said.

The world’s most valuable carbon market, the EU’s ETS, was worth around 770 billion euros last year, up 2% from the previous year and representing 87% of the global total.

The price of carbon permits in the EU ETS hit a record high over 100 euros in February last year but fell towards the end of 2023 amid weak demand from industrial buyers and the power sector.

This bearish trend has continued into 2024 with the benchmark contract falling below 60 euros/ton.

“Economic growth is likely to remain sluggish in the near term across Europe and is expected to lead to further demand destruction from many of the industrial sectors covered by the EU ETS,” the report said.

The value of the UK’s ETS fell 22% to 36.4 billion euros with prices averaging around 65 euros/ton, some 34% lower than the 2022 average, the report said.

In North America prices hit record high’s last year in the main compliance markets, hitting $39/ton in the Western Climate Initiative and over $15/ton in the Regional Greenhouse Gas Initiative.

Prices in China’s national ETS also hit a record high in 2023 of 80.51 yuan ($11.19) in October, the report said.

The North American markets were worth a combined 71.4 billion euros while the Chinese market was worth 2.3 billion.

($1 = 0.9286 euros)

($1 = 7.1929 Chinese yuan renminbi)

(Reporting By Susanna Twidale; Editing by Chizu Nomiyama)

By Timothy Aeppel

(Reuters) – North American companies ordered about a third fewer robots last year as worries about a slowing economy and higher interest rates made it harder to justify buying the advanced machines, the first hiccup in five years in what has been a steady progression of the robot invasion of the region’s workforce.

“When the economy isn’t great, it’s easier to delay purchases,” said Jeff Burnstein, president of the Association for Advancing Automation, an industry group that tracks robot orders.

Companies bought 31,159 robots in 2023, a decrease of 30% over the year before, the largest drop in percentage terms since 2006 and largest drop ever in net units, according to the group, known as A3. The pullback occurred in automotive-related industries – which made up about half of the market last year – as well as other sectors such as food and metals manufacturing.

Orders in the fourth quarter hit 7,683, an 8% drop from the same period a year earlier.

Slowing robot orders came even as some companies announced initiatives to develop more advanced versions of the machines. Robotics startup Figure said last month it forged a partnership with Germany’s BMW to deploy humanoid robots in the carmaker’s South Carolina factory to take on certain physical tasks. Electric-vehicle maker Tesla also has a humanoid robot in development.

But for many robot makers, selling existing machines has been hampered by worries about a softening economy and the excess inventories built up during the COVID-19 pandemic. Universal Robots, a Danish maker of small, flexible robots, recently reported its revenue fell 7% last year, to $304 million.

Universal’s president, Kim Povlsen, told investors: “2023 was characterized by a difficult economic and business environment for many of our core customers with global industrial activity slowing in the first half of the year.”

COMING OFF A RECORD YEAR

Robot sales boomed during the COVID-19 pandemic – as producers scrambled to use the machines to churn out goods amid a dire labor shortage. Indeed, 2022 marked a record year for orders, according to A3’s data.

To be sure, robots are just one type of equipment companies need, and other gauges of spending have held up better in the U.S. Orders for non-defense capital goods excluding aircraft – a measure closely watched by economists to track trends in business spending – rose 1.7% last year, according to the Commerce Department, suggesting that investments in more basic types of equipment remained close to steady as the economy defied expectations of a sharper slowdown.

Dave Fox, president of CIM Systems Inc, a Noblesville, Indiana, company known as an integrator that assembles robotic systems for customers, said his business started off strong last year but then slumped.

“Several big projects got pushed into this year,” said Fox. “There were definitely a few customers who brought up their concern about where the economy is headed. And interest rates probably didn’t help.” Fox estimates his business volume fell 30% in 2023, compared with the year before.

Fox said some customers who delayed orders are now asking for updated quotes, which is a good sign for business in the months ahead. But he said it is too early to say whether business will return to lofty pandemic levels.

A3’s Burnstein said most robot producers he speaks with are optimistic that business will pick up during the second half of this year.

Burnstein said the industry has largely worked its way through the distortions caused by the pandemic.

During the crisis, many companies put in extra orders for robots because they worried about receiving deliveries amid production delays and a breakdown in global supply chains. “There’s still this feeling that companies were buying in advance of their needs (in 2022),” said Burnstein, “so a lot of companies now have inventory to work through before they order a lot of new robots again.”

Joe Gemma, chief revenue officer of Wauseon Machine, a systems integrator in Ohio, agreed there was an inventory glut that distorted the business.

“A lot of us were ordering extra inventory,” he said. “Our customers were too.”

Gemma said an ongoing shortage of labor in the U.S. means the robot business will continue to thrive. “I was at a plant recently that normally has 600 people working in production – and they have 140 open positions,” he said. “Almost every place we go, there’s still a workforce challenge.”

(Reporting by Timothy Aeppel in New York; Editing by Matthew Lewis)

By Jamie McGeever

ORLANDO, Florida (Reuters) -An engine of world growth for 20 years, the largest consumer of commodities and world’s number two economy has somehow slipped into “alternative investment” buckets for many global investors.

China’s property bust and increasingly interventionist government, along with deepening geopolitical fissures with the United States, have dramatically dimmed its allure as a destination for international capital.

China may not yet be “uninvestable”, as U.S. Commerce Secretary Gina Raimondo suggested U.S. companies believe, but many investors are recategorizing their reduced exposure – in some cases to alternative investment.

“Alts” are typically assets outside the traditional stocks, bonds and cash buckets, like hedge funds, real estate and private equity. They are often riskier but potentially more lucrative bets, and are attractive for their diversification and hedging qualities.

Crucially, they are non-correlated with traditional assets. This is where many investors see Chinese stocks and bonds now – a non-correlated, idiosyncratic play, effectively a hedge against their core bets.

That was the anecdotal evidence garnered from investors, asset managers and allocators on the sidelines of the recent “Hedge Fund Week” conferences in Miami. It is also supported by global capital flows trends.

One fund manager said he may put 5-10% of his portfolio in Chinese stocks but is fully prepared to lose it. A hedge fund manager overseeing billions of dollars of assets said he likes China’s “idiosyncrasies” and diversification qualities but noted that his investors’ money is mostly offshore, not onshore.

Alex Lennard, fund manager at Ruffer, admitted that the economic climate in China is “clearly awful” but his firm is putting money there, essentially as a hedge.

“It’s a small part of our portfolio, about 4%, but it does provide an offset to some of the other market ‘certainties’ that exist,” Lennard said.

It’s worth noting that they are relative optimists on China. The wider consensus is far gloomier.

OUTFLOWS, OUTFLOWS, OUTFLOWS

According to Morningstar Direct, U.S. equity funds’ average asset-weighted exposure to Chinese stocks in December last year was 1.38%, down from 2.17% three years earlier, while their average equal-weighted exposure is down to 3.5% from 4.13%.

U.S. emerging market funds’ allocation to China as a share of total EM exposure declined to 20.6% from 28.6% on an asset-weighted basis, and to 20% from 26% on an equal-weighted basis.

It is a similar pattern across global emerging market funds. The China portion as a share of their overall EM equity allocation has fallen to 19.5% from 27.1% on an asset-weighted basis and to 21% from 25.5% on an equal-weighted basis, according to Morningstar Data.

Demand for Chinese bonds should be stronger though, right?

China is included in the $1.2 trillion benchmark JP Morgan EMBI Global Diversified bond index, and there is now an in-built demand for Chinese bonds from the yuan’s emergence in recent years as an alternative international reserve currency.

But China’s share of the $12 trillion global FX reserves pie has slipped to a four-year low of 2.37%, and has never been higher than 2.83%, according to the International Monetary Fund.

Figures from the Institute of International Finance show outflows from Chinese debt portfolios for seven straight months and only three monthly inflows in the last two years.

Emerging market ex-China debt funds, meanwhile, have attracted inflows for the past seven months and in January drew in $47.3 billion, the most since October 2022 and one of the highest on record.

Whichever way you slice it, investors of all stripes are taking chips off the Chinese table.

BURST OPTIMISM

This is not how many thought it would pan out.

A Greenwich Associates survey of institutional money managers in 2020 showed that pension funds and endowments had 3-5% allocations to China and only 5% of North American institutions had any dedicated exposure to Chinese stocks.

Nearly a quarter of respondents said they planned to increase or significantly increase their dedicated allocation to Chinese equities in the next three to five years.

Liang Yin, investment director at Willis Towers Watson, wrote in November that year that investors should consider raising their allocation to China to around 20% over the next decade.

But Beijing’s closer alignment with Moscow, fraying relations with Washington, and a strengthening interventionist hand in business and markets at home have scared a lot of horses.

The findings of a recent survey by the Official Monetary and Financial Institutions Forum of 22 public pension and sovereign wealth funds managing $4.3 trillion in assets were startling – not one had a positive outlook for China’s economy or saw higher relative returns there.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever;Editing by Kylie MacLellan)

By Chris Prentice and Huw Jones

NEW YORK/LONDON (Reuters) -Global equities rose on Friday, with the S&P 500 crossing the 5,000-point milestone for the first time ever, as U.S. inflation data raised expectations of an interest rate cut this year, while closely watched U.S. Treasury yields rose.

The greenback reversed earlier gains, falling 0.06%.

Oil notched a gain for the week on worries over a broadening conflict in the Middle East after Israel rejected a ceasefire offer from Hamas.

The MSCI All Country stock index climbed 0.4% to a third straight weekly gain.

The mood in stock markets was buoyed by Wall Street, where the S&P 500 index rose above 5,000 points, helped by big gains in megacap stocks such as Nvidia.

The chipmaker climbed to a record high after Reuters reported it was building a new business unit.

“The new closing high over 5,000 bodes well over the intermediate to longer term, with a key technical level being cleared today,” Larry Tentarelli, Chief Technical Strategist with Blue Chip Daily Trend Report, in North Andover, Massachusetts.

“We believe that the combination of very strong corporate earnings, strong jobs data, strong GDP data and declining inflation are an excellent backdrop for equities going forward.”

U.S. monthly consumer prices rose less than initially estimated in December, but underlying inflation remained a bit warm, data showed on Friday. The data revision did little to alter expectations for central bank rate changes.

U.S. inflation data for January is coming next week.

The Dow Jones Industrial Average fell 54.64 points, or 0.14%, to 38,671.69, the S&P 500 gained 28.70 points, or 0.57%, to 5,026.61 and the Nasdaq Composite gained 196.95 points, or 1.25%, to 15,990.66.

The yield on benchmark U.S. 10-year notes rose 0.7 basis points to 4.177%, from 4.17% late on Thursday.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 3.2 basis points to 4.4883%, from 4.456% late on Thursday.

Gold prices came under pressure from the stronger yields, with spot gold down 0.44% at $2,024.16 an ounce. U.S. gold futures settled 0.4% lower at $2038.7.

Brent crude futures settled up 0.7% at $82.19 a barrel, and U.S. crude futures finished up 0.8% at $76.84.

European shares ended slightly lower under pressure from rising yields and sliding L’Oreal shares.

The pan-European STOXX 600 index closed 0.1% lower, but still eked out a weekly advance of 0.2%.

L’Oreal dropped 7.6% after the French cosmetics company reported underwhelming fourth-quarter sales growth.

Inflation in Germany, Europe’s biggest economy, eased in January to 3.1%, adding fuel to bets on when the European Central Bank will begin easing rates.

However, euro zone bond yields hit multi-week highs after several ECB rate setters warned against easing monetary policy too early.

“Indeed, it seems pretty clear now that the ECB will be waiting for European wage data statistics at the end of April before likely cutting rates in June,” ING bank said in a note.

Japanese shares hit 34-year highs. The yen recovered after falling to a 10-week low, with traders reassessing their bets on how quickly the Bank of Japan might raise rates.

In China, mainland markets were closed and Hong Kong traded thinly and shut early, with the Hang Seng down 0.8% amid worries authorities might not deliver on promises for support.

“I am betting that (decisive action) is happening,” said Chi Lo, senior markets strategist for Asia Pacific at BNP Paribas Asset Management.

(Reporting by Huw Jones; Additional reporting by Tom Westbrook; Editing by Kirsten Donovan, Jonathan Oatis, Cynthia Osterman and David Ljunggren)

By Chris Prentice and Huw Jones

NEW YORK/LONDON (Reuters) -Global equities rose on Friday, with the S&P 500 crossing the 5,000-point milestone, as U.S. inflation data raised expectations the Federal Reserve will cut interest rates this year, while closely watched U.S. Treasury yields rose.

The greenback reversed earlier gains, falling 0.06%.

Oil notched a gain for the week on worries over a broadening conflict in the Middle East after Israel rejected a ceasefire offer from Hamas.

The MSCI All Country stock index climbed 0.4% to a third straight weekly gain.

The mood in stock markets was buoyed by Wall Street, where the S&P 500 index rose above 5,000 points for the first time ever, helped by big gains in megacap stocks such as Nvidia.

The chipmaker climbed to a record high after Reuters reported it was building a new business unit.

“A close above this closely watched level will undoubtedly create headlines and further feed fear of missing out (FOMO) emotions,” said Adam Turnquist, chief technical strategist for LPL Financial in Charlotte, North Carolina.

“Outside of a potential sentiment boost, round numbers such as 5,000 often provide a psychological area of support or resistance for the market. Researchers often refer to them as ‘cognitive shortcuts’ that create a round-number bias.”

U.S. monthly consumer prices rose less than initially estimated in December, but underlying inflation remained a bit warm, data showed on Friday. The data revision did little to alter expectations for central bank rate changes.

U.S. inflation data for January is coming next week.

The Dow Jones Industrial Average fell 54.64 points, or 0.14%, to 38,671.69, the S&P 500 gained 28.70 points, or 0.57%, to 5,026.61 and the Nasdaq Composite gained 196.95 points, or 1.25%, to 15,990.66.

The yield on benchmark U.S. 10-year notes rose 0.5 basis points to 4.175%, from 4.17% late on Thursday.

The two-year note yield, which typically moves in step with interest rate expectations, rose 2.8 basis points to 4.4841%, from 4.456% late on Thursday.

Gold prices were under pressure from the stronger yields, with spot gold down 0.41% at $2,024.90 an ounce. U.S. gold futures settled 0.4% lower at $2038.7.

Brent crude futures settled up 0.7% at $82.19 a barrel, and U.S. crude futures finished up 0.8% at $76.84.

European shares ended slightly lower under pressure from rising yields and sliding L’Oreal shares.

The pan-European STOXX 600 index closed 0.1% lower, but still eked out a weekly advance of 0.2%.

L’Oreal dropped 7.6% after the French cosmetics company reported underwhelming fourth-quarter sales growth.

Inflation in Germany, Europe’s biggest economy, eased in January to 3.1%, adding fuel to bets on when the European Central Bank will begin easing rates.

However, euro zone bond yields hit multi-week highs after several ECB rate setters warned against easing monetary policy too early.

“Indeed, it seems pretty clear now that the ECB will be waiting for European wage data statistics at the end of April before likely cutting rates in June,” ING bank said in a note to clients.

Japanese shares hit 34-year highs. The yen recovered after falling to a 10-week low, with traders reassessing their bets on how quickly the Bank of Japan might raise rates.

In China, mainland markets were closed and Hong Kong traded thinly and shut early, with the Hang Seng down 0.8% amid worries that authorities may not deliver on promises for support.

“I am betting that (decisive action) is happening,” said Chi Lo, senior markets strategist for Asia Pacific at BNP Paribas Asset Management.

(Reporting by Huw Jones; Additional reporting by Tom Westbrook; Editing by Kirsten Donovan, Jonathan Oatis and Cynthia Osterman)

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. monthly consumer prices rose less than initially thought in December, but the overall inflation revisions were mixed, and did not shift expectations on the timing of an anticipated interest rate cut from the Federal Reserve this year.

The annual revisions published by the Labor Department on Friday also showed the consumer price index increasing slightly more than previously reported in October and November.

Prices excluding the volatile food and energy components were unrevised, after rounding, from October through December. All told, the revisions did not materially alter the path of inflation, which is moderating after surging in 2022.

The revised CPI data had been eagerly awaited by financial markets and economists after Federal Reserve Governor Christopher Waller last month flagged them as among the key data pieces he would be watching as policymakers try to gauge progress in their fight against inflation.

“The revisions were much ado about nothing,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise.”

The consumer price index rose 0.2% in December instead of 0.3% as reported last month, the revisions of the CPI data published by the Labor Department’s Bureau of Labor Statistics (BLS) showed. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated.

The CPI gained 0.1% in October. Prices were previously reported to have been unchanged in October. The 3-month annualized increase in the CPI was revised up to a 1.9% rate from a 1.8% pace.

The revisions emanated from the recalculation of seasonal adjustment factors, the model used by the government to strip out seasonal fluctuations from the data. This routine procedure, which the BLS undertakes every year, covered data from January 2019 through December 2023. The year-on-year data, which is not seasonally adjusted, was unrevised.

Excluding food and energy, the CPI advanced by 0.275% in December, which was rounded up to 0.3%. That was revised down from 0.309%, rounded to 0.3%. The so-called core CPI was revised up to 0.308% in November, rounded to 0.3%.

It was previously reported to have increased 0.285% in November, rounded up to 0.3%. The 3-month increase in the core CPI inflation rate was unchanged at 3.3%.

Core goods prices fell in the first half, but not as steeply as had been previously estimated, while the increase in the cost of services was revised down for November and December. The increase in services excluding rents was revised lower in November and December.

“This should give more support to the Fed that strong growth and jobs are not causing an acceleration in inflationary pressures,” said Ellen Zentner, chief economist at Morgan Stanley in New York.

Stocks on Wall Street were trading higher. The dollar was steady versus a basket of currencies. U.S. Treasury prices fell.

UPDATED WEIGHTS

Financial markets expect the U.S. central bank will start cutting interest rates sometime in the first half of the year. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.

The 2023 data was of interest after revisions last year showed inflation a bit warmer in the second half of 2022 than previously thought. Economists saw a minor impact from the CPI revisions on the personal consumption expenditures (PCE) price indexes data for the fourth quarter, the inflation measures tracked by the U.S. central bank for its 2% inflation target.

“On the whole for October-December, the period that will be subject to revision in the next related report, we look for basically no revision to the monthly changes to the core PCE data on net, with the December change revised down by 0.02 percentage point but offsetting upward revisions to the earlier months,” said Daniel Silver, an economist at JPMorgan.

The core PCE price index gained 0.2% on the month in December and rose 2.9% year-on-year.

The BLS also updated spending weights used to calculate the CPI, effective with January’s report due next Tuesday. Housing now has a higher weighting, while transportation’s share was lowered. It will also introduce changes to the methodology used to calculate used cars and trucks prices.

According to a Reuters survey of economists, the CPI likely increased 0.2% in January. That would lower the annual increase in prices to 3.0% from 3.4% in December. The core CPI was forecast advancing 0.3%, with the year-on-year increase slowing to 3.8% from 3.9%.

“Since some Fed officials were apparently worried about a repeat of last year, the lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto.”

(Reporting by Lucia Mutikani; Additional reporting by Chuck Mikolajczak in New York; Editing by Andrea Ricci)

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. monthly consumer prices rose less than initially estimated in December, but underlying inflation remained a bit warm, a mixed picture that did not shift expectations on the timing of an anticipated interest rate cut from the Federal Reserve this year.

The annual revisions published by the Labor Department on Friday also showed the consumer price index increasing slightly more than previously reported in October and November.

The revised CPI data had been eagerly awaited by financial markets and economists after Federal Reserve Governor Christopher Waller last month flagged them as among the key data pieces he would be watching as policymakers try to gauge progress in their fight against inflation.

“The revisions were much ado about nothing,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise.”

The consumer price index rose 0.2% in December instead of 0.3% as reported last month, the revisions of the CPI data published by the Labor Department’s Bureau of Labor Statistics (BLS) showed. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated.

The CPI gained 0.1% in October. Prices were previously reported to have been unchanged in October.

The revisions emanated from the recalculation of seasonal adjustment factors, the model used by the government to strip out seasonal fluctuations from the data. This routine procedure, which the BLS undertakes every year, covered data from January 2019 through December 2023. The year-on-year data, which is not seasonally adjusted, was unrevised.

Excluding the volatile food and energy components, the CPI advanced by an unrevised 0.3% in December. The so-called core CPI also advanced by an unrevised 0.3% in November. The 3-month annualized core CPI inflation rate was unchanged at 3.3%

Aside from Waller’s comments, the 2023 data was also of interest after revisions last year showed inflation a bit warmer in the second half of 2022 than previously thought.

U.S. Treasury yields initially fell, but later rose. The dollar was little changed against a basket of currencies. Stocks on Wall Street opened higher.

“Since some Fed officials were apparently worried about a repeat of last year, the lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto.

The CPI inflation readings for the fourth quarter will have an impact on the personal consumption expenditures (PCE) price indexes, the inflation measures tracked by the U.S. central bank for its 2% inflation target.

The core CPI increased 3.9% on a year-on-year basis in December. It is running ahead of the core PCE price index, which gained 0.2% on the month and rose 2.9% year-on-year in December.

Financial markets are anticipating that the Fed will start cutting interest rates sometime in the first half of the year. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.

(Reporting by Lucia Mutikani; Additional reporting by Chuck Mikolajczak in New York; Editing by Andrea Ricci)

By Jamie McGeever

ORLANDO, Florida (Reuters) – An engine of world growth for 20 years, the largest consumer of commodities and world’s number two economy has somehow slipped into “alternative investment” buckets for many global investors.

China’s property bust and increasingly interventionist government, along with deepening geopolitical fissures with the United States, have dramatically dimmed its allure as a destination for international capital.

China may not yet be “uninvestable”, as U.S. Commerce Secretary Gina Raimondo suggested U.S. companies believe, but many investors are recategorizing their reduced exposure – in some cases to alternative investment.

“Alts” are typically assets outside the traditional stocks, bonds and cash buckets, like hedge funds, real estate and private equity. They are often riskier but potentially more lucrative bets, and are attractive for their diversification and hedging qualities.

Crucially, they are non-correlated with traditional assets. This is where many investors see Chinese stocks and bonds now – a non-correlated, idiosyncratic play, effectively a hedge against their core bets.

That was the anecdotal evidence garnered from investors, asset managers and allocators on the sidelines of the recent “Hedge Fund Week” conferences in Miami. It is also supported by global capital flows trends.

One fund manager said he may put 5-10% of his portfolio in Chinese stocks but is fully prepared to lose it. A hedge fund manager overseeing billions of dollars of assets said he likes China’s “idiosyncrasies” and diversification qualities but noted that his investors’ money is mostly offshore, not onshore.

Alex Lennard, fund manager at Ruffer, admitted that the economic climate in China is “clearly awful” but his firm is putting money there, essentially as a hedge.

“It’s a small part of our portfolio, about 4%, but it does provide an offset to some of the other market ‘certainties’ that exist,” Lennard said.

It’s worth noting that they are relative optimists on China. The wider consensus is far gloomier.

OUTFLOWS, OUTFLOWS, OUTFLOWS

According to Morningstar Direct, U.S. equity funds’ average asset-weighted exposure to Chinese stocks in December last year was 1.38%, down from 2.17% three years earlier, while their average equal-weighted exposure is down to 3.5% from 4.13%.

U.S. emerging market funds’ allocation to China as a share of total EM exposure declined to 20.6% from 28.6% on an asset-weighted basis, and to 20% from 26% on an equal-weighted basis.

It is a similar pattern across global emerging market funds. The China portion as a share of their overall EM equity allocation has fallen to 19.5% from 27.1% on an asset-weighted basis and to 21% from 25.5% on an equal-weighted basis, according to Morningstar Data.

Demand for Chinese bonds should be stronger though, right?

China is included in the $1.2 trillion benchmark JP Morgan EMBI Global Diversified bond index, and there is now an in-built demand for Chinese bonds from the yuan’s emergence in recent years as an alternative international reserve currency.

But China’s share of the $12 trillion global FX reserves pie has slipped to a four-year low of 2.37%, and has never been higher than 2.83%, according to the International Monetary Fund.

Figures from the Institute of International Finance show outflows from Chinese debt portfolios for seven straight months and only three monthly inflows in the last two years.

Emerging market ex-China debt funds, meanwhile, have attracted inflows for the past seven months and in January drew in $47.3 billion, the most since October 2022 and one of the highest on record.

Whichever way you slice it, investors of all stripes are taking chips off the Chinese table.

BURST OPTIMISM

This is not how many thought it would pan out.

A Greenwich Associates survey of institutional money managers in 2020 showed that pension funds and endowments had 3-5% allocations to China and only 5% of North American institutions had any dedicated exposure to Chinese stocks.

Nearly a quarter of respondents said they planned to increase or significantly increase their dedicated allocation to Chinese equities in the next three to five years.

Liang Yin, investment director at Willis Towers Watson, wrote in November that year that investors should consider raising their allocation to China to around 20% over the next decade.

But Beijing’s closer alignment with Moscow, fraying relations with Washington, and a strengthening interventionist hand in business and markets at home have scared a lot of horses.

The findings of a recent survey by the Official Monetary and Financial Institutions Forum of 22 public pension and sovereign wealth funds managing $4.3 trillion in assets were startling – not one had a positive outlook for China’s economy or saw higher relative returns there.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Kylie MacLellan)