WASHINGTON (Reuters) - The U.S. federal budget deficit jumped 26% in November from a year earlier to $314 billion, a record for the month and the highest since March, the Treasury Department said on Tuesday, driven by sharply higher interest costs and other outlays.

Economists polled by Reuters had estimated the deficit for the second month of the fiscal year would come in at $301.05 billion.

Federal revenues in November rose $23 billion to $275 billion, a 9% increase from a year earlier.

Outlays jumped $88 billion to $589 billion, 18% higher than a year earlier. Interest payments on U.S. government debt accounted for $25 billion of the increase.

Debt service costs have surged since March 2022 when the Federal Reserve began raising borrowing costs sharply to rein in inflation, driving up the benchmark overnight interest rate by 5.25 percentage points.

The outlay for interest on the debt in November, at $80 billion, surpassed the $66 billion outlay for national defense, which was up $8 billion from a year earlier. The outlay for the government-run Medicare health insurance program also rose by $8 billion, to $93 billion, while the outlay for the government-run Medicaid program for the poor and disabled climbed $2 billion to $50 billion.

The biggest outlay was the $122 billion for monthly Social Security payments.

The weighted average interest rate on the $26 trillion of outstanding Treasury securities rose to 3.10% last month from 2.22% in November of last year.

The Treasury's year-to-date deficit for fiscal 2024 grew by 13% to $381 billion, versus $336 billion in the comparable period a year earlier.

WASHINGTON (Reuters) - Auto dealers will be barred from luring vehicle buyers with promises they do not keep and will not be able to charge junk fees - like a service contract for an oil change for an electric vehicle - under a new rule, the U.S. Federal Trade Commission said on Tuesday.

The rule could fundamentally change how millions of Americans buy vehicles annually by requiring up-front pricing in dealers' advertising and sales discussions, and bars the sale of add-on products or services that confer no benefit to consumers.

The FTC, in a rule finalized on Tuesday that was first announced in 2022, said it had been concerned about dealers that allegedly targeted young men and women in the military.

"By the age of 24, around 20% of young servicemembers have at least $20,000 in auto debt," the agency said in a statement which said that the rule "prohibits dealers from lying to servicemembers and other consumers about important cost and financing information."

Consumer Reports said the FTC proposal would bar "shady tactics" by car dealers that can boost the cost of new vehicles.

Sam Levine, director of the FTC's Bureau of Consumer Protection, said that consumers often begin car shopping by comparing prices before going to a dealer.

"The reality is once you actually get to the dealership, you find the car, you find the model you like, it's in stock, and you get closer to the end of the transaction, you realize that the price that's been advertised is not actually the price that you can drive away with the car with," he said.

The rule, which attracted sharp criticism from the National Automobile Dealers Association (NADA), takes aim at practices the FTC says costs consumers $3.4 billion annually and prolongs the vehicle-shopping process.

NADA President and CEO Mike Stanton said the rule was "heavy-handed bureaucratic overreach and redundancy at its worst, that will needlessly lengthen the car sales process by forcing new layers of disclosures and complexity into the transaction."

"We are exploring all options on how to keep this ill-conceived rule from taking effect," said Stanton in an email.

Carvana's Chief Brand Officer Ryan Keeton said the company has championed transparency. "We support efforts to introduce more transparency across the industry to help consumers make informed decisions on their own terms," Keeton said in an email comment.

While the FTC did not name any companies in its release, other of the biggest auto dealers include AutoNation (NYSE:AN), Penske, Lithia Motors (NYSE:LAD), CarMax (NYSE:KMX), Group 1 Automotive (NYSE:GPI) and Sonic Automotive (NYSE:SAH). None had an immediate comment.

The rule would specifically bar misrepresentations about price, cost and the total cost of the vehicle.

Dealers will also be required to obtain consent for any charges they add to a vehicle's price. They would be barred from charging for add-ons that are useless to the buyer, such as selling nitrogen-filled tires that contain no more nitrogen than normal air.

The Alliance for Automotive Innovation, representing General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Volkswagen (ETR:VOWG_p) and other major automakers, raised concerns about the FTC plan and warned of "excessive regulation and micromanagement of the sales experience."

HONG KONG (Reuters) - Children are the most worthy investment for China's economy to help stimulate consumption and expand domestic demand a Beijing policy institute said, after the country posted its first population drop in more than six decades last year.

China, the world's second-largest economy, has struggled to mount a strong post-pandemic recovery and any decline in its future workforce and consumer demand could have a profound impact on its economy.

"In the current Chinese economy, children are the best investment. Infrastructure investment is becoming saturated, manufacturing has overcapacity ... but investment in the number of children is not enough," said the policy paper by the Yuwa Population Research institute published on Tuesday.

The paper urged authorities to "urgently" reverse a rapid decline in the number of newborns.

China's advantage will shrink in the future as the young population shrinks rapidly, while economic measures such as cutting interest rates, activating the capital market and optimising real estate regulation have not helped to bolster economic growth and the recovery remains weak, it said.

In order to boost the economy, the Yuwa report recommended that maternity subsidies be distributed at a national level rather than by local governments and targeted measures be implemented to reduce the large cost of childbearing and rearing.

Local governments have announced a series of measures to help lower childcare costs in recent years but many policies

have not been implemented or remain on paper due to insufficient funding and lack of motivation by local governments, it said

"Nowadays people are unwilling to get married and have children ... Because the cost of childbearing is too high, the difficulty for women to balance family and work, the average fertility willingness of Chinese people is almost the lowest in the world."

Current subsidies are still insufficient, lower than most European countries it said.

China reported a drop of roughly 850,000 people for a population of 1.41175 billion in 2022, marking the first decline since 1961, the last year of China's Great Famine.

(Reuters) - Goldman Sachs has raised its 12-month forecast for the pan-European STOXX 600 index to 500, implying a nearly 6% gain through 2024-end, on expectation of lower interest rates.

Goldman's target is roughly 1% above the index's January 2022 high. The U.S. Federal Reserve began raising interest rates in March of the year.

The brokerage had earlier expected the index to close 2024 at 480 points. The STOXX 600 has risen more than 11% so far this year.

"We find that lower inflation combined with lower rates is typically associated with modestly higher valuations," Peter Oppenheimer, chief global equity strategist at Goldman, said in a note dated Dec. 8.

The markets have already priced in expectations of lower inflation, he added.

"On average, since 1973 European equities have delivered 7% real per annum price returns in an environment of 1-3% inflation and falling."

Despite weaker economic activity, especially in Germany, and concerns over profits for capex- and China-exposed companies, Oppenheimer said the valuation of STOXX 600 remains "unchallenging".

The index currently trades at 12.5 times forward earnings over the next 12 months.

For 2024, Goldman Sachs maintains that European companies' earnings will grow by 7%.

The brokerage has downgraded its recommendation on European banks to "neutral" as the European Central Bank is expected to cut interest rates next year.

(This story has been corrected to say that the Fed began raising interest rates in March 2022, and not January, in paragraph 2)

(Reuters) -The U.S. Treasury Department on Monday said its Financial Crimes Enforcement Network (FinCEN) unit is planning to propose a long-awaited rule aimed at curbing money laundering in real estate in early 2024.

The regulator is also aiming to issue a notice of proposed rulemaking that would require investment advisers flag suspicious transactions to regulators.

THE TAKE

The proposal, which FinCEN was previously slated to unveil this year, is expected to require real estate professionals report the identities of the beneficial owners of companies buying real estate in cash to the regulator.

Anti-corruption advocates have been pushing for years for regulators to close a loophole they say allows criminals to hide money in U.S. real estate.

THE CONTEXT

While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry. Criminals have for decades anonymously hidden ill-gotten gains in real estate, Treasury Secretary Janet Yellen said earlier this year.

The existing regulatory regime for real estate is easy to skirt, anti-corruption advocates have said.

KEY QUOTE

The proposal "will be will be an important step toward bringing greater transparency to this sector," the agency said in a statement.

"Treasury is also considering next steps with regard to addressing the illicit finance risks associated with the U.S. commercial real estate sector."

KEY QUOTE

"This long-delayed step would plug a gaping loophole in our anti-money laundering rules to make sure that drug traffickers, Russian oligarchs, and environmental criminals can't hide their wealth in U.S. real estate," said Ian Gary, executive director the Financial Accountability and Corporate Transparency (FACT) Coalition.

By Ankur Banerjee

SINGAPORE (Reuters) - Asian shares crept higher on Tuesday while the dollar eased as investors stayed cautious ahead of a crucial U.S. inflation report later in the day that will set the tone for the week filled with central bank meetings.

The U.S. Federal Reserve is widely expected to hold rates on Wednesday, with the spotlight squarely on comments from Chair Jerome Powell during his press conference as well as the central bank's dot plot and summary economic projections.

Before that, the U.S. Labor Department's Consumer Price Index (CPI) report later on Tuesday is expected to show inflation still cooling but staying well above the Fed's 2% annual target, with core CPI expected to come in at 4%.

That has meant investors are hesitant in placing major bets, with MSCI's broadest index of Asia-Pacific shares outside Japan 0.38% higher. Japan's Nikkei rose 0.72%.

"Should core CPI come in at or above 4.2% year-over-year, equity traders will likely rush to hit the sell button first and ask questions later," said IG market analyst Tony Sycamore.

"Should core CPI print at 3.9% or less, it would be the green light for equity markets to extend gains into year-end." 

Overnight, U.S. stocks registered modest gains but managed to close at new highs for the year. [.N]

In China, blue-chip stocks eased 0.28%, while Hong Kong's Hang Seng index fell 0.20% as investors looked for signs of policy support after data showed China's November consumer prices posted their fastest fall in three years.

In a busy week for central bankers, the European Central Bank, Bank of England, Norges Bank and the Swiss National Bank all also meet on Thursday.

Investors have steadily dialled back some of the expectations of the Fed cutting rates early next year. Markets are now pricing in a 45% chance of a rate cut in March compared with 57% a week earlier, according to CME FedWatch tool. Markets though have priced in 75% chance of a rate cut in May.

"While any fireworks (from the Fed meeting) are ruled out, the market will likely be hoping for a message that at least helps keep the current rally intact," said Gary Dugan, CIO of Dalma Capital.

"We struggle to see how the Fed could endorse such a move higher in bonds and equities when the medium-term strength of economic data is unclear."

The yield on 10-year Treasury notes eased 0.6 basis points to 4.233% in Asian hours after lacklustre three- and 10-year note auctions on Monday. [US/]

Investors were reluctant to buy Treasuries in the auctions given thinner liquidity with the U.S. consumer price data and the Fed policy meeting on the horizon this week.

The Treasury Department will sell $21 billion in 30-year reopened bonds on Tuesday, following Monday's auction of $50 billion in reopened three-year notes and $37 billion in 10-year notes.

In currency market, the Japanese yen remained in the spotlight as expectations that the Bank of Japan was ready to walk away from its ultra loose monetary policy faded after Bloomberg reported on Monday, citing sources, that BOJ officials see little need to rush out of negative rates.

Tom Kenny, senior international economist at ANZ, said a hike now seems premature with a backdrop of weak consumer spending but recent trends in inflation and wages suggest the BOJ is edging closer to achieving its 2% inflation target.

"We anticipate the BOJ will start its journey of rate normalising by April 2024 ... other aspects of policy stance will remain open for adjustment, such as more tweaks to YCC or its complete end and removing its forward guidance that rates could go lower."

The Japanese yen strengthened 0.41% to 145.58 per dollar in early Asian trade after sliding nearly 0.8% on Monday. The BOJ is due to meet next week. [FRX/]

The dollar index, which measures the U.S. currency against six rivals including yen, eased 0.067% to 103.99.

Gold prices edged higher after touching a three-week low in the previous session ahead of the inflation report and Fed policy decision. Spot gold added 0.2% to $1,984.29 an ounce. [GOL/]

U.S. crude rose 0.14% to $71.42 per barrel and Brent was at $76.09, up 0.08% on the day. [O/R]

SYDNEY (Reuters) - Australian consumer sentiment edged up in December, although it ended its second worst year on record amid a surge in the cost of living and sharply higher interest rates, a survey showed on Tuesday.

The Westpac-Melbourne Institute index of consumer sentiment rose 2.7% in December from November, when it fell 2.6%. The index reading of 82.1 still showed pessimists greatly outnumbered optimists.

While ending on a slightly better note, 2023 still marks the second worst calendar year for sentiment on records dating back to 1974, said Westpac. The index has been below the neutral 100 mark since March 2022, the longest streak since the early 1990s recession.

Consumers heaved a sigh of relief, with a jump of 5.4% in confidence, after the Reserve Bank of Australia (RBA) last week left interest rates unchanged at a 12-year high of 4.35% after a rise in November to tame inflation.

"The RBA's decision to leave rates on hold at its final meeting of the year has eased concerns that further hikes are imminent," said Matthew Hassan, a senior economist at Westpac.

"However, this is small comfort for Australian consumers that have seen incomes come under extraordinary pressure from a surge in the cost of living, sharply higher interest rates and a rising tax take."

The Westpac survey found confidence among mortgage holders rose 5.4% to a still pessimistic 77.4.

The measure of family finances over the coming 12 months improved 3.9%. The economic outlook for the next year, however, slid 2.2%, but that for the next five years jumped 9.7%.

The measure of whether it was a good time to buy a major household item fell 3.8%

By Gabriela Baczynska and Andrew Gray

BRUSSELS (Reuters) - European Union heavyweights are set for a showdown with Hungary this week over giving Ukraine billions of euros in aid and the chance to start membership negotiations, both key objectives for Kyiv as its war with Russia stalls.   

European Union leaders will meet for a summit in Brussels on Thursday and Friday to decide on proposals to grant 50 billion euros of economic support to Kyiv, assign a further 20 billion euros to Ukraine's military and launch accession talks.

Securing fresh financial assistance from Europe is critical as doubts mount over future U.S. support for Kyiv, which relies on Western financial aid for its war with Russia.

    But Hungarian Prime Minister Viktor Orban, who boasts about his ties with Russian President Vladimir Putin, has threatened to veto the aid and enlargement talks at the Dec.14-15 summit.

    All three decisions - as well as a fourth one on what would be the EU's 12 package of sanctions against Russia since the invasion begun in February, 2022 - require unanimous backing of all the bloc's 27 countries.

    "We are in a key moment," a senior EU official said, in referring to a stalemate on the battlefield and the U.S. Congress not having approved President Joe Biden's $60 billion aid package for Ukraine.

"It's very important that... the European Union will show clear and full support to Ukraine," the official said under condition of anonymity. "That message wouldn't be only for Moscow, it would also be a message for Washington, it would also be a message for Kyiv."

   Europe's own credibility is also at stake with the bloc having previously vowed to stand by Ukraine as long as it takes.

"We count on positive decisions," Ukraine President Volodymyr Zelenskiy said on Sunday evening. "Europe must defend its values and unity decisively."

    WHAT ORBAN WANTS

    Orban is not new to causing a stir in the European Union.

    Hungary has watered down sanctions against Russia and last December vetoed a deal to grant Ukraine 18 billion euros in 2023.

It eventually allowed that assistance through after haggling for days over EU aid to Hungary blocked over concerns of democratic backsliding under Orban.

As the EU finds itself again seeking to win Orban's support for Ukraine, the executive European Commission is expected to unlock Budapest's access to 10 billion euros this week.

    In opposing opening membership negotiations with Kyiv, Orban initially complained about Ukraine's treatment of the country's Hungarian minority. He has since said Ukraine was too corrupt and not ready to join the EU.

    Instead of deciding on new aid to Ukraine, he demanded the bloc hold a "strategic discussion" on its support for Kyiv.

Diplomats said related bids by Georgia and Bosnia to advance their hopes to join the EU - both backed by Orban - would fall through if Hungary vetoes Ukraine.

"Our feeling was that Orban always knew how far he could go and that he would know exactly when it was time to climb down the tree," said a second senior EU diplomat.

Those expecting Orban to budge described a possible compromise throwing the start on negotiations with Ukraine to March under final conditions. Others, however, worry that this time the Hungarian leader may not be persuaded.

Orban will be up against German Chancellor Olaf Scholz, among others, who has said Berlin backs starting negotiations for Kyiv to join the EU someday.

    FINANCIAL AND MILITARY AID

    While Orban may be the loudest critic of extending more support to Ukraine, a ruling last month by Germany's constitutional court further complicated the EU talks by blowing a massive hole in its richest member's budget.

Should Hungary veto assigning 50 billion euros to Ukraine through the bloc's shared budget, the 26 other EU countries could extend their contributions bilaterally to Kyiv - a more complicated and expensive way.

    Uncertainty also hangs over the future of the EU's military aid to Ukraine, where Russia now controls nearly a fifth of territory.

    A proposal to use an EU-run military fund – the European Peace Facility (EPF) – to give Ukraine 20 billion euros in arms and other support over the next four years has run into resistance from Germany.

Some EU members are pushing for the summit at least to pledge five billion euros to Ukraine via EPF next year, a plan EU foreign ministers will discuss on Monday with their Ukrainian counterpart.

    Despite the gloomy outlook, some Brussels diplomats believe the bloc will avoid the worst-case scenario and deliver on some of the promises made to Ukraine.

    "Will it be difficult? Yes. Will it be extremely difficult? Most likely. Will there be blood in the air at some point? Probably," said a second senior EU official. "But I continue to think it's possible to find solutions."

By Yoruk Bahceli

AMSTERDAM (Reuters) - Investors seeking to cash in on a policy pivot from the European Central Bank will watch Thursday's meeting for any hint they should sit tight on bets for swift interest rate cuts next year.

Euro zone inflation is tumbling and the economy may be in a shallow recession, so traders don't buy the ECB's mantra that rates will stay high for some time.

"The biggest challenge will be to try and navigate around the amount of cuts and the speed of the cuts that's been priced in," said Ed Hutchings, head of rates at Aviva (LON:AV) Investors.

Here are five key questions for markets.

1/ What can we expect this week?

The ECB is likely to say it is pleased that inflation, which exceeded 10% last year, is nearing its 2% target.

"They may even clearly tone down the language on the possibility of more hikes. So to the market they'd be saying: this is likely it, this is the peak," said Jens Eisenschmidt, a former ECB economist and now Morgan Stanley's Europe chief economist.

But don't expect ECB chief Christine Lagarde to sound dovish beyond that; analysts reckon she will not want to fuel further expectations of policy easing.

2/ Is the inflation fight over?

The signs are certainly positive.

Euro zone inflation tumbled to 2.4% in November, undershooting expectations for a third straight month, with even the core measure excluding volatile food and energy prices falling sharply to 3.6%.

"The inflation picture is much more favourable than the ECB has in its forecasts," said Carmignac chief economist Raphael Gallardo.

Inflation is expected to rise again as subsidies shielding consumers from high energy prices expire, however, while wage growth remains elevated. So the ECB will be reluctant to declare victory just yet.

3/ Who's right on rates - traders or the ECB?

Traders now see over 130 basis points of ECB rate cuts next year, starting in March. When the ECB last met on Oct. 26, they priced in just 70 bps of cuts commencing in July.

Even board member Isabel Schnabel, a renowned hawk, has added fuel to the fire, telling Reuters the ECB can take further hikes off the table and should not guide for steady rates through mid-2024.

But wary of inflation risks, the ECB is all but certain to avoid endorsing market pricing, and many economists think March is too early for cuts.

"I expect a cautious, conservative, and moderately hawkish counter-reaction to the recent dovish market repricing," said UBS chief European economist Reinhard Cluse.

4/ What's happening to PEPP?

Lagarde recently said the ECB will "probably" discuss ending reinvestments under its 1.7 trillion euro Pandemic Emergency Purchase Programme (PEPP) earlier than the current end-2024 deadline, so the topic could come up this week.

Italian bonds, the main beneficiary, outperformed in November on rate cut hopes, sharply narrowing the risk premium they pay over Germany. But that has also boosted the case for bringing forward an end to reinvestments, analysts said.

Were the ECB to halt the reinvestments in June, Italy would miss out on some 15 billion euros of cash, compared to over 350 billion euros of debt it will sell next year, Pictet Wealth Management's head of macroeconomic research Frederik Ducrozet, estimates.

For Ducrozet such a small amount isn't worth risking volatility in markets right now. BNP Paribas (OTC:BNPQY) nevertheless expects the ECB to start a formal discussion on ending reinvestments.

"What the decision may reveal is how much influence the hawks still have," Ducrozet said.

5/ What will new ECB projections show?

Analysts largely expect the ECB to lower its growth and inflation projections for next year from September estimates, boosting the case for easing hawkish guidance, and inflation to be around 2% in 2026.

With inflation undershooting substantially, the ECB's fresh staff projections, which will include forecasts for 2026 for the first time, are in focus.

By Noel Randewich and Amruta Khandekar

(Reuters) - U.S. stocks closed higher on FridayA, with the S&P 500 and Nasdaq notching their highest closing levels since early 2022 after a robust U.S. jobs report fueled investor optimism about a soft landing for the economy.

Investors pared bets that the Federal Reserve will cut interest rates in March after a Labor Department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000.

The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth.

Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting next week, according to the CME FedWatch tool. However, futures prices now imply traders mostly expect the Fed to start cutting rates in May, two months later than the March meeting many investors had been betting on in recent days.

"The drop in the unemployment rate in particular will assuage any concerns of a recession, and with payrolls and earnings both rising, it keeps the ‘soft landing’ narrative very much in the ascendancy," said Stuart Cole, head macro economist at Equiti Capital in London.

    "The report will likely see some of those forecasting an early Fed cut next year re-evaluating their positions," Cole said.

The S&P 500 climbed 0.41% to end the session at 4,604.37 points.

The Nasdaq gained 0.45% to 14,403.97 points, while Dow Jones Industrial Average rose 0.36% to 36,247.87 points.

The S&P 500's close was its highest since March 2022, while the Nasdaq's close was it highest since April 2022.

For the week, the S&P 500 rose 0.21%, the sixth time in a row it has logged a weekly gain, its longest streak since November 2019.

The Dow edged up 0.01% for the week, also its sixth straight weekly gain, its longest run of positive weeks since February 2019.

The Nasdaq gained 0.69% for the week.

The S&P 500 remains down 4% from its record high close in late 2021 with the Nasdaq still down 10% from its record high then.

Chipmaker Nvidia (NASDAQ:NVDA) and Facebook-owner Meta Platforms (NASDAQ:META) each gained nearly 2% in Friday's session.

Shares of Google-parent Alphabet (NASDAQ:GOOGL) dipped 1.4%, giving up gains after an AI-led rally in the previous session.

Other data showed U.S. consumer sentiment perked up much more than expected in December, snapping four straight months of declines.

Robust quarterly reports and optimism that the Fed has finished raising rates have fueled steady gains in the U.S. stock market since late October.

Honeywell (NASDAQ:HON) dipped 1.6% after the industrial firm said it would buy air conditioner maker Carrier Global (NYSE:CARR)'s security business for $4.95 billion. Carrier's shares rose almost 4%.

Paramount Global soared 12% after reports of takeover interest in the media company. Peer Warner Bros Discovery (NASDAQ:WBD) jumped 6.6%.

DocuSign (NASDAQ:DOCU) rallied 4.8% after the e-signature product provider raised its annual forecast for revenue.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.5-to-one ratio.

The S&P 500 posted 33 new highs and no new lows; the Nasdaq recorded 104 new highs and 90 new lows.

Volume on U.S. exchanges was 11.0 billion shares traded, in line with the previous 20 sessions.