By Philip Blenkinsop

BRUSSELS (Reuters) -The European Union and the United States have agreed that Washington will continue to suspend tariffs on EU steel and aluminium until March 2025 and Brussels will not reimpose its retaliatory measures, the European Commission said on Tuesday.

Under the 15-month extension, the United States will refrain from its tariffs of 25% on EU steel and 10% on EU aluminium imposed in 2018 by former President Donald Trump, so parking the dispute until after U.S. and EU elections.

EU tariffs, imposed in retaliation, covered a range of U.S. goods from Harley Davidson motorcycles to bourbon whiskey and power boats.

Washington replaced its tariffs with quotas from January 2022, initially for a period of two years.

The two sides were supposed to agree on measures to tackle overcapacity before the end of 2023, but negotiations stalled ahead of a U.S-EU summit in October.

Washington has since offered to extend the tariff suspension to allow more time for talks on creating a system to counter overcapacity and promote less carbon-intensive steel-making.

European steel association Eurofer said it viewed the extension as positive and said it cleared the way for a resumption of negotiations.

The U.S. Distilled Spirits Council said it greatly appreciated the extension and that it had averted a reimposition and doubling of the EU tariff to 50% in the new year. It called for a permanent end to the dispute.

The U.S. quota system allows up to 3.3 million metric tons of EU steel and 384,000 tons of aluminium into the United States tariff-free, reflecting past trade levels, with further amounts subject to tariffs.

The European Commission has complained the system is rigid and meant EU steel was subject to some $264 million of U.S. tariffs last year, while the EU simply removed its retaliatory tariffs.

PARIS (Reuters) - French economic activity will only pick up in 2025 as lower inflation boosts consumers' purchasing power, falling short of the government's growth expectations in the meantime, the central bank forecast on Tuesday in its quarterly outlook.

After growth estimated this year at 0.8%, the euro zone's second-biggest economy is on course to expand 0.9% in 2023, according to the Bank of France, which trimmed its 2023 forecast from 0.9% following weak third quarter data.

The government is more optimistic and has based its budget planning on forecasts that pegged growth this year at 1% and next year at 1.4%.

If growth turns out closer to the central bank's forecast, the government may need to find extra savings in the budget to keep its deficit-reduction plans on track.

The Bank of France said that as inflation slows and gives households purchasing power gains, consumer spending should recover over the course of 2024, pushing overall economic growth to 1.3% in 2025 and 1.6% in 2026.

Marginally lowering its estimates, it forecast that inflation would slow from 5.7% on average this year to 2.5% next year and pass below the European Central Bank's 2% in the first quarter of 2025.

That means that wages were likely to grow faster than inflation from 2024-2025, helping support purchasing power gains and possibly tempting consumers to lower their currently high savings rates in favour of spending more.

By Marius Zaharia

HONG KONG (Reuters) - China's disappointing post-COVID recovery has raised significant doubts about the foundations of its decades of stunning growth and presented Beijing with a tough choice for 2024 and beyond: take on more debt or grow less.

The expectations were that once China ditched its draconian COVID rules, consumers would burst back into malls, foreign investment would resume, factories would rev up and land auctions and home sales stabilise.

Instead, Chinese shoppers are saving for rainy days, foreign firms pulled money out, manufacturers face waning demand from the West, local government finances wobbled, and property developers defaulted.

The dashed expectations have partly vindicated those who always doubted China's growth model, with some economists even drawing parallels with Japan's bubble before its "lost decades" of stagnation starting in the 1990s.

China sceptics argue Beijing failed to shift the economy from construction-led development to consumption-driven growth a decade ago, when it should have done so. Since then, debt has outpaced the economy, reaching levels that local governments and real estate firms now struggle to service.

Policymakers vowed this year to boost consumption, and reduce the economy's reliance on property. Beijing is guiding banks to lend more to high-end manufacturing, away from real estate.

But a concrete long-term roadmap for cleaning up debt and restructuring the economy remains elusive.

Whatever choices China makes, it will have to account for an ageing and shrinking population, and a difficult geopolitical environment as the West grows wary of doing business with the world's No.2 economy.

WHY IT MATTERS

China likely grew 5%-or-so in 2023, outrunning the global economy. However, beneath that headline is the fact China invests more than 40% of its output - twice as much as the United States - suggesting a significant portion of that is unproductive.

That means many Chinese don't feel that growth. Youth unemployment topped 21% in June, the last set of figures before China controversially stopped reporting.

University graduates who studied for advanced-economy jobs are now taking up low-skilled positions to make ends meet while others have seen their wages cut.

In an economy where 70% of household wealth is parked in property, home owners are feeling poorer. Even in one of the few bright spots of the economy, the electric vehicle sector, a price war is causing pain downstream for suppliers and workers.

The national pessimism could present President Xi Jinping with social stability risks, analysts say. If China does slip into a Japan-style decline, it would do so before ever achieving the kind of development Japan did.

That would be felt widely as most global industries depend significantly on suppliers in China. Africa and Latin America count on China buying their commodities and financing their industrialisation.

WHAT IT MEANS FOR 2024

China's problems give it little time before it has to make some tough choices.

Policymakers are keen to change the structure of the economy, but reform has always been difficult in China.

A push to boost welfare for hundreds of millions of rural migrant workers, who could - by some estimates - add 1.7% of GDP in household consumption if they had similar access to public services as urban residents, is already stalling due to worries about social stability and costs.

China's efforts to resolve its property and debt problems come up against similar concerns.

Who pays for their bad investments? Banks, state-owned firms, the central government, businesses or households?

Any of those options could mean weaker future growth, economists say.

For now, however, China appears hesitant to make choices that would sacrifice growth for reform.

Government advisers are calling for a growth target of around 5% for next year.

While that's in line with its 2023 target, it won't have the same flattering year-on-year comparison with the slump caused by the 2022 lockdowns.

Such a target might push it into more debt - the type of fiscal looseness that prompted Moody's (NYSE:MCO) to cut China's credit rating outlook to negative this month, pushing Chinese stocks to five-year lows.

Where that money gets spent will tell us if Beijing is changing its approach or doubling down a growth model many fear has run its course.

By Ira Dugal

BENGALURU (Reuters) -The International Monetary Fund has reclassified India's "de facto" exchange rate regime to "stabilized arrangement" from "floating" for December 2022 to October 2023, following an article IV review of the country's policies.

The reclassification follows the Reserve Bank of India's likely interventions in the foreign exchange market, where the rupee moved in a "very narrow range" against the U.S. dollar, "suggesting intervention likely exceeded levels necessary to address disorderly market conditions," IMF said in the report.

The IMF's Article IV consultation report reviews a country's current and medium-term economic policies and outlook.

In a press release, the IMF said its staff diverged from Indian authorities' view "that exchange rate stability reflects improvements in India’s external position and that foreign exchange interventions have been used to avoid excessive volatility not warranted by fundamentals."

Between December 2022 and October 2023, the rupee traded in a range of 80.88-83.42 against the U.S. dollar. Since October, the range has narrowed to 82.90-83.42 and volatility expectations have fallen to the lowest in over a decade.

RBI Governor Shaktikanta Das said in October that currency market interventions should not be seen as "black and white" and is needed to prevent volatility and build reserves.

India's forex reserves are assessed at just above 100% of the IMF composite reserve adequacy metric, the report said.

"Going forward, a flexible exchange rate should act as the first line of defense in absorbing external shocks," the fund said.

The IMF also projected India's economy will grow at 6.3% in both the current fiscal year and the next, below the RBI's forecast of 7% in the current year.

"India has potential for even higher growth, with greater contributions from labor and human capital, if comprehensive reforms are implemented," the IMF said.

Headline inflation is expected to gradually decline to the target although it remains volatile due to food price shocks, it added.

Volatile food prices pushed up retail inflation to 5.55% in November, above the central bank's target of 4%.

The fund called for India to pursue an “ambitious” medium-term consolidation efforts given elevated public debt levels, while welcoming the near-term approach of accelerating capital spending while tightening the fiscal stance.

The federal government's fiscal deficit is targeted at 5.9% for the current fiscal year with an aim to bring it down to 4.5% by 2025-26.

By Michael S. Derby

(Reuters) -The average wage U.S. employers were willing to offer new workers surged to record levels in November, a report from the New York Federal Reserve showed on Monday.

The average full-time annual wage offer moved to $79,160 in November from $69,475 in July, the regional Fed bank said in its Survey of Consumer Expectations Labor Market Survey. The wage in November was the highest ever in a survey that dates back to 2014 and likely reflects ongoing labor market tightness, with firms being forced to come up with higher levels of cash to secure employees.

Workers in the survey also trimmed their so-called reservation wage, which is the minimum pay level someone will take for a new job. That dropped to $73,391 as of last month, from $78,645 in July.

The report also showed that churn in the job market may be set to increase. Some 23.1% of respondents said they'd searched for a new job in the last month, compared to 19.4% who said the same thing in July. Meanwhile, the expected likelihood of moving to a new job rose to 12.3% in November, from 10.6% in July. The report also found a record 3.5% of respondents said it was likely they would move out of the labor force, which was the highest reading ever for the survey.

Market participants and central bankers are all scanning the labor sector for signs of weakness in the wake of an aggressive string of Fed rate hikes since the U.S. central bank kicked off its tightening cycle in March 2022.

The Fed has strongly signaled it is likely done pushing up short-term borrowing costs in its bid to lower inflation, and central bank officials are now actively weighing whether ebbing price pressures will allow them to lower the policy rate next year.

Some of the confidence that inflation will continue to retreat is tied to the view that labor market conditions are becoming more balanced. That could reduce upward wage pressures and, in turn, help guide overall inflation back to the Fed's 2% target. But it remains a process that is still playing out.

"Labor demand still exceeds the supply of available workers" although the balance between those who are hiring and those who are looking for work is continuing to equal back out, Fed Chair Jerome Powell said in a press conference last week after the end of the central bank's final policy meeting of the year.

(Reuters) -New York-listed e-commerce giant Coupang plans to buy Farfetch (NYSE:FTCH) Holdings in a deal that will provide the struggling online luxury fashion retailer with $500 million in capital to stay in operation, the companies said in a joint statement.

Trading in shares of Farfetch, which has a market capitalization of $226.7 million, were halted, while those of Coupang were down 4.5% on Monday.

Farfetch, an e-commerce company that has helped luxury brands sell online, has been hit by a slowdown in the industry which has complicated its efforts to make a profit on technology investments and prompted credit rating downgrades in recent weeks.

Farfetch operates an online luxury marketplace selling high-end fashion and jewelry that dozens of small brands and boutiques rely on as their main selling platform. It also provides back-end technology for ecommerce for department stores and brands like Harrods and Ferragamo.

Coupang, which operates food delivery, video streaming and payment services in markets including South Korea, Taiwan, Singapore, China and India, struck the deal with an investor group that held over 80% of Farfetch's outstanding $600 million term loans.

The e-commerce giant said it would combine its logistics expertise with Farfetch’s experience selling high-end brands to expand in South Korea, a fast-growing luxury goods market.

Investment firm Greenoaks is investing alongside Coupang.

Last month, the Telegraph newspaper reported that Farfetch founder and CEO Jose Neves was in talks to take the company private.

JPMorgan advised Farfetch on the deal.

In a separate statement, Cartier-owner Richemont said that a previous deal to sell its online ecommerce activity Yoox Net-a-Porter (BIT:YNAP) to Farfetch had been scrapped and that it would consider alternative options for powering e-commerce of its brands - noting they continue to operate with their own technology.

Richemont added it did not expect to be repaid a $300 million loan to Farfetch issued in November 2020.

(Reuters) -World markets head into year-end on a "buy everything" high, with the Federal Reserve signalling it will switch to rate cuts in 2024, propelling stocks and gold higher.

Meanwhile, the Bank of Japan could finally hint at an end to its ultra-loose monetary policy. The road into 2024 for investors could be bumpy.

Here's your week ahead in markets from Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Naomi Rovnick, Marc Jones and Amanda Cooper in London.

1/ROLE REVERSAL   

    Speculation is rife the Bank of Japan (BOJ) may soon exit negative interest rates, again making it a global outlier as the focus at the Fed and others turns to when to cut rates.

    A change likely won't come as soon as the policy decision on Tuesday, but the BOJ meets again in January, and next week could be used to prepare the way for tightening.

    That expected pivot, plus the Fed's dovish tilt, has pushed the yen back to the stronger side of 141 per dollar for the first time since July.

    A political scandal over suspected kickbacks could ironically provide a tailwind to ending easing, as Prime Minister Fumio Kishida clears his cabinet of pro-stimulus elements.

    A reversal of politically unpopular yen weakness may help his sagging approval ratings, but the speed of yen strength could also be damaging. The Nikkei has lagged most other major stock indices this month.

2INFLATION WANING?

    Investors hope a key U.S. inflation gauge will show easing consumer price pressures, after the Fed signalled its campaign of interest rate hikes is ending and cuts may arrive next year.

    The Dec. 22 release of November's personal consumption expenditures (PCE) price index, which the Fed tracks, will be one of the last key pieces of data this year. Fed Chair Jerome Powell has said the historic tightening of monetary policy is likely over and discussion of rate cuts is coming "into view".

    Data on consumer confidence, as investors seek to gauge how much higher interest rates may be weighing on spending, is also due out. Whether the Fed has been able to engineer a soft landing for the U.S. economy is a key market theme as the calendar flips to 2024.

3/ GOLD STAR

Gold is heading for its first annual increase since 2020, fuelled by a weaker dollar and by the view that interest rates and inflation are going one way and fast in 2024.

Gold, which bears no interest, tends to perform better in an environment of falling real rates, those adjusted for inflation.

Real U.S. 10-year yields have been rising non-stop since early 2022, but only turned positive in June, knocking gold back from a near-record. They are now at their highest in eight years, but this has been no barrier to gold vaulting above $2,000 an ounce. And yet the price is still some 20% below its inflation-adjusted all-time high above $2,500 in 1980.

Investors are banking on a flurry of rate cuts next year, while political and economic uncertainty are on the rise - potentially heralding a sweet spot for gold investors.

4/ INFLATION NATION

UK inflation is running at more than double the Bank of England's (BoE) 2% target. Latest data on Dec. 20 may confirm UK price pressures remain elevated compared to other major economies.

The pound hit a three-month high against the euro this month after euro zone inflation dropped sharply, fuelling speculation the BoE will take longer to cut rates than the European Central Bank.

But high rates could also tip the UK economy, which the BoE expects to flat-line in 2024, into recession, meaning sterling strength is not a one-way bet. The pound's fate rests on whether the BoE keeps reacting to current inflation trends, or takes the longer-term view that economic weakness will dampen wages and prices.

5/DOWN THE NILE

Egyptian President Abdel Fattah al-Sisi's third straight election win should be officially confirmed on Monday. With little in the way of opposition, the former general has cruised this one, but faces a daunting list of challenges.

War in Gaza is raging next door and Egypt is grappling with an economic crisis fuelled by near-record inflation and past borrowing sprees that mean its debt interest payments alone now eat up almost half the government's revenues.

Economists say that is unsustainable. At least $42.26 billion is due in 2024, including $4.89 billion to the International Monetary Fund.

The first move after the election looks set to be another big currency devaluation. Egypt's pound has already halved against the dollar since March 2022. A dollar now fetches about 49 Egyptian pounds on the black market versus an official rate of 31 pounds. FX forwards markets say the same.

By Wayne Cole

SYDNEY (Reuters) -Asia stocks slipped on Monday in a subdued start to a week where Japan's central bank might edge further away from its uber-easy policies, while a key reading on U.S. inflation is expected to underpin market pricing of interest rate cuts there.

The Bank of Japan (BOJ) meets Tuesday amid much chatter that it is considering how and when to move away from negative interest rates. None of the analysts polled by Reuters expected a definitive move at this meeting, but policy makers might start laying the groundwork for an eventual shift.

April was favoured by 17 of 28 economists as the kick-off for negative rates to be scrapped, making the BOJ one of the few central banks in the world actually tightening.

"Since the last meeting in October, 10-year JGB yields have fallen and the yen has appreciated, giving the BOJ little incentive to revise policy at this stage," said Barclays economist Christian Keller.

"We think the BOJ will wait to confirm the result of the 'shunto' wage negotiations next spring, before moving in April."

Japan's Nikkei lost 0.7%, weighed in part by a firm yen. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3%.

South Korea's main index added 0.3%, showing no obvious reaction to reports North Korea had fired a ballistic missile off its east coast.

Chinese blue chips edged down 0.3%, following five straight weeks of falls.

S&P 500 futures inched up 0.3%, while Nasdaq futures added 0.2%. EUROSTOXX 50 futures slipped 0.3% and FTSE futures 0.1%.

Over in the United States, a reading on core personal consumption expenditure (PCE) index is forecast by analysts to rise 0.2% in November with the annual inflation rate slowing to its lowest since mid-2021 at 3.4%.

Analysts suspect the balance of risk is on the downside and a rise of 0.1% for the month would see the six-month annualised pace of inflation slow to just 2.1% and almost at the Federal Reserve's target of 2%.

Markets reckon the slowdown in inflation means the Fed will have to ease policy just to stop real rates from rising, and are wagering on early and aggressive action.

New York Fed President John Williams did try to rain on the parade on Friday by saying there was no talk of easing by policy makers, but markets were disinclined to listen.

MARCH MADNESS

Two-year Treasury yields ticked up only slightly in response, and still ended the week down a steep 28 basis points at the lowest close since mid-May.

Yields on 10-year notes stood at 3.91%, having dived 33 basis points last week in the biggest weekly fall since early 2020.

Fed fund futures imply a 74% chance of a rate cut as early as March, while May has 39 basis points (bp) of easing priced in. The market also implies at least 140 basis points of cuts for all of 2024.

"We now forecast three consecutive 25bp cuts in March, May, and June, followed by a slower pace of one cut per quarter until reaching a terminal rate of 3.25-3.5%, 25bp lower than we previously expected," wrote analysts at Goldman Sachs in a client note.

"This implies five cuts in 2024 and three more cuts in 2025."

If correct, such easing would allow some Asian central banks to ease earlier, with Goldman bringing forward cuts in India, Taiwan, Indonesia and the Philippines.

The investment bank also raised its forecast for the S&P 500 which it now sees ending 2024 at 5,100, while decelerating inflation and Fed easing would keep real yields low and support a price-to-earnings multiple greater than 19.

The market's dovish outlook for U.S. rates saw the dollar slip 1.3% against a basket of currencies last week, though the Fed is hardly alone in the rate-cutting stakes.

Markets imply around 150 basis points of easing by the European Central Bank next year, and 113 basis points of cuts from the Bank of England.

That outlook restrained the euro at $1.0909, having pulled back from a top of $1.1004 on Friday. The dollar was looking more vulnerable against the yen at 142.23, having slid 1.9% last week.

The drop in the dollar and yields should be positive for gold at $2,021 an ounce, though that was short of its recent all-time peak of $2,135.40. [GOL/]

Oil prices were trying to steady after hitting a five-month low last week amid doubts all OPEC+ producers will stick with caps on output. [O/R]

Lower exports from Russia and attacks by the Houthis on ships in the Red Sea offered some support. Brent nudged up 47 cents to $77.02 a barrel, while U.S. crude rose 47 cents to $71.90.

BEIJING (Reuters) - China's finance ministry has allocated a first batch of 237.9 billion yuan ($33.38 billion) of funds from sovereign bonds as of Monday, in an effort to support the renovation of infrastructure in areas hit by natural disasters, state media CCTV reported.

The funds were part of a plan unveiled in October when China said it would issue 1 trillion yuan of sovereign bonds to enhance disaster-prevention infrastructure, the report said.

The plan to help rebuild areas hit by this year's floods and improve urban infrastructure to cope with future disasters has widened China's 2023 fiscal deficit target to 3.8% of gross domestic product from the original 3%.

The first batch of funds will support more than 2,900 projects, CCTV reported, including 107.5 billion yuan to help with rebuilding and disaster prevention and mitigation.

Another 125.4 billion yuan will be used to subsidise high-standard farmland in the northeastern region and the Beijing-Tianjin-Hebei region, and 5 billion yuan will go to major natural disaster prevention and control system projects, CCTV added.

China's finance ministry did not respond immediately to a Reuters request for comment on when it started issuing the bonds.

China has grappled with weather extremes this year, from ultra-low temperatures in January to record rainfall and a blistering hot summer, in wild swings that scientists attribute to climate change.

Temperatures in parts of China, including in provinces Shanxi, Hebei and Liaoning, hit their lowest levels since records began, CCTV said on Sunday, as a cold snap gripped large swathes of the country.

Northern China, including the capital city of Beijing, were the hardest hit by floods after record rainfall from Typhoon Doksuri in July and August. Southern China, including economic powerhouses Guangdong and Fujian provinces, has been hit by two typhoons since September.

($1 = 7.1274 Chinese yuan renminbi)

By Jan Strupczewski, Krisztina Than and Ingrid Melander

BRUSSELS (Reuters) - European Union leaders expressed confidence on Friday that they would clear a large package of aid for Ukraine early in 2024, despite a veto by Hungarian Prime Minister Viktor Orban.

All 27 EU states except Hungary agreed on Thursday to start accession talks with Ukraine despite its invasion by Russia, bypassing Orban's grievances by getting him to leave the room.

But they could not overcome his resistance to revamping the EU budget to channel 50 billion euros ($55 billion) to Kyiv and provide more cash for other tasks such as managing migration.

Kyiv is reliant on foreign assistance as Russia's war in Ukraine rages on, and U.S. President Joe Biden has so far been unable to get a $60 billion package for Kyiv through Congress.

EU leaders, who would prefer a deal backed by all members but also have a plan B, are expected to revisit the issue at an emergency summit at the end of January or early in February.

"We are working very hard to have an agreement by 27 member states," European Commission President Ursula von der Leyen said, adding: "But I think it is now also necessary to work on potential alternatives to have an operational solution in case that an agreement by 27, so unanimity, is not possible."

German Chancellor Olaf Scholz and French President Emmanuel Macron were among those expressing optimism on getting the aid to Kyiv, which is part of a broader multi-year EU budget plan.

"We have other ways of helping Ukraine, but we have not given up on the goal of finding a solution here," said Scholz, who diplomats and officials said played a big role in getting Orban to leave the room to clear the way for a decision on starting accession talks.

Macron said the EU was "not blocked" from providing aid next year, adding he felt Orban had an incentive to reach a deal.

The EU could continue to help with a workaround that involved a deal between 26 members and Ukraine, which would also deny Budapest access to linked EU funds, such as on migration.

The Kremlin praised Orban, who maintains close ties to Russia, and said the EU decision to open accession talks with Kyiv was politicised and could destabilise the bloc.

Orban, who has a history of trying to use disagreements with other EU leaders for his electoral benefit, told state radio he had blocked the aid to ensure Budapest gets EU money that is frozen over concerns about the rule of law in Hungary.

"It is a great opportunity for Hungary to make it clear that it must get what it is entitled to," he said.

The EU restored Hungary's access to 10.2 billion euros of frozen funds this week, but 21.1 billion euros remain locked.

'BAD DECISION'

Ukrainian President Volodymyr Zelenskiy hailed the approval of membership talks as a victory for Ukraine and Europe.

And while Lithuanian President Gitanas Nauseda said that while it made him "proud to be European", he added it was "only the first page of a very long, long process".

Orban, meanwhile, called the move a "bad decision".

"We can halt this process later on, and if needed we will pull the brakes," he said.

EU leaders ended talks on the financial package in the early hours of Friday, with all except Orban agreeing to provide Ukraine with 50 billion euros over four years. His veto blocked the funds, however, because the decision requires unanimity.

The best legal form for providing aid outside the EU budget is to be determined, but the Commission could coordinate a collection of grants for Kyiv.

Ukraine is unlikely to join the EU for many years, but the decision on talks took it a step closer to its long-term goal of anchoring itself in the West and leaving Russia's orbit.

($1 = 0.9162 euros)