Economists

FILE PHOTO: Japanese Prime Minister Shinzo Abe holds a joint news conference with visiting U.S. President Donald Trump (not pictured) in Tokyo
FILE PHOTO: Japanese Prime Minister Shinzo Abe holds a joint news conference with visiting U.S. President Donald Trump (not pictured) in Tokyo, Japan May 27, 2019. REUTERS/Jonathan Ernst

June 19, 2019

By Linda Sieg and Kiyoshi Takenaka

TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe faced stiff opposition criticism on Wednesday after a report warned that many retirees won’t be able to live on pensions alone, a topic likely to become an issue in an election for parliament’s upper house.

Abe has made reform of the social security system a top priority to cope with Japan’s fast-ageing, shrinking population.

But the furor over the report and Finance Minister Taro Aso’s refusal to accept its findings have created a headache for Abe’s coalition ahead of the upper house poll and amid speculation that the premier may also call a snap election for the more powerful lower chamber.

A report this month by advisers to the Financial Services Agency (FSA) said a model case couple would need $185,000 in addition to their pensions if they lived for 30 years after retiring.

The report was meant to highlight the need to plan ahead for retirement but instead gave opposition parties ammunition to blast Abe’s government.

“What is making lots of people angry is that you are simply stressing stability (of the system) and not addressing their anxiety head-on,” Yukio Edano, leader of the largest opposition Constitutional Democratic Party of Japan, told Abe during debate before a parliamentary panel.

Abe said the report had caused “misunderstandings” and reiterated the government’s position that reforms to the pension system implemented in 2004 had ensured its sustainability.

Pensions are a particularly sensitive topic for Abe.

His Liberal Democratic Party suffered a massive defeat in a 2007 upper house election during his first stint as premier partly because of voter outrage over misplaced pension records. Two months later, Abe resigned.

Abe’s ruling bloc is unlikely to lose its upper house majority but the fuss has trimmed his support and a weak performance would hamper efforts to cement his legacy.

Aso, 78, the wealthy scion of an elite political family, also said he’d never worried about supporting himself as he aged and didn’t know if he was receiving a pension.

“INCONVENIENT TRUTH”

That many retirees cannot subsist on pensions alone and will outlive their savings is one of Japan’s worst-kept secrets and one reason Abe is considering raising the retirement age.

“The FSA has done exactly what it is supposed to do — not be afraid to uncover inconvenient truths,” said Jesper Koll, CEO of asset manager WisdomTree Japan.

Yuichiro Tamaki, leader of the opposition Democratic Party for the People, said Aso’s rejection of the report had deepened public unease.

“Holding back, hiding or even falsifying information just because an election is near does not help you win trust for the government nor for the pension system,” he told Abe.

Japan’s life expectancy is the highest among Organization for Economic Cooperation and Development countries at 87.1 years for women and 81 years for men. The World Economic Forum last week forecast Japanese men could be expected to outlive their savings by 15 years and women by almost two decades.

About 54% of Japanese who get public pensions rely on them for their entire income, according to 2015 government data.

Opposition parties have also used the FSA report to renew questions about the sustainability of the public pension system.

The government in 2004 adopted reforms it said had made the system sustainable for the next 100 years, a pledge many private economists, opposition lawmakers and ordinary Japanese question.

“People knew, even before the release of report, that there will be many economic problems after their retirement,” said Yu Nakahigashi, 40, a self-employed businessman. “I don’t want them to hide the truth from the public.”.

(Additional reporting by Yuri Harada; editing by Darren Schuettler and Nick Macfie)

Source: OANN

FILE PHOTO: Worker walks in a container area at a port in Tokyo
FILE PHOTO: A worker walks in a container area at a port in Tokyo, Japan January 25, 2016. REUTERS/Toru Hanai/File photo/File Photo

June 19, 2019

TOKYO (Reuters) – Japan’s exports fell 7.8% in May from a year earlier, down for a sixth straight month, Ministry of Finance (MOF) data showed on Wednesday, underscoring persistent weakness in overseas demand.

That compared with a 7.7% drop expected by economists in a Reuters poll, and followed a 2.4% fall in April.

Imports fell 1.5% in the year to May, versus the median estimate for a 0.2% increase.

The trade balance came to a deficit 967.1 billion yen ($8.91 billion), versus the median estimate for a 979.2 billion yen shortfall.

For full tables, go to the MOF website: http://www.customs.go.jp/toukei/info/index_e.htm

(Reporting by Tetsushi Kajimoto and Daniel Leussink; Editing by Chang-Ran Kim)

Source: OANN

FILE PHOTO: Federal Reserve Board Chairman Jerome Powell delivers the Federal Reserve’s Semiannual Monetary Policy Report to the House Financial Services Committee on Capitol Hill in Washington
FILE PHOTO: Federal Reserve Board Chairman Jerome Powell delivers the Federal Reserve’s Semiannual Monetary Policy Report to the House Financial Services Committee on Capitol Hill in Washington, U.S., February 27, 2019. REUTERS/Joshua Roberts/File Photo

June 18, 2019

By Howard Schneider and Ann Saphir

WASHINGTON/SAN FRANCISCO – (Reuters) – Bond investors expect an aggressive set of U.S. interest rate cuts this year, and a voluble president pines for the “old days” when his predecessors bullied central bankers to get their way.

If Federal Reserve Chairman Jerome Powell had a complicated task last year in calling an early halt to further Fed rate hikes, his mission in a Wednesday press conference may be even trickier: Thread the needle between growing expectations that lower rates are coming soon and economic data that looks reasonably healthy with rates just where they are.

Failing to pull it off could trigger the same sort of volatility and tightening of financial conditions witnessed in December, when Powell’s press conference remarks were interpreted as overly hawkish and in part responsible for an 8% drop in the S&P 500 over the next few days.

At the extreme, that sort of volatility could feed into the real economy and make the Fed’s job in coming weeks even more complicated.

“Powell will have to do a lot of tap dancing,” Bank of America Merrill Lynch economists wrote Friday in outlining how the Fed will need to account for expected slower U.S. growth, weak inflation and trade risks, without making it seem as if a serious downturn is in the offing.

“This is a Fed that wants to insure that the recovery will continue,” they said. “The goal will be to talk about the need to ease policy but underscore that a recession is not around the corner.”

The Fed begins its two-day policy meeting on Tuesday, and will issue a new statement and economic projections at 2 p.m. (1800 GMT) on Wednesday. Powell’s press conference is scheduled to begin Wednesday at 2:30 p.m. (1830 GMT)

The central bank is expected to leave its benchmark overnight policy rate unchanged at its current range of between 2.25% and 2.5%. The federal funds rate has been at that level since December after a three-year cycle of monetary policy tightening that began slowly but ended with roughly quarterly rate hikes over 2017 and 2018.

A ‘DARKENED’ OUTLOOK?

The mood has clearly shifted since the Fed last met in early May, in part because of trade policy choices made by President Donald Trump and which the president has demanded be offset with looser monetary policy.

But it is unclear by how much. One Federal Reserve regional bank president has referred to the outlook as “darkened,” and another has called for lower rates “soon.” Powell in his most recent public comments dropped the use of the word “patient” in referring to the Fed’s posture when it comes to deciding on the next rate move.

That suggested to many analysts that the word will disappear from the policy statement as well. In May that 279-word missive said the Fed “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”

But an absence of patience doesn’t mean the central bank is on a hair trigger. The focus on Powell will center around how he describes the Fed’s sensitivity to upcoming data, how seriously it views the risks of a widening trade war, and whether it still sees weak inflation as likely “transitory,” as he described it in May.

A LITTLE ‘FEDSPLAINING’?

Despite his December misstep, Powell has been given generally good marks by Wall Street investors for his ability to communicate policy.

His immediate predecessors had their own miscues.

Former chairman Ben Bernanke triggered weeks of global bond market volatility with his 2013 comments about the Fed’s plan to reduce its bond purchases. And former chair Janet Yellen in 2015 had to navigate the difficulties of the first interest rate increase since the 2007 to 2009 financial crisis.

But Powell this week may have a pronounced information gap to fill. As of March, 11 of 17 policymakers felt that rates at year-end would be unchanged from today, and the other six saw them as likely a bit higher.

The expected performance of the economy has not changed that much since then. Even if Trump’s trade policies have been hard to predict, Fed officials say the economic consequences could just as easily cavort to the upside if, for example, an upcoming meeting of the Group of 20 nations ends with any hint of progress in U.S.-China trade negotiations.

At this point, as economists at Goldman Sachs wrote over the weekend, the “hurdle” for the Fed to cut rates “is likely to be higher than widely believed,” with the economy and markets either healthier or more aligned with Fed policy than was the case in the 1990s when the Fed used preemptive “insurance” rate cuts to encourage continued economic growth.

If Fed officials don’t collectively push their rate view down, as markets expect and the White House demands, it will be up to Powell to explain why.

(Graphic: Fed communications ratings – https://tmsnrt.rs/31DehYx)

(Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci)

Source: OANN

FILE PHOTO: Bank Indonesia's logo is seen at Bank Indonesia headquarters in Jakarta
FILE PHOTO: Bank Indonesia’s logo is seen at Bank Indonesia headquarters in Jakarta, Indonesia, January 17, 2019. REUTERS/Willy Kurniawan

June 18, 2019

JAKARTA (Reuters) – Bank Indonesia is expected to keep its benchmark interest rate steady at a policy review on Thursday, but it may begin to follow other Asian central banks by cutting later this year, a Reuters poll showed.

All but three of 22 analysts surveyed predicted Bank Indonesia (BI) will hold the 7-day reverse repurchase rate at 6.0%, where it has been since November.

The other three forecast a trim by 25 basis points (bps), which would be the first rate cut since September, 2017.

A reduction would put BI on the same path as central banks in India, Malaysia and the Philippines who have loosened monetary conditions following the Federal Reserve’s dovish turn.

Hours before BI’s meeting, the Fed, facing fresh demands by U.S. President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged, but possibly lay the groundwork for a rate cut later this year.

“Now, we believe the stars in the global economic atmosphere are aligned for a BI rate cut,” said Satria Sambijantoro, an economist with Bahana Sekuritas, who is among the minority predicting a cut this week.

He cited even stronger dovish signals from the Fed, prospects of lower oil prices, and a credit rating upgrade from Standard & Poor’s last month as reasons why BI would feel comfortable cutting now.

Most other economists, however, think BI will take time to monitor global markets before cutting.

Trimegah Securities said in a note this week a premature rate cut would hurt the rupiah currency. Anchoring the rupiah was among BI’s main goals behind rate increases last year that increased the policy rate by a total 175 basis points.

“We’ll turn bearish on rupiah and bonds if BI delivers a rate cut too early,” its economist Fakhrul Fulvian said.

Governor Perry Warjiyo in an interview with Reuters last month said that BI will take into consideration global market conditions and Indonesia’s external balance when “considering the room for monetary policy to be more accommodative”.

Warjiyo told Reuters 2019 GDP expansion is seen at 5.1%, a fraction below last year’s 5.17% and near the bottom end of BI’s 5.0%-5.4% outlook.

On Monday, the governor told a hearing with parliament he expects global uncertainties to subside in the second half of the year.

Indonesian exports have plunged in recent months as global trade slowed and trade tensions between the United States and China escalated.

At its May 16 policy meeting, BI widened its forecast for the current account gap to 2.5%-3% of gross domestic products (GDP) this year, from an initial estimate of 2.5%.

All eight respondents who gave a view on the year-end benchmark expect at least one rate cut in 2019. Four predicted the rate would end the year 25 bps below its current level, three saw it 50 bps lower, and one saw the rate 75 bps lower.

(Polling by Tabita Diela and Nilufar Rizki in JAKARTA, Khusboo Mittal in BENGALURU; Editing by Simon Cameron-Moore)

Source: OANN

FILE PHOTO: The central bank headquarters building is seen in Brasilia
FILE PHOTO: The central bank headquarters building is seen in Brasilia, Brazil May 16, 2017. REUTERS/Ueslei Marcelino /File Photo

June 17, 2019

By Jamie McGeever

BRASILIA (Reuters) – Brazil’s central bank will leave its benchmark interest rate on hold this week, according to a Reuters poll of economists, but increasingly weak economic growth and inflationary pressures suggest it may not be long before it eases policy.

The central bank’s Selic rate has been at a record low 6.50% for over a year, and 18 of the 19 economists polled by Reuters said it will still be there after the bank’s policymaking committee, known as “Copom,” meets on June 18-19.

One economist forecast a rate cut.

The downward bias is building rapidly. Brazil’s economy is stagnating and may even be in recession, the global outlook is deteriorating and there are signs that inflation is drifting back toward the central bank’s 4.25% target.

Of the 19 economists polled, thirteen said the skew for rates over the next year is downward, five said neutral and only one said it is to the upside.

That is far more dovish than the previous poll in May, when five out of 15 economists said the bias was to the downside, nine were neutral, and one said to the upside.

“The weakness of the Brazilian economy and rapidly falling inflation mean we now expect an interest rate cut, and we think there is a window of opportunity for Copom to act at (this) meeting,” Edward Glossop, Latin America economist at Capital Economics, wrote in a client note.

“All told, Wednesday’s Copom meeting will be a close call but, on balance, we think a 25bp cut (to 6.25%) is more likely than not,” he said.

Glossop’s forecast is the most aggressive in the poll but reflects the general view on the economy and the path for rates. Several economists expect Copom to insert more dovish language in its policy statement, paving the way for an eventual cut.

Much of Copom’s debate is likely to center on how serious policymakers think the current economic slowdown is and how confident they are that inflation has topped out.

The economy shrank in the January-March period, its first contraction since 2016. April and May indicators so far offered little sign that things have turned around much, if at all, suggesting the economy could technically be in recession.

The central bank’s latest IBC-Br economic activity index may have tipped the balance for some Copom members. It showed that economic activity fell again in April – the longest stretch of declining activity since the last recession.

Brazil’s economy is expected to grow by less than 1.0% this year, according to a central bank survey released Monday, as economists cut their forecasts for the 16th week in a row to new lows and dramatically slashed their interest rate outlook.

Financial markets have aggressively scaled back their interest rate views. On Thursday, 2020 rates futures contracts fell below 6.0% for the first time, suggesting the Selic rate will be 50 basis points lower in around 12 months.

Even if it skirts recession, the economy is underperforming. Uncertainty surrounding pension reform, the government’s 1.237 trillion reais ($319 billion) proposal to balance Brazil’s books and revive growth, is not helping either.

Annual inflation fell to 4.66% in May from 4.92% in April, the first decline this year, providing some relief after four months of increases.

(Reporting by Jamie McGeever and Gabriel Burin in Buenos Aires; Editing by Jeffrey Benkoe)

Source: OANN

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

June 17, 2019

By Ann Saphir and Howard Schneider

SAN FRANCISCO/WASHINGTON (Reuters) – The U.S. Federal Reserve, facing fresh demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at a policy meeting this week but possibly lay the groundwork for a rate cut later this year.

New economic projections that will accompany the U.S. central bank’s policy statement on Wednesday will provide the most direct insight yet into how deeply policymakers have been influenced by the U.S.-China trade war, Trump’s insistence on lower interest rates, and recent weaker economic data.

Analysts expect the “dot plot” of year-end forecasts for the Fed’s benchmark overnight lending rate – the federal funds rate – will show a growing number of policymakers are open to cutting rates in the coming months, though nowhere near as aggressively as investors expect or Trump wants.

The Fed is also widely, though not universally, expected to remove a pledge to be “patient” in taking future action on rates, opening the door to a possible cut at its coming policy meetings.

Risks may be rising, but “I don’t think they want to box themselves into a corner,” said Carl Tannenbaum, chief economist at Northern Trust. “The markets are set up for a cut in July, and if they don’t get it, financial conditions will tighten.”

The federal funds rate is currently set in a range of 2.25% to 2.50%.

The Fed’s policy-setting committee is due to release its latest statement and economic projections at 2 p.m. EDT (1800 GMT) on Wednesday after the end of a two-day meeting. Fed Chairman Jerome Powell will hold a press conference shortly after.

MIND THE DOTS

The Fed’s last set of economic and policy projections, released in March, showed most policymakers foresaw no need to change rates this year and only very gradual rate hikes thereafter. (For a graphic of the gap between market and Fed expectations, please see https://tmsnrt.rs/2WzJ6tu.)

But since that meeting the economic outlook has become cloudier.

Recent U.S. retail sales numbers were strong. But while unemployment has held near a 50-year low of 3.6%, U.S. employers created a paltry 75,000 jobs in May. Inflation, which Powell says is low in part because of temporary factors, continues to undershoot the Fed’s 2% target.

The Atlanta Fed forecast on Friday that gross domestic product will increase at a 2.1 percent annualized rate in the April-June quarter, a drop from the 3.1 percent pace of the first three months of the year.

Trade uncertainty has increased as well, with Trump using the threat of tariffs on goods from Mexico to force the country to curb the number of mostly Central American immigrants crossing the U.S.-Mexico border.

He has also vowed to slap more tariffs on Chinese imports if no trade deal is reached when he meets Chinese President Xi Jinping at a Group of 20 summit at the end of this month in Japan.

Concern that mounting tariffs could further slow U.S. and global economic growth is one of the chief reasons traders in interest rate futures loaded up on contracts anticipating three U.S. rate cuts by the end of the year.

Fed officials may have reason to trim their rate outlook a bit, but meeting market expectations would involve a dramatic shift. Nine of the Fed’s current 17 policymakers would have to move their rate projections downward for the median to reflect a single cut, let alone three.

“Powell will do what he can to try to downplay the dots especially if they don’t show what the markets want them to show,” said Roberto Perli, economist at Cornerstone Macro. “He will have a tough time.”

Adding to the pressure for a rate cut is a yield curve inversion in parts of the market for U.S. government debt, historically a precursor of recessions. The three-month Treasury bill, for instance, has paid out a higher rate than a 5-year Treasury note for the last several months running.

And Trump, who has said that rates should be lowered by perhaps a full percentage point or more, continues to publicly berate the Fed and Powell, his handpicked chairman, for refusing to act.

“I’ve waited long enough,” Trump said in an interview with ABC News last week, talking favorably of the “old days” when Presidents Lyndon Johnson and Richard Nixon intervened forcefully in Fed policy – and set the stage, many economists argue, for the high inflation, economic volatility and recessions that followed in the 1970s.

DOWNWARD SHIFT

Most of the more than 100 economists polled June 7-12 by Reuters say they are not penciling in a rate cut until the third quarter of next year. But views are shifting rapidly. Forty respondents expected at least one rate cut sometime in 2019, up from just eight who did in the previous poll.

Within the U.S. central bank, St. Louis Fed President James Bullard is the only policymaker who has said a rate cut may be needed “soon.”

Several others have signaled a readiness to move off their wait-and-see stance, with Powell saying earlier this month in a speech in Chicago that the Fed will act “as appropriate” in the face of risks posed by the global trade war and other developments.

The word “patient,” which had been repeatedly used by the Fed since early this year to signal its willingness to hold off further rate hikes, was notably absent from Powell’s remarks, though the Fed chief stopped well short of suggesting a rate cut was coming soon.

The Fed raised rates four times in 2018 but has since abandoned plans to continue lifting borrowing costs this year.

It is likely to avoid signaling any move to cut rates until it is ready to deliver, predicted Bruce Monrad, a high-yield bond portfolio manager at Boston-based Northeast Investors Trust.

Nevertheless, Monrad added, Fed policymakers may have tied their own hands by letting bets in financial markets stray so far. “They have had six months to control the rhetoric. They really haven’t walked back the market.”

(Reporting by Ann Saphir and Howard Schneider; Editing by Paul Simao)

Source: OANN

FILE PHOTO: A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo
FILE PHOTO: A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan, January 7, 2019. REUTERS/Kim Kyung-Hoon

June 17, 2019

By Tomo Uetake

TOKYO (Reuters) – Asian shares got off to a shaky start on Monday as investors were cautious ahead of a closely-watched Federal Reserve meeting, while political tensions in the Middle East and Hong Kong kept risk-appetite in check.

MSCI’s broadest index of Asia-Pacific shares outside Japan opened slightly lower and was last little changed, while Japan’s Nikkei average stood flat.

Wall Street stocks ended lower on Friday as investors turned cautious before this week’s Fed meeting, while a warning from Broadcom on slowing demand weighed on chipmakers and added to U.S.-China trade worries.[.N]

“The week ahead is likely to provide some clarification for investors on three fronts that have been a source of uncertainty. The FOMC meeting, with updated forecasts, is center stage,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

A private gauge on eurozone’s manufacturing sector as well as U.S.-China trade frictions will also be watched closely, Chandler said.

Financial markets have been sideswiped since a sudden escalation in Sino-U.S. trade tensions in early May, with growing anxiety among investors that a protracted standoff could tip the global economy into recession.

Adding to the tensions between the world’s two biggest economies, U.S. Secretary of State Mike Pompeo told Fox News on Sunday that U.S. President Donald Trump would raise the issue of Hong Kong’s human rights with China’s President Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan later this month.

On Sunday, hundreds of thousands of black-clad protesters in Hong Kong demanded that Beijing-backed city leader Carrie Lam step down over her handling of a bill that would have allowed extradition to China, resulted her to issue a rare apology.

Geopolitical tensions in the Middle East added another layer of uncertainty for investors after the United States blamed Iran for attacks on two oil tankers in the Gulf of Oman last week.

Hopes that global central banks will keep the money spigot open have helped to temper some of the fears, and all eyes are on the Fed’s two-day meeting starting on Tuesday.

Strong U.S. retail sales data on Friday rolled back expectations of a Fed rate cut at this week’s meeting to 21.7%, from 28.3% on Thursday, according to CME Group’s FedWatch tool. But bets of an easing at the July meeting remain high at 85%.

The Bank of Japan also meets this week and is widely expected to reinforce its commitment to retain a massive stimulus program for some time to come.

The retail report also sent short-dated U.S. Treasury yields higher, flattening the yield curve.[L2N23L10H]

Benchmark 10-year notes was last at 2.091%, while two-year bond yield edged up, shrinking the spread between two- and 10-year yields to 23.6 basis points compared to more than 30 earlier this month.

A Reuters poll showed a growing number of economists expect the Fed policymakers to cut interest rates this year, although the majority still see it holding steady.

In currency markets, the dollar index against a basket of six major currencies climbed to 97.583 on Friday, its highest level in almost two weeks, after the U.S. retail sales data eased fears that the world’s largest economy is slowing sharply.

The index last stood at 97.511, while the euro fetched $1.1220, near the lower end of its weekly trading range.

Oil extended gains on Monday after the attacks on two oil tankers last week raised concerns about potential supply disruptions, but prices remained on track for a weekly loss on fears that trade disputes will dent global oil demand. [O/R]

Brent futures rose 0.2% to $62.13 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 0.2% to $52.60.

Spot gold eased 0.1% to $1,340.25 an ounce after hitting a 14-month peak on Friday.

Bitcoin jumped overnight to $9,391.85, its highest level in 13 months. It was last quoted at $9150.15.

(Reporting by Tomo Uetake; Editing by Shri Navaratnam)

Source: OANN

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

June 16, 2019

(Reuters) – Goldman Sachs economists said on Sunday they are skeptical of “insurance” U.S. interest rate decreases from the Federal Reserve to forestall possible slowing in U.S. economic growth due to global trade tensions.

A surprise escalation in trade tensions between Washington and Beijing since May, together with stubbornly low inflation, have spurred bets among traders the U.S. central bank may lower key lending rates by 0.75 percentage points by year-end.

“However, we think the hurdle for such cuts is likely to be higher than widely believed,” Goldman economists wrote in a research note published on Sunday.

A number of primary dealers, or the 24 top Wall Street firms that do business directly with the Fed, anticipate the Fed would lower key borrowing costs beginning this summer.

Goldman Sachs Group Inc and a few other primary dealers have stuck with calls that the Fed would refrain from decreasing rates until there is evidence of significant deterioration in business and consumer activities.

Goldman economists said the three-quarter point in rate cuts in 1995-1996 and 1998, which some analysts point to as recent examples of pre-emptive policy easing from the Fed, were responses to data “rested at least as much on observable deterioration as on an insurance motive.”

They said another assumption for insurance rate-cuts is that Fed officials could reserve the moves once the risk abates.

“However, the greater political scrutiny of Fed hikes now—especially with a presidential election approaching—could make this harder to do in 2020, so that overly hasty insurance cuts now might increase the risk that the funds rate gets stuck at too low a level if the economy remains resilient,” they wrote.

On Friday, U.S. short-term interest rates futures implied traders see about a 58% chance the Fed would lower short-term rates by 0.75 point by year-end, up from 54% a week earlier and 7% a month ago, according to CME Group’s FedWatch too.

Fed policy-makers will meet next Tuesday and Wednesday where analysts widely expect they would pave the way for possible rate cuts later this year.

Interest rates futures suggested traders priced in a 23% probability the Fed would lower rates next week, compared with 25% a week ago and 13% a month earlier, the CME FedWatch program showed.

(Reporting by Richard Leong; Editing by Lisa Shumaker)

Source: OANN

FILE PHOTO: The inside of the Gadsden Mall is pictured in Gadsden, Alabama
FILE PHOTO: The inside of the Gadsden Mall is pictured in Gadsden, Alabama, U.S., December 10, 2017. REUTERS/Carlo Allegri

June 14, 2019

WASHINGTON (Reuters) – U.S. retail sales increased in May and sales for the prior month were revised higher, suggesting a pick-up in consumer spending that could ease fears the economy was slowing down sharply in the second quarter.

The Commerce Department said on Friday retail sales rose 0.5% last month as households bought more motor vehicles and a variety of other goods. Data for April was revised up to show retail sales gaining 0.3%, instead of dropping 0.2% as previously reported.

Economists polled by Reuters had forecast retail sales climbing 0.6% in May. Compared to May last year, retail sales increased 3.2%.

Excluding automobiles, gasoline, building materials and food services, retail sales advanced 0.5% last month after an upwardly revised 0.4% rise in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

They were previously reported to have been unchanged in April. Consumer spending accounts for more than two-thirds of economic activity.

The solid gains in core retail sales in April and May suggested consumer spending was gaining speed in the second quarter after braking sharply in the January-March quarter.

That could see economists raising their second-quarter GDP growth estimates, which are currently below a 2.0% annualized rate. The economy grew at a 3.1% pace in the January-March quarter after getting a temporary boost from exports and an accumulation of inventory.

Exports dropped in April and inventory investment is slowing. In addition, manufacturing production and home sales fell in April. The outlook for consumer spending is mixed. While consumer confidence remains strong, wage growth retreated in May and hiring moderated sharply.

Overall, the economy is losing steam as the stimulus from last year’s $1.5 trillion tax cut and increased government spending dissipates. The trade war between the United States and China, which escalated recently, is also hurting the economy.

Last month, sales at auto dealerships accelerated 0.7% after dropping 0.5% in April. Receipts at service stations rose 0.3%.

Building materials and garden equipment sales edged up 0.1%, while online and mail-order purchases jumped 1.4%.

Sales at clothing stores were unchanged and receipts at furniture outlets nudged up 0.1%. Sales at bars and restaurants increased 0.7% last month, while those at hobby, musical instrument and book stores rose 1.1%.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Source: OANN

Man is seen in front of an electronic board showing stock information on the first day of trading in the Year of the Pig at a brokerage house in Hangzhou
FILE PHOTO: A man is seen in front of an electronic board showing stock information on the first day of trading in the Year of the Pig, following the Chinese Lunar New Year holiday, at a brokerage house in Hangzhou, Zhejiang province, China February 11, 2019. REUTERS/Stringer

June 14, 2019

By Shinichi Saoshiro

TOKYO (Reuters) – Asian stocks were subdued on Thursday ahead of key Chinese data that could provide more clues on how heavily the U.S.-Sino trade war is weighing on the economy, while oil prices were supported by supply concerns after attacks on tankers in the Gulf of Oman.

China will release May industrial production along with retail sales and investment numbers at 0700 GMT.

Economists polled by Reuters expect industrial production in China to have risen 5.5% in May from 5.4% in April and believe retail sales increased 8.1% from 7.2% the previous month.

But even if the data is better than forecast, expectations of more stimulus in China are growing as the trade dispute threatens to escalate into a full-blown trade war that could push the global economy into recession.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.2%.

For the week, it was headed for a gain of nearly 1%, as global stock markets were lifted by factors including expectations for Federal Reserve rate cuts and relief over a U.S.-Mexico tariff deal.

The Shanghai Composite Index dipped 0.1%, Australian stocks added 0.1% and Japan’s Nikkei climbed 0.25%.

“Risk assets have been struggling for direction as competing themes battle to decide the tone of global risk sentiment,” wrote strategists at ANZ.

“On one hand, the prospect of Fed easing assuages some fear of a global slowdown, but on the other hand trade issues still

present downside risk.”

U.S. stocks rose on Thursday after two days of declines, with energy shares rebounding on the back of crude oil’s surge. [.N]

Wall Street shares have had a strong run in June on hopes the Federal Reserve will ease monetary policy soon to counter pressure on the U.S. economy from the escalating trade war. The S&P 500 index is up about 5% so far for the month.

The Fed’s June 18-19 meeting will give investors an opportunity to see if the Fed’s monetary policy stance is in sync with market expectations for a near-term rate cut.

A Reuters poll this week showed a growing number of economists expect a Fed rate cut this year but the majority still expect it to stay on hold.

“There is a large degree of uncertainty going into next week’s FOMC (Federal Reserve Open Committee) meeting as market reaction will differ significantly depending on whether the Fed hints toward easing policy,” said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.

“A wait-and-see mood is likely to begin prevailing in the markets ahead of the FOMC.”

In commodities, Brent crude futures edged up 0.2% to $61.43 per barrel after rallying 2.3% the previous day.

Brent surged on Thursday after two oil tankers were attacked in the Gulf of Oman, one Norwegian-owned and the other Japanese-owned.

The United States has blamed Iran for the assaults. But U.S. and European security officials as well as regional analysts left open the possibility that Iranian proxies, or someone else entirely, might have been responsible.

U.S. crude slipped 0.13% to $52.21 per barrel after rising more than 2 percent on Thursday.

The dollar index against a basket of six major currencies was little changed at 97.023 after ending the previous day nearly flat, with caution ahead of the next week’s Fed meeting keeping the greenback in a tight range.

The euro was steady at $1.1276 while the greenback dipped 0.1% to 108.300 yen .

The Australian dollar extended overnight losses and fell to a three-week low of $0.6892.

The Aussie has lost 1.4% this week, during which soft domestic labor data added to expectations of a rate cut by the Reserve Bank of Australia.

(Editing by Simon Cameron-Moore & Kim Coghill)

Source: OANN

Man is seen in front of an electronic board showing stock information on the first day of trading in the Year of the Pig at a brokerage house in Hangzhou
FILE PHOTO: A man is seen in front of an electronic board showing stock information on the first day of trading in the Year of the Pig, following the Chinese Lunar New Year holiday, at a brokerage house in Hangzhou, Zhejiang province, China February 11, 2019. REUTERS/Stringer

June 14, 2019

By Shinichi Saoshiro

TOKYO (Reuters) – Asian stocks were subdued on Thursday ahead of key Chinese data that could provide more clues on how heavily the U.S.-Sino trade war is weighing on the economy, while oil prices were supported by supply concerns after attacks on tankers in the Gulf of Oman.

China will release May industrial production along with retail sales and investment numbers at 0700 GMT.

Economists polled by Reuters expect industrial production in China to have risen 5.5% in May from 5.4% in April and believe retail sales increased 8.1% from 7.2% the previous month.

But even if the data is better than forecast, expectations of more stimulus in China are growing as the trade dispute threatens to escalate into a full-blown trade war that could push the global economy into recession.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.2%.

For the week, it was headed for a gain of nearly 1%, as global stock markets were lifted by factors including expectations for Federal Reserve rate cuts and relief over a U.S.-Mexico tariff deal.

The Shanghai Composite Index dipped 0.1%, Australian stocks added 0.1% and Japan’s Nikkei climbed 0.25%.

“Risk assets have been struggling for direction as competing themes battle to decide the tone of global risk sentiment,” wrote strategists at ANZ.

“On one hand, the prospect of Fed easing assuages some fear of a global slowdown, but on the other hand trade issues still

present downside risk.”

U.S. stocks rose on Thursday after two days of declines, with energy shares rebounding on the back of crude oil’s surge. [.N]

Wall Street shares have had a strong run in June on hopes the Federal Reserve will ease monetary policy soon to counter pressure on the U.S. economy from the escalating trade war. The S&P 500 index is up about 5% so far for the month.

The Fed’s June 18-19 meeting will give investors an opportunity to see if the Fed’s monetary policy stance is in sync with market expectations for a near-term rate cut.

A Reuters poll this week showed a growing number of economists expect a Fed rate cut this year but the majority still expect it to stay on hold.

“There is a large degree of uncertainty going into next week’s FOMC (Federal Reserve Open Committee) meeting as market reaction will differ significantly depending on whether the Fed hints toward easing policy,” said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.

“A wait-and-see mood is likely to begin prevailing in the markets ahead of the FOMC.”

In commodities, Brent crude futures edged up 0.2% to $61.43 per barrel after rallying 2.3% the previous day.

Brent surged on Thursday after two oil tankers were attacked in the Gulf of Oman, one Norwegian-owned and the other Japanese-owned.

The United States has blamed Iran for the assaults. But U.S. and European security officials as well as regional analysts left open the possibility that Iranian proxies, or someone else entirely, might have been responsible.

U.S. crude slipped 0.13% to $52.21 per barrel after rising more than 2 percent on Thursday.

The dollar index against a basket of six major currencies was little changed at 97.023 after ending the previous day nearly flat, with caution ahead of the next week’s Fed meeting keeping the greenback in a tight range.

The euro was steady at $1.1276 while the greenback dipped 0.1% to 108.300 yen .

The Australian dollar extended overnight losses and fell to a three-week low of $0.6892.

The Aussie has lost 1.4% this week, during which soft domestic labor data added to expectations of a rate cut by the Reserve Bank of Australia.

(Editing by Simon Cameron-Moore & Kim Coghill)

Source: OANN

FILE PHOTO: People walk past PBOC headquarters in Beijing
FILE PHOTO: People walk past the headquarters of the People’s Bank of China (PBOC), the central bank, as two paramilitary police officials patrol around it in Beijing, China November 20, 2013. REUTERS/Jason Lee

June 13, 2019

SHANGHAI/BEIJING (Reuters) – China is expected to adjust money and credit supply in coming weeks, including cuts to interest rates or reserve ratio requirements, to counter “downside risks” if trade tensions escalate further, China Daily said, citing economists.

Stronger measures are required to maintain liquidity in the financial market and support infrastructure investment, the state-controlled newspaper said.

China’s broad money supply and new yuan loans grew more slowly than expected in May, official data on Wednesday showed, giving authorities room move on policy if desired.

Consumer inflation also remained moderate last month, quickening to 2.7%, below the annual official target of around 3%.

PBOC chief Yi Gang said last week that there was “tremendous” room to make policy adjustments if the China-U.S. trade war worsens.

“We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” Yi said.

Last month, the PBOC stepped up efforts to increase loan growth and business activity, announcing a three-phase cut in regional banks’ reserve requirements to reduce financing costs for small and private companies.

It has now delivered six RRR cuts since early 2018.

But the central bank remains reluctant to lower benchmark interest rates on concerns it could risk adding to a mountain of debt and pressure the Chinese yuan, according to analysts, who say adjustments in market interest rates would be considered first.

Citing experts, China Daily said financial institutions were facing tighter liquidity in June, with authorities requiring a higher credit expansion rate in order to meet economic growth targets and issue more bonds to finance new infrastructure.

Further cuts in banks’ reserve requirements are expected this year, especially after an escalation in the U.S.-China trade war last month, when both sides hiked tariffs on each other’s goods and Washington threatened more.

U.S. President Donald Trump on Wednesday declined to set a deadline for levying tariffs on another $325 billion of Chinese goods and called the relationship with Beijing good but “testy”.

Trump, who said he still plans to meet with Chinese President Xi Jinping at a G20 summit later this month, has repeatedly threatened to escalate a months-long trade war by putting tariffs on nearly all of the remaining Chinese imports not already affected by U.S. levies, including products such as cell phones, computers and clothing.

Trump has said previously that he would decide after the G20 meeting in Japan at the end of June whether to carry out his threat.

(Reporting by David Stanway in SHANGHAI and Ryan Woo in BEIJING; Editing by Shri Navaratnam)

Source: OANN

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie

June 13, 2019

By Shrutee Sarkar

BENGALURU (Reuters) – The chances of a Federal Reserve interest rate cut this year have dramatically increased in the past month, according to a Reuters poll of economists who warned trade tensions will intensify and the risk of a U.S. recession has crept up.

Fed Chair Jerome Powell said last week the central bank would act “as appropriate” to address risks from the U.S.-China trade war, leaving the door open for a possible rate cut. That is the second sudden shift in the Fed’s tone after it changed its policy bias away from steady tightening in January.

While many economists now argue the Fed is likely to cut rates this year, some said they were reluctant to change their base case forecasts for the federal funds rate immediately, citing rapidly changing developments on trade talks.

The consensus in the June 7-12 poll of over 100 economists showed the Fed will hold interest rates steady at 2.25-2.50% this year and not cut rates until the third quarter next year – taking the fed funds rate to 2.00-2.25%.

While the latest consensus points to rates on hold this year, 40 of 100 common contributors from last month forecast at least one rate cut at some point in 2019, compared to just eight respondents in the previous poll.

When asked about the probability of one Fed rate cut this year, the median from a smaller sample of economists showed a 55% chance, with the highest at 100%. The probability was a still-high 40% for two rate cuts this year.

“There is a full-blown trade war. This final round of tariffs against China is the big, big concern,” said Scott Brown, chief economist at Raymond James.

“I think there is certainly scope for them to cut rates. If not in June, July is still a strong possibility. But obviously…that it is going to depend on the economic data. If we start to see some strong numbers, it would push that out.”

Interest rate futures markets are already pricing in an 80% chance of a rate cut by July. The dollar is set to maintain its strength for the rest of this year but will come under pressure from the trade war and eventual Fed rate cuts.

The sharp escalation in the U.S.-China trade conflict and U.S. President Donald Trump’s surprise threat of tariffs on Mexico in May fueled recession fears. That has made for the most turbulent month so far this year for stock markets.

While Wall Street has snapped back on optimism over Trump’s decision on Friday to hold off import tariffs on Mexico, over two-thirds of economists who answered an additional question said tensions between the United States and its trading partners would intensify this year.

“Trump is in an ebullient mood, talking up the resilience of the U.S. economy and its ability to withstand any negative fallout from trade tensions,” said James Knightley, chief international economist at ING.

“Yet markets aren’t convinced. Bond yields are plumbing to new lows, equities have dipped and two Fed rate cuts are now priced in for the next 12 months.”

Trump is due to meet Chinese President Xi Jinping at the June 28-29 G20 summit of world leaders in Osaka, Japan.

A PASSING STORM

Indeed, some economists are still clinging to the view this is only a passing storm, and the Fed will resume raising rates next year. Those say they are reluctant to chop their already-modest growth and inflation forecasts.

The growth outlook remained largely unchanged from last month’s poll. The Fed’s preferred measure of inflation, which has remained below the central bank’s target so far this year, was not expected to show any significant pick-up anytime soon, either.

“What we worry about with the point forecasts is not necessarily the outlook for growth, it is the downside risks to growth and the uncertainty – it could be a lot weaker,” said Raymond James’ Brown. “Again, a lot of it hinges on what Trump does with those tariffs.”

With trade tensions expected to intensify this year, the chance of a recession in the next 12 months increased to 30% from 25% the previous month. The chance of a slump in the next two years held at 40%.

More than three-quarters of economists gave a higher probability of a recession or at best kept their views unchanged from last month.

“The probability of a recession has risen,” said Philip Marey, senior U.S. strategist at Rabobank, one of five institutions in the poll which indicated two consecutive quarters of economic contraction at some point in their forecasts.

“An insurance cut in 2019 by the Fed will not be enough. We expect the U.S. economy to fall into recession in the second half of 2020. This will force the Fed to start a full-blown cutting cycle in 2020.”

(Reuters poll graphic on U.S. recession probability: https://tmsnrt.rs/2O50W4M?eikon=true).

(Additional reporting by Manjul Paul; Polling by Nagamani Lingappa and Richa Rebello; Editing by Ross Finley and Andrea Ricci)

Source: OANN

FILE PHOTO: A Union flag hangs across a street of houses in London
FILE PHOTO: A Union flag hangs across a street of houses in London, Britain June 3, 2015. REUTERS/Suzanne Plunkett

June 12, 2019

LONDON (Reuters) – Britain’s Brexit-battered housing market steadied in May and a measure of prices improved as the delay in the country’s European Union exit gave some encouragement to buyers, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors (RICS) house price measure – the difference between members reporting price rises and falls – improved to -10 from -22 in April.

That was its highest reading since October and was stronger than the median forecast of -21 in a Reuters poll of economists.

There were also signs of improvement in agreed sales and new instructions, but there was little sign of a pickup in transactions any time soon, RICS said.

“Much of the anecdotal insight provided by respondents is still quite cautious, reflecting concerns about both the underlying political and economic climate,” said Simon Rubinsohn, RICS’ chief economist.

EU leaders in April granted Britain a delay to its deadline for the leaving the bloc until the end of October.

Britain’s housing market has slowed sharply since the Brexit referendum in June 2016 when RICS’ house price measure stood at +19. But there have been signs in recent months that the market might be bottoming out.

RICS, which said its price index typically has a six-month lead over other measures of house price inflation, said southeast England showed the weakest sentiment on price movements while London appeared to have bounced back a little.

(Reporting by William Schomberg)

Source: OANN

People tour The Shops during the grand opening of The Hudson Yards development in New York
People tour The Shops during the grand opening of The Hudson Yards development, a residential, commercial, and retail space on Manhattan’s West side in New York City, New York, U.S., March 15, 2019. REUTERS/Brendan McDermid

June 12, 2019

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy could increase pressure on the Federal Reserve to cut interest rates this year.

The report from the Labor Department on Wednesday, however, showed some pockets of inflation, with rents and healthcare costs rising solidly, which could buy the U.S. central bank some time before easing monetary policy.

Fed policymakers are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May that has led financial markets to price in at least two interest rate cuts by the end of 2019.

Fed Chairman Jerome Powell said last week that the central bank was closely monitoring the implications of the trade war on the economy and would “act as appropriate to sustain the expansion.” A rate cut is not expected next Wednesday.

The consumer price index edged up 0.1% last month as a rebound in the cost of food was offset by cheaper gasoline, the government said. The CPI gained 0.3% in April.

In the 12 months through May, the CPI increased 1.8%, slowing from April’s 1.9% gain. Economists polled by Reuters had forecast the CPI would rise 0.1% in May and 1.9% year-on-year.

Excluding the volatile food and energy components, the CPI nudged up 0.1% for the fourth straight month. The so-called core CPI was held down by a sharp decline in the prices of used cars and trucks as well as motor vehicle insurance.

In the 12 months through May, the so-called core CPI rose 2.0% after advancing 2.1% in April.

The U.S. dollar dropped sharply against a basket of currencies after the release of the data while U.S. Treasury yields fell. U.S. stock index futures pared losses slightly.

RENT, HEALTHCARE COSTS RISE

A report on Tuesday showing core producer prices advancing solidly for a second consecutive month in May had offered hope for a firmer core CPI reading in May, as well as in the inflation measure tracked by the Fed for monetary policy.

The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.6 percent in the year to April after gaining 1.5% in March. Data for May will be released later this month. The core PCE price index has been running below the Fed’s 2% target this year.

Gasoline prices fell 0.5% in May after rising 5.7% in April. Food prices rebounded 0.3% in May after dipping 0.1% in the prior month. Food consumed at home increased 0.3% last month.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3% in May after rising 0.3% in April.

Healthcare costs increased 0.3%, matching April’s rise. The solid increase in healthcare costs at both the consumer and production levels last month suggests a pickup in the core PCE price index in May.

The cost of hospital services increased 0.5% in May and the cost of doctor visits ticked up 0.1%. But the prices for prescription medication fell 0.2%.

Apparel prices were unchanged in May after tumbling 0.8% in the prior month. They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices.

Prices for used motor vehicles and trucks tumbled 1.4%. That was the largest drop since last September and marked the fourth straight monthly decrease. The cost of motor vehicle insurance fell 0.4%, the most since May 2007. There were also decreases in the cost of recreation.

But prices for airline tickets, household furnishings and new vehicles rose last month. Household furnishings are likely to trend higher in the coming months because of U.S. President Donald Trump’s decision in early May to slap additional tariffs of up to 25% on $200 billion of Chinese goods.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Source: OANN

Traders work on the floor at the NYSE in New York
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 23, 2019. REUTERS/Brendan McDermid

June 12, 2019

By Shreyashi Sanyal

(Reuters) – U.S. stock index futures dropped on Wednesday ahead of inflation data as trade worries returned to the forefront and weighed on sentiment after Washington took a tough stance on its talks with China.

President Donald Trump said he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points, which led the blue-chip Dow index to snap a six-day winning streak on Tuesday.

With under three weeks to go before proposed talks between the United States and Chinese leaders, sources say there has been little preparation for a meeting even as the health of the world economy is at stake.

Trump also said that interest rates were “way too high”, ahead of a reading on U.S. inflation that could shift the odds toward a cut in rates as soon as July.

Hopes that the Federal Reserve will act to counter a slowing global economy due to escalating trade war have spurred a rally in stocks this month, with the S&P 500 index up about 5% so far in June.

Fed policymakers will meet on June 18-19 and markets have priced in at least two rate cuts by the end of 2019. Fed fund futures imply around an 80% chance of an easing as soon as July.

That might change depending on what U.S. consumer price data show at 8:30 a.m. ET. Headline inflation is expected to slow to 1.9%, with the core rate, excluding volatile items such as food and energy, steady at 2.1% on a year-on-year basis for May.

Investors will closely watch the data for further evidence of inflation after U.S. producer prices increased solidly for a second straight month in May, in line with expectations of economists polled by Reuters.

Meanwhile, concerns of a slowdown in China rose as data showed factory inflation slowed in May and the country reported the worst-ever monthly sales drop.

At 7:17 a.m. ET, Dow e-minis were down 63 points, or 0.24%. S&P 500 e-minis were down 6.5 points, or 0.23% and Nasdaq 100 e-minis were down 31.25 points, or 0.42%.

Trade-sensitive Caterpillar Inc dipped 0.1%, while Boeing Co dropped 0.7% in premarket trading.

Chipmakers and semiconductor equipment makers, which get a sizeable portion of revenue from China, declined, with Micron Technology Inc, Nvidia Corp and Applied Materials Inc trading down between 1.6% and 3%.

Qualcomm Inc slipped 4% after smartphone maker LG Electronics Inc and U.S. Federal Trade Commission opposed the chip supplier’s efforts to put a sweeping U.S. antitrust decision on hold.

Medidata Solutions fell 4.3% after France’s Dassault Systemes agreed to buy the U.S. firm focused on clinical trials for $92.25 per share, a discount of 3% to its last close.

(Reporting by Shreyashi Sanyal and Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur)

Source: OANN

FILE PHOTO: A currency dealer works at a dealing room of a bank in Seoul
FILE PHOTO: A currency dealer works in front of electronic boards showing the Korea Composite Stock Price Index (KOSPI) (C), the exchange rates between the Chinese yuan and South Korean won (L), and the exchange rate between U.S. dollar and South Korean won (R), at a dealing room of a bank in Seoul, South Korea, August 25, 2015. REUTERS/Kim Hong-Ji/File Photo

June 12, 2019

By Yena Park and Hideyuki Sano

SEOUL/TOKYO (Reuters) – South Korea’s exposure to a stressed global manufacturing supply chain has knocked its currency – Asia’s most risk sensitive – to over two-year lows as investors use it as a proxy to bet on the economic costs of a protracted U.S.-China trade war.

The won has dropped nearly 6% against the dollar this year, worse than some of its peers, hit also by broader concerns over global growth and growing views the Bank of Korea will soon have to cut rates to support the economy.

As trade tensions flared up between the world’s two largest economies last month and the Chinese yuan threatened to fall past the key 7-per-dollar level, the won slid to near 1,200 per dollar, its lowest since January 2017.

“The won is like a proxy currency to not only global growth sentiment but one that’s also related to U.S.-China trade talks,” said Park Sang-hyun, chief economist at Hi Investment & Securities in Seoul.

“It won’t be easy to keep the dollar/won level of 1,250 should the U.S.-China spat intensify, with possibly additional tariffs, for example.”

The spiraling trade war between Washington and Beijing, which has gone beyond tariffs to company blacklists and travel restrictions, makes that scenario highly plausible.

U.S. President Donald Trump has said he expects to meet Chinese President Xi Jinping at the G20 leaders’ summit in Osaka later this month, after bilateral trade talks ended in a stalemate in May, but China has not confirmed any such meeting.

Trade war damage and a softening in global demand will make 2019 the worst year for trade since the financial crisis a decade ago, with only 0.2% growth, said economists at ING.

That’s rough on trade-dependent economies such as South Korea, whose currency has borne the brunt despite heavy verbal and dollar-supplying intervention by the authorities.

Market participants believe South Korean authorities stepped in recently to stop the won from crossing the 1,200-per-dollar mark, considered a psychologically important threshold.

A policy source told Reuters the authorities weren’t trying to defend specific levels but said: “You can’t completely ignore where the rate stands when market players take a certain level as a particularly significant one.”

YUAN PROXY

As was the case in 2015, the won has proven to be the most correlated and liquid proxy for the Chinese currency. Then, it fell nearly 15% in just over a year against the dollar during the turmoil around the yuan’s devaluation.

“Clearly the Korean won lends itself to trading because of its liquidity and because it’s so obviously linked to the supply chain,” said Claudio Piron, a strategist with BofAML in Singapore.

He expects the won will fall to the weaker side of 1,200 “if there is no trade deal and dollar/yuan goes above 7”.

South Korea’s semiconductor products, its biggest export segment, will be hurt by the U.S. ban on Chinese telecom giant Huawei Technologies. China is South Korea’s largest trading partner.

Korea’s semiconductor exports in May plummeted 30% from a year earlier, the biggest fall since 2009, while its current account surplus – about 5% of GDP last year – shrunk.

(GRAPHIC: South Korea current account balance – https://tmsnrt.rs/2QVCNPM)

(GRAPHIC: South Korea’s semiconductor exports – https://tmsnrt.rs/2R1AuuA)

Making matters worse, fund managers have been selling South Korean shares as they adjust for a rise in Chinese equity weightings in MSCI’s emerging markets index. May saw about 2.5 trillion won ($2.1 billion) of non-resident funds pulled out of Seoul’s main stock exchange.

As much as $3.5 billion of passive investment is expected to flow out of Korean shares in total as a result of the MSCI index adjustments this year, KB Securities in Seoul estimates.

One source of reprieve for Korean markets could be easier U.S. and Chinese monetary policy. In the longer term, markets will also bounce back if a Sino-U.S. trade deal is reached.

“Markets will likely conclude that they have over-reacted a bit to the headline on U.S.-China economic spats,” said Kenji Hashizume, a senior fund manager at Sumitomo Mitsui DS Investments in Hong Kong.

“It’s not like demand for 5G and IoT (internet of things) will completely disappear. Even if one company gets excluded from the market, that does not mean the end of the story,” he said.

(Writing by Hideyuki Sano; Editing by Vidya Ranganathan and Jacqueline Wong)

Source: OANN

A worker is seen in front of facilities and chimneys of factories at the Keihin Industrial Zone in Kawasaki
FILE PHOTO: A worker is seen in front of facilities and chimneys of factories at the Keihin Industrial Zone in Kawasaki, Japan September 12, 2018. REUTERS/Kim Kyung-Hoon

June 12, 2019

TOKYO (Reuters) – Japan’s core machinery orders rose 5.2% in April from the previous month, up for a third straight month, government data showed on Wednesday, in a sign business spending remains resilient despite a simmering trade war and global slowdown.

The rise in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, compared with economists median estimate of a 0.8% decline in a Reuters poll.

Compared with a year earlier, core orders, which exclude those of ships and electricity utilities, rose 2.5% in April, versus a 5.3% drop seen by economists, the Cabinet Office data showed.

(Reporting by Tetsushi Kajimoto; Editing by Chang-Ran Kim)

Source: OANN

FILE PHOTO: Benoit Coeure, board member of the European Central Bank (ECB), is photographed during an interview with Reuters at ECB headquarters in Frankfurt
FILE PHOTO: Benoit Coeure, board member of the European Central Bank (ECB), is photographed during an interview with Reuters at ECB headquarters in Frankfurt, Germany, May 17, 2017. REUTERS/Kai Pfaffenbach/File Photo

June 11, 2019

By Giselda Vagnoni

ROME (Reuters) – Italy is ready to back a French candidate to lead the European Central Bank as part of its plan to ensure Rome retains a seat on the ECB executive board once Italian chief Mario Draghi steps down this year, a government source in Rome said.

Draghi ends his eight-year mandate in October and cannot be renewed in the job, potentially leaving Italy without board representation unless someone from France or Germany, the other big euro-zone powers already on the board, takes the top job.

According to unwritten rules, Italy, France and Germany are de facto entitled to seats but are allocated only one each on the six-member executive board.

If a French or a German were to succeed Draghi, either country would have to relinquish its existing seat, opening up an automatic vacancy for Italy.

Rome would prefer a French candidate – central bank chief Francois Villeroy de Galhau or current ECB board member Benoit Coeure – rather than Bundesbank chief Jens Weidmann to take the top job, the source said.

That is because of the German candidate’s previous criticism of ECB bond purchases. Buying up state bonds were part of Draghi’s “whatever it takes” stimulus drive that helped heavily indebted Italy through the global financial crisis.

“We will support a French candidate in order to get a seat for Italy,” said the source, who declined to be named.

However, the candidate considered most likely to clinch the top job is former Finnish central bank chief Erkki Liikanen or the incumbent Bank of Finland boss, Olli Rehn.

Given Finland is not currently represented on the executive board, that outcome could leave Italy out in the cold at least until end-2020 when the next vacancy comes up.

Any Italian-French deal over ECB seats would contrast with recently strained relations between the two countries.

Italy’s populist government has been an outspoken critic of centrist French President Emmanuel Macron. Paris recalled its Italy ambassador in February after the leader of one of Rome’s ruling parties met “yellow vest” anti-government protest leaders in France.

However, the government source said Rome was prepared to bury its anti-Macron rhetoric to clinch French support for continued Italian representation on the board, which plays a central role in setting interest rate policy for the 19-nation euro zone.

A recent Reuters survey of economists found that France’s Coeure was considered the best-qualified candidate.

(Editing by Mark Bendeich and Balasz Koranyi; Editing by Mark Heinrich)

Source: OANN

Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia
FILE PHOTO: Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States’ largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela

June 11, 2019

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices increased solidly for a second straight month in May, boosted by a surge in the cost of hotel accommodation and gains in a range of other services, pointing to a steady pickup in underlying inflation pressures.

The report from the Labor Department on Tuesday likely supports the Federal Reserve’s view that the recent weak inflation readings are probably transitory.

Fed policymakers are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May that have led financial markets to price in at least two interest rate cuts by the end of 2019.

Fed Chairman Jerome Powell said last week that the U.S. central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.” A rate cut is, however, not expected next Wednesday.

Producer prices excluding food, energy and trade services rose 0.4% last month, matching April’s gain, the government said. The so-called core PPI increased 2.3% in the 12 months through May after rising 2.2% in April.

Weaker energy and food prices, however, partially offset the increase in services last month. That led the producer price index for final demand to edge up 0.1% in May after gaining 0.2% in April. In the 12 months through May, the PPI climbed 1.8%, slowing from April’s 2.2% advance.

Economists polled by Reuters had forecast the PPI would nudge up 0.1% in May and rise 2.0% on a year-on-year basis.

U.S. Treasury yields ticked up and the dollar rose to a session high against a basket of currencies after the release of the data. U.S. stock index futures were trading higher.

FOOD PRICES FALL

The services-led increase in the core PPI last month is likely to translate into a slightly higher reading for other underlying inflation measures in May. According to a Reuters survey of economists, core consumer prices probably increased 0.2% last month after nudging up 0.1% in April. The consumer price data will be published on Wednesday.

The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.6 percent in the year to April after gaining 1.5% in March. Data for May will be released later this month.

In May, wholesale energy prices fell 1.0% after rising 1.8% in the prior month. Goods prices slipped 0.2% last month after gaining 0.3% in April.

Wholesale food prices fell 0.3% in May. Core goods prices were unchanged for a second straight month. Prices for hotel accommodation surged 10.1% in May, the most since April 2009.

That accounted for nearly 80 percent of the rise in services prices in May. Services prices rose 0.3% after gaining 0.1% in April.

The cost of healthcare services increased 0.2% last month after increasing 0.3% in April. There were increases in the prices for both inpatient and outpatient care last month. Those healthcare costs feed into the core PCE price index.

There were also gains in prices for passenger transportation and portfolio management.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Source: OANN

FILE PHOTO: FILE PHOTO: Federal Reserve Board Chairman Jerome Powell holds a news conference in Washington
FILE PHOTO: Federal Reserve Board Chairman Jerome Powell speaks at his news conference following the closed two-day Federal Open Market Committee meeting in Washington, U.S., May 1, 2019. REUTERS/Yuri Gripas/File Photo/File Photo

June 11, 2019

By Howard Schneider

WASHINGTON (Reuters) – U.S. President Donald Trump’s attacks on the Federal Reserve have broken one set of precedents, his talk of stacking the central bank with political allies has strained another, and his on-again off-again tariff threats have made the economic outlook harder than ever to predict.

While the Fed may well find reason to cut interest rates in recent weak job and inflation readings, doing so could also put a safety net under Trump policies that, to the eyes of many policymakers, have to date done more harm than good.

“There is a kind of feed the beast aspect to it,” said former Fed vice chair Alan Blinder. “Among the many things the Fed has to take as given is trade policy. And if in fact trade policy is going to push the economy into a slump, that is a reason to cut interest rates … If the Fed comes in to bail him out you encourage bad behavior.”

Fed Chair Jerome Powell and other officials insist they can only consider what is happening in the economy and the appropriate policy response, and not try to second guess what the administration does or might do.

Trump on Monday renewed his attacks on the Fed, claiming that central bank policy put him at a disadvantage in his trade negotiations with China because that country, with closer political control of its central bank, could devalue its currency or use other tools to offset the tariffs Trump has imposed on Chinese imports.

“Our Fed is very destructive to us… They haven’t listened to me,” Trump said in a CNBC interview. “They’re not my people.”

In fact, Trump elevated Powell to the Fed leadership and appointed three of the other four sitting Fed governors.

Trump has for a year berated the Fed for raising rates and other policy steps that Fed officials say are the best way for keeping the recovery under way. That broke a roughly 30-year run of presidents largely staying away from specific policy recommendations for the Fed, even if they were sometimes generically critical of the central bank.

Earlier this year, Trump threatened a fuller assault by considering the appointment of two highly partisan political allies to the central bank, straying from a tradition of more technocratic appointments.

The surprise announcement in early May of higher tariffs on China and a threatened imposition of levies on Mexican imports added to the minefield the Fed must now navigate.

Though Trump in the end chose not to impose the tariffs on Mexico, the prospect of using an economic lever for the non-economic end of border control showed how in the Trump era policy could shift abruptly for central bankers who try to keep their focus on medium- and longer-term outcomes.

“We take all kinds of things…into account,” St. Louis Fed President James Bullard said last week before Trump called off the Mexican tariffs. “There are some good policies in there. There may be some bad policies in there. But we have to take everything into account.”

NOT IN A BOX

Recent economic data are already complicating the Fed’s job. Policymakers have expected the economy to slow, but also regarded the likely slowing as modest, and not enough to warrant a rate cut.

The story shifted after Trump’s latest trade war salvo.

“I don’t feel backed into a box,” to cut rates, Dallas Federal Reserve bank president Robert Kaplan said last week. But “in the month of April I might have said … I was a little more optimistic that the outlook was firming, and today I will tell you I am more cognizant of risks to the downside. That is a pretty big change in a relatively short amount of time.”

Whether it is enough for the Fed to put a rate cut squarely on the table will become clearer next week. Fed officials will hold their policy meeting on Tuesday and Wednesday, and issue updated rate projections. They will also have to decide whether to maintain their “patient” approach to changing rates from the current range of between 2.25% and 2.5%, or drop that description in a sign that they are open to a move sooner rather than later.

Weak inflation readings like those in a New York Fed report on Monday have already led Bullard to say that a rate reduction was “warranted.” [nL2N23H0PS]

Analysts and markets, though, are split.

Bond markets have been aggressive in pricing in lower rates later this year, and U.S. stocks have rallied hard in the past week on optimism that a rate cut looked more likely, especially after last week’s weak jobs report. Economists at Goldman Sachs and elsewhere, meanwhile, have discounted any pressure from Trump and argue the economic outlook does not yet warrant a rate cut.

Rolling with the punches from political Washington is nothing new. Former Fed chair Ben Bernanke complained when congressional spending caps reduced economic growth just as the U.S. recovery was getting traction and the eurozone was threatening to crack apart.

This problem here is different, though, with the Fed both under political pressure and less certain, week to week, what actions of the White House they may have to take into account.

After years in which U.S. central bankers bemoaned being “the only game in town” influencing the economy, they may now be nostalgic for those simpler times.

“The Fed has had too much on its plate for a long time,” said Boston College economics professor Peter Ireland. “Powell was taking pains to say ‘trade is trade’ and that is not our business. But he has gotten sucked into it.”

(Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci)

Source: OANN

FILE PHOTO: Workers are seen crossing the Millennium Bridge, with St Paul's Cathedral seen behind during the morning rush hour in London
FILE PHOTO: Workers are seen crossing the Millennium Bridge, with St Paul’s Cathedral seen behind, during the morning rush hour in London, Britain, September 25, 2018. REUTERS/Toby Melville/File Photo

June 11, 2019

LONDON, (Reuters) – British wages in the three months to April grew faster than expected and hiring slowed less sharply, as the jobless rate held at its lowest rate since 1975, official figures showed on Tuesday.

Total earnings growth, including bonuses, rose by an annual 3.1% in the three months to April, official data showed, slowing from 3.3% in March but beating the median forecast of 3.0% in a Reuters poll of economists, the Office for National Statistics said.

Excluding bonuses, which smooths out some volatility, pay growth picked up to 3.4% from 3.3%, beating all forecasts and boosted by a 3.8% annual jump in pay for April alone, the largest single-month rise since May 2008.

“Overall, the labour market continues to be strong,” ONS statistician Matt Hughes said.

Britain’s labour market has performed robustly since Britain voted to leave the European Union in June 2016, in contrast to other parts of the economy which have suffered from uncertainty about the timing and terms on which Britain will leave.

Official figures on Monday showed the economy shrank by 0.4% in April, its biggest monthly drop since 2016.

The unemployment rate remained at 3.8% as expected, its joint-lowest since the three months to January 1975, and the absolute number of people out of work dropped by 34,000 to 1.304 million.

The number of people in employment rose by 32,000 to 32.746 million, the smallest increase since the three months to August last year, as employers increasingly say it is hard to find staff.

The BoE last month said it expected wage growth of 3% at the end of this year.

But it sees Britain’s hiring spree as a reflection of how many firms have opted to take on workers rather than commit to longer-term investments.

(Reporting by David Milliken and Jonathan Cable)

Source: OANN

A logo of Turkey's Central Bank is pictured at the entrance of the bank's headquarters in Ankara
FILE PHOTO: A logo of Turkey’s Central Bank (TCMB) is pictured at the entrance of the bank’s headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas

June 10, 2019

By Behiye Selin Taner

ISTANBUL (Reuters) – Turkey’s central bank is expected to leave its key interest rate unchanged at 24% this week, though a Reuters poll suggested the first policy change since September was getting closer, with two of 16 economists predicting a cut.

The central bank hiked its policy rate by 11.25 percentage points to 24% last year to battle a currency crisis and stem an inflation spike, and has left it there since September.

The Turkish lira lost nearly 30% of its value last year, causing import prices to surge and stoking inflation which hit a 15-year high of more than 25%. Inflation has since eased to just below 19%, even while a renewed bout of selling has hit the lira since late March.

Fourteen economists in a Reuters poll on Monday predicted that the central bank will not change its one-week repo rate at a Wednesday policy meeting. One economist predicted that it will lower the rate to 23.5%, while another estimated that it will be cut to 23.25%.

In the previous Reuters poll in April, three economists expected a cut in June.

Haluk Burumcekci, of Burumcekci Consulting, who predicted a 75 basis point cut cited the lira’s recent gains against the dollar, an expected sharp decline in inflation in coming months and expectations of rate cut from the U.S. Federal Reserve.

“When all these developments come together, I would think the Turkish central bank would start rate cuts as of June,” he said.

The median estimate in the Reuters poll for the central bank’s year-end policy rate stood at 21.5%, unchanged from April, with forecasts ranging between 17.5% and 24%.

Expectations of the timing of the first rate cut differed among respondents. While the two economists expected the first cut to come this week, five expected it in July, three in September, two in October and one each in January 2020 and March 2020.

Muhammet Mercan, ING Bank chief economist, said in a note that a rate cut is not expected this week because of a deterioration in the government’s budget performance this year, a trend of dollarization in deposits and difficult inflation dynamics.

“Despite improving pricing pressure and the recent (lira) strength, the (central bank) will likely maintain the current policy stance and avoid any premature policy rate adjustment to maintain price stability and support financial stability,” he said.

The central bank will announce its policy rate decision on June 12 at 1100 GMT.

(Writing by Ali Kucukgocmen; Editing by Jonathan Spicer)

Source: OANN

A Russian flag flies over Russian Central Bank headquarters in Moscow
A Russian flag flies over Russian Central Bank headquarters in Moscow, Russia December 3, 2018. REUTERS/Maxim Shemetov

June 10, 2019

By Andrey Ostroukh and Elena Fabrichnaya

MOSCOW (Reuters) – The Russian central bank is expected to cut interest rates on Friday, opening the door for a further easing cycle later this year amid slowing economic growth and inflation, a Reuters poll showed on Monday.

Twenty-nine analysts and economists who took part in the poll predicted that the central bank will cut the key rate to 7.50% at the upcoming board meeting. Three expected the rate to remain unchanged at 7.75%.

Expectations for a rate cut, which would be the first since March 2018, were bolstered last week by Governor Elvira Nabiullina, who said the board of directors was considering lowering rates, among other options.

Previously, the central bank signaled it was ready for a cut as early as in the second quarter, after inflation, its main remit, had peaked and was on track to slow to the 4% target within a year.

“The central bank of Russia will embark on monetary easing cycle this summer,” said Andrei Melaschenko, an economist at Renaissance Capital. “A limited inflation pace, stabilized inflationary expectations among households and limited consumer demand growth all speak for that.”

The bond market is already pricing in a cut in the key rate, the main gauge of the cost of lending in the economy.

Yields of 10-year OFZ treasury bonds fell to 7.70%, their lowest since August 2018. Investors tend to buy government bonds when they expect the central bank to lower rates as cuts drive yields of bonds lower and, simultaneously, push their prices up.

The next rate cut is likely to take place at one of the board meetings in the second half of 2019, according to a Reuters monthly economic poll carried out in late May.

Analysts who predicted the on-hold decision for this Friday cited lingering risks and uncertainties on the global market.

“Taking into account the trade row between the United States and China, a rate cut could be premature as, if develops in a negative way, it could boost capital outflow from the Russian market and add pressure on financial stability,” said Vladimir Tikhomirov, chief economist at BCS Brokerage.

The central bank will announce its rate decision at 1030 GMT on Friday, and Nabiullina will shed more light on the bank’s decision and outlook at a media conference scheduled for 1200 GMT.

(Writing by Andrey Ostroukh, editing by Larry King)

Source: OANN

A Russian flag flies over Russian Central Bank headquarters in Moscow
A Russian flag flies over Russian Central Bank headquarters in Moscow, Russia December 3, 2018. REUTERS/Maxim Shemetov

June 10, 2019

By Andrey Ostroukh and Elena Fabrichnaya

MOSCOW (Reuters) – The Russian central bank is expected to cut interest rates on Friday, opening the door for a further easing cycle later this year amid slowing economic growth and inflation, a Reuters poll showed on Monday.

Twenty-nine analysts and economists who took part in the poll predicted that the central bank will cut the key rate to 7.50% at the upcoming board meeting. Three expected the rate to remain unchanged at 7.75%.

Expectations for a rate cut, which would be the first since March 2018, were bolstered last week by Governor Elvira Nabiullina, who said the board of directors was considering lowering rates, among other options.

Previously, the central bank signaled it was ready for a cut as early as in the second quarter, after inflation, its main remit, had peaked and was on track to slow to the 4% target within a year.

“The central bank of Russia will embark on monetary easing cycle this summer,” said Andrei Melaschenko, an economist at Renaissance Capital. “A limited inflation pace, stabilized inflationary expectations among households and limited consumer demand growth all speak for that.”

The bond market is already pricing in a cut in the key rate, the main gauge of the cost of lending in the economy.

Yields of 10-year OFZ treasury bonds fell to 7.70%, their lowest since August 2018. Investors tend to buy government bonds when they expect the central bank to lower rates as cuts drive yields of bonds lower and, simultaneously, push their prices up.

The next rate cut is likely to take place at one of the board meetings in the second half of 2019, according to a Reuters monthly economic poll carried out in late May.

Analysts who predicted the on-hold decision for this Friday cited lingering risks and uncertainties on the global market.

“Taking into account the trade row between the United States and China, a rate cut could be premature as, if develops in a negative way, it could boost capital outflow from the Russian market and add pressure on financial stability,” said Vladimir Tikhomirov, chief economist at BCS Brokerage.

The central bank will announce its rate decision at 1030 GMT on Friday, and Nabiullina will shed more light on the bank’s decision and outlook at a media conference scheduled for 1200 GMT.

(Writing by Andrey Ostroukh, editing by Larry King)

Source: OANN

A construction worker works on a new house being built in a suburb located north of Toronto
FILE PHOTO: A construction worker works on a new house being built in a suburb located north of Toronto in Vaughan, Ontario Canada, June 29, 2015. REUTERS/Mark Blinch/File Photo

June 10, 2019

TORONTO (Reuters) – Canadian housing starts fell in May compared with the previous month as groundbreaking tumbled by 18.5% on multiple unit urban homes, data from the national housing agency showed on Monday.

The seasonally adjusted annualized rate of housing starts fell to 202,337 units in May from a revised 233,410 units in April, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected starts to fall to 205,000.

(Reporting by Fergal Smith)

Source: OANN

Workers assemble cars at the plant for the Mini range of cars in Cowley, near Oxford
Workers assemble cars at the plant for the Mini range of cars in Cowley, near Oxford, Britain June 20, 2016. REUTERS/Leon Neal/Pool

June 10, 2019

LONDON, (Reuters) – Britain’s economy contracted sharply in April after the biggest fall in car production since records began, as manufacturers were unable to reverse closures planned for when they had expected Britain to leave the EU.

Early in 2019 many motor manufacturers had announced temporary shutdowns in Britain for April, in anticipation of trade disruption around the time Britain was due to leave the European Union on March 29.

In the event, Prime Minister Theresa May delayed departure with just days to go and subsequently set a new date of Oct. 31 — but this was too late for businesses to change their plans.

Britain’s economy overall contracted by 0.4% in April after a 0.1% decline in March, the Office for National Statistics said on Monday, a bigger drop than any economist had forecast in a Reuters poll last week.

Growth in the three months to April slowed to 0.3% from 0.5% in the first quarter of 2019, also a sharper deceleration than most economists had expected, while the annual growth rate fell to 1.3%.

But this masked a far bigger impact for the manufacturing sector, which shrank by 3.9% on the month in April, the biggest fall since June 2002.

Car production in April fell 24% on the month, the biggest drop since records began in 1995, and the broader category of ‘transport equipment’ showed its largest drop since 1974.

“GDP growth showed some weakening across the latest three months with the economy shrinking in the month of April, mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns,” ONS statistician Rob Kent-Smith said.

Monday’s data confirm that the economy is slowing after receiving a bigger-than-expected boost in the first three months of 2019 from businesses stockpiling ahead of a Brexit that never came.

The Bank of England forecast last month that GDP growth would slow to 0.2% during the three months to June from 0.5% in the first-quarter of the year, though on Saturday its chief economist Andy Haldane wrote that he still expected “solid” growth of 1.5% for 2019 overall.

Britain’s economy has lost momentum since 2016’s Brexit referendum – before which growth would typically exceed 2% a year – but the job market has strengthened and Haldane said the time for another rate rise was approaching.

This stance contrasts with the view in markets, where concerns about the impact of trade conflict between the United States and China have intensified, alongside the risk that Britain could face a disruptive departure from the EU on Oct. 31.

May’s purchasing managers’ index (PMI) surveys pointed to the economy being close to stagnation, although they were similarly gloomy in the first quarter when official data turned out strong, despite businesses’ concerns about Brexit.

(Reporting by David Milliken and Alistair Smout)

Source: OANN

Men sleep in a supply truck loaded with sacks of cauliflower at a vegetable wholesale market in Mumbai
Men sleep in a supply truck loaded with sacks of cauliflower at a vegetable wholesale market in Mumbai, India, February 14, 2019. REUTERS/Francis Mascarenhas

June 10, 2019

By Tushar Goenka

BENGALURU (Reuters) – India’s retail inflation likely accelerated to a seven-month high in May on rising food prices, but it is expected to remain well below the Reserve Bank of India’s target, giving it room to ease policy further, a Reuters poll found.

The RBI changed its stance to “accommodative” from “neutral” last week and cut interest rates for the third time in a row, bringing the borrowing rate to a nine-year low of 5.75%.

According to a June 4-7 Reuters poll of over 40 economists, the retail inflation rate rose to 3.01 percent in May from a year earlier, up from 2.92 percent in April. Forecasts ranged between 2.83-3.50%.

If the consensus forecast is met, consumer prices will rise at their fastest pace since October, but would still be lower than the central bank’s medium-term target for a 4.0% increase for a tenth consecutive month.

Food prices have steadily risen since March after contracting from October 2018-February 2019. Food prices constitute nearly half of India’s inflation basket.

“The uptick in retail inflation is because of higher vegetable prices,” said Sameer Narang, chief economist at Bank of Baroda.

“Pre-monsoon rains have been delayed and are below normal. It has put sowing a bit behind (schedule) because of which productivity will be low, pushing prices higher.”

In a country where agriculture largely relies on rain instead of irrigation, a weak monsoon can lead to a sharp rise in food prices.

The RBI also highlighted that risk last week and raised its inflation forecasts for the first half of the current fiscal year.

But core inflation, which excludes volatile components like food and energy, has been on a downward trajectory since February, suggesting weakness in economic activity.

In the January-March quarter, India’s economic growth slowed more sharply than expected to 5.8% – lagging China’s pace for the first time in nearly two years – raising the prospect of fiscal stimulus and further policy easing.

“The weaker-than-expected GDP spooked the MPC, with all six members voting to cut. It’s now more than clear that the MPC under Governor Shaktikanta Das cares more about lifting economic growth than keeping strictly to the RBI’s fledging inflation targeting framework,” noted Miguel Chanco, senior Asia economist at Pantheon.

But Vishnu Varathan, an economist at Mizuho Bank, was not convinced interest rate cuts are the only solution when the risk to inflation is skewed to the upside.

    “I would be a lot more consoled if one more rate cut is accompanied by a lot of efforts to improve policy transmission rather than cutting and using the knife as the only tool,” he said.

(Polling by Anisha Sheth and Khushboo Mittal; Editing by Kim Coghill)

Source: OANN

FILE PHOTO: Bundles of Mexican Peso banknotes are pictured at a currency exchange shop in Ciudad Juarez
FILE PHOTO: Bundles of Mexican Peso banknotes are pictured at a currency exchange shop in Ciudad Juarez, Mexico January 15, 2018. REUTERS/Jose Luis Gonzalez/File Photo

June 10, 2019

By Daniel Leussink

TOKYO (Reuters) – The Mexican peso jumped against the dollar early in Asia on Monday after the United States and Mexico struck a migration deal late last week to avert a tariff war, providing much-needed relief to fragile market sentiment.

Over the past year, trade disputes between the United States and its trading partners, including a long-running conflict with China, have slowed global growth and unsettled financial markets.

Group of 20 finance leaders on Sunday said that trade and geopolitical tensions have “intensified”, raising risks to improving global growth, but they stopped short of calling for a resolution of the deepening U.S.-China trade conflict.

The Mexican peso rose as much as 2% against the dollar as trading resumed for the first time after Mexico agreed on Friday to expand along the entire border a program that sends migrants seeking asylum in the United States to Mexico. The peso was last up 1.65% at 19.30 pesos per dollar.

U.S. President Donald Trump had threatened to impose 5% import tariffs on all Mexican goods starting on Monday if Mexico did not commit to do more to tighten its borders.

“We all knew that Donald Trump was unpredictable, but this was taking it to a whole new level,” said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.

“This was political, it was social. It meant that financial markets had to wear a higher risk premium.”

Against the safe-haven yen, the dollar gained 0.2% to 108.425 yen.

The Japanese currency tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation.

Futures for the S&P 500 were last up nearly half a percent.

Still, the dollar’s gains were checked by rising expectations the Federal Reserve will cut interest rates during the second half of the year.

Those views were bolstered on Friday when data showed nonfarm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists in a Reuters poll, suggesting the loss of momentum in economic activity was spreading to the labor market.

Fed funds rate futures are still pricing in more than two 25-basis point rate hikes by the end of this year even after their retreat early on Monday after the U.S.-Mexico migration deal.

“The market is saying it is not a question of if, it is a question of when, and to what extent, we’re going to get a rate cut for this year,” said Pepperstone’s Weston.

Against a basket of six peers, the dollar rose 0.2% to 96.716, recovering slightly after ending with a 1.2% loss last week, its worst weekly performance since the week of Feb. 16 last year.

Elsewhere in the currency market, the euro edged down 0.1% to $1.1318, retreating from an 11-week high of $1.1348 touched on Friday.

The Australian dollar was down a shade at $0.6995, giving up some of last week’s gains, when it rose 0.9%.

(Graphic: World FX rates in 2019 – http://tmsnrt.rs/2egbfVh)

(Editing by Shri Navaratnam)

Source: OANN

FILE PHOTO: Traders work on the floor at the NYSE in New York
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., June 3, 2019. REUTERS/Brendan McDermid/FIle Photo

June 9, 2019

By Hideyuki Sano

TOKYO (Reuters) – U.S. stock futures jumped on Monday after a migration deal between the United States and Mexico late last week to avert a tariff war added to a weak U.S. job data which cemented expectations of Federal Reserve rate cuts.

S&P500 mini futures rose 0.6% in early trade while Japan’s Nikkei looks set to gain 1.5 percent, based on Chicago-listed futures price.

U.S. Treasuries futures dropped 13/32 in price while U.S. interest rate futures gave back gains made after Friday’s soft payroll data.

The Mexican peso jumped more than 1.5 percent in early Monday trade to 19.2895 on the dollar after the migration deal between U.S. and Mexican negotiators removed President Donald Trump’s threatened tariffs on goods from Mexico for now.

The improved risk sentiment also helped lift the dollar against the yen 0.2% to 108.45 yen.

“The deal with Mexico is boosting sentiment while expectations of U.S. rate cuts will be also supporting share prices,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

“Still, with limited progress seen so far in U.S-China trade talks, the most important issue for markets, stock prices will be able to rise only so much,” he added.

On the whole, the dollar was undermined by rising expectations the Fed will cut rates in coming months.

A U.S. Labor Department report showed nonfarm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists in a Reuters poll, suggesting the loss of momentum in economic activity was spreading to the labor market.

The Fed funds rate futures are still pricing in more than two 25-basis point rate cuts by the end of this year even after their retreat early on Monday following the U.S.-Mexico deal.

The euro was little changed at $1.1329 near a 2-1/2-month high of $1.1348 touched on Friday. The common currency held firm near five-month highs against sterling at 88.965 pence.

The offshore Chinese yuan traded at 6.9385 yuan per dollar, having hit a seven-month low of 6.9616 on Friday.

China’s trade data due later in the day will be keenly watched for the impact of intensifying frictions between Washington and Beijing.

Group of 20 finance leaders on Sunday said that trade and geopolitical tensions have “intensified”, raising risks to improving global growth, but they stopped short of calling for a resolution of the deepening U.S.-China trade conflict.

(Graphic: Asian stock markets – https://tmsnrt.rs/2zpUAr4)

(Editing by Shri Navaratnam)

Source: OANN

FILE PHOTO: Workers pour cement at a construction site for an office town in downtown San Diego
FILE PHOTO: Workers pour cement at a construction site for an office town in downtown San Diego, California, U.S., April 23, 2019. REUTERS/Mike Blake

June 7, 2019

By Jason Lange

WASHINGTON (Reuters) – Weak U.S. hiring data led investors to raise bets on Friday the U.S. Federal Reserve will cut interest rates later this year to stave off a recession. Is the U.S. economy really showing signs of rolling over?

Maybe not. A range of U.S. economic data, including the hiring report released on Friday, point to cooling growth rather than recession. At least for now.

To be sure, recessions are notoriously hard to predict and the Fed may yet decide that interest rates are too high. But several economic gauges widely seen as leading indicators are not yet flashing red.

For example, a rapid rise in the number of Americans filing initial claims for unemployment benefits often happens when a recession is brewing. While the Labor Department’s data on new claims can be volatile, it has the advantage of being updated just one week after workers file their claims. For a few months beginning last September, the data appeared to be on a worrisome upward trend. But new claims have fallen since February and the trend over the last eight months looks about flat, pointing to a generally stable labor market.

(GRAPHIC: Stable benefits link: https://tmsnrt.rs/2QTV4wE).

U.S. employment growth last month, while it slowed considerably from April, was still up a historically solid 1.6 percent from May 2018. Economists also like to look at three-month moving averages for job growth to smooth out volatility. Job growth has slowed at a more severe level several times in recent years without leading to a recession.

(GRAPHIC: Job growth link: https://tmsnrt.rs/2QR7QvO).

For many economic observers on recession watch, a key concern is that a slowing global economy and U.S. trade conflicts with China and Mexico will hit U.S. factories, triggering weakness in the broader economy. But a closely watched gauge of growth in U.S. manufacturing continues to point toward growth. True, this index of sentiment at factory purchasing measures has deteriorated since August. But the downward movement does not look out of place from the ebb and flow of strength in the sector since the last recession.

(GRAPHIC: Ebb and flow link: https://tmsnrt.rs/2QVmyCa).

(Reporting by Jason Lange; Editing by Leslie Adler)

Source: OANN

Traders work on the floor at the NYSE in New York
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., June 5, 2019. REUTERS/Brendan McDermid

June 7, 2019

By Amy Caren Daniel and Sruthi Shankar

(Reuters) – Wall Street’s main indexes rose 1% on Friday, as a sharp slowdown in May domestic job growth raised hopes of an interest rate cut, while Washington’s decision to delay tariffs on Chinese goods added to the upbeat mood.

The S&P 500 is up 4.8% this week, putting it on pace for its best weekly gain since November, on rising expectations that the Fed would turn more accommodative to blunt the impact of escalating trade tensions.

A Labor Department report showed nonfarm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists in a Reuters poll, suggesting the loss of momentum in economic activity was spreading to the labor market.

“We’ve seen a bit of slowing in jobs growth which will embolden those in the rate cut camp,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

Following the week jobs data, traders raised their bets that the Federal Reserve will start cutting rates in July followed by two more rate cuts before the end of the year.

Interest-rate sensitive bank stocks fell 0.40%, but the broader financial sector reversed course to trade marginally higher.

Also helping sentiment, the United States officially granted Chinese exporters two more weeks to get their products into the country before increasing tariffs, according to a U.S. government notice posted online.

“The market is just so sensitive to trade right now that anything that looks positive will have an upsized reaction,” Antonelli said.

Tariff-sensitive Boeing Co and Caterpillar Inc rose about 1%, while industrial stocks gained 1.2%.

At 10:58 a.m. ET, the Dow Jones Industrial Average was up 336.05 points, or 1.31%, at 26,056.71. The S&P 500 was up 38.85 points, or 1.37%, at 2,882.34 and the Nasdaq Composite was up 139.87 points, or 1.84%, at 7,755.42.

On the tussle with Mexico, a senior White House official said if talks continue to go well President Donald Trump could decide not to move forward with tariffs on Mexican imports on Monday.

All the major S&P sectors were trading higher and the technology sector, among the hardest hit due to the recent escalation in trade tensions, rose 2.3% and provided the biggest boost.

Beyond Meat Inc shares surged 32.5% after the maker of plant-based burgers and sausages said it expects to more than double its revenue and report breakeven EBITDA this year.

Advancing issues outnumbered decliners by a 5.23-to-1 ratio on the NYSE and by a 2.72-to-1 ratio on the Nasdaq.

The S&P index recorded 107 new 52-week highs and no new low, while the Nasdaq recorded 84 new highs and 59 new lows.

(Reporting by Amy Caren Daniel and Sruthi Shankar in Bengaluru; Additional reporting by Shreyashi Sanyal; Editing by Sriraj Kalluvila)

Source: OANN

Mexico's Foreign Minister Ebrard speaks to reporters after U.S.-Mexico talks at State Department in Washington
Mexico’s Foreign Minister Marcelo Ebrard exits the U.S. State Department to speak to reporters after a meeting between U.S. and Mexican officials on immigration and trade in Washington, U.S., June 6, 2019. REUTERS/Leah Millis

June 7, 2019

WASHINGTON (Reuters) – U.S.-Mexico migration talks were set to resume on Friday as Mexican officials continue their push to reach an agreement that would avert U.S. tariffs set to take effect next week.

Vice President Mike Pence said progress has been made after two days of talks but gave no specifics. He said President Donald Trump, who returns from a week-long trip to Europe on Friday afternoon, would have final say on any deal.

“There has been some movement on their part. It’s been encouraging,” Pence said on Thursday.

Mexican Foreign Minister Marcelo Ebrard said the Mexican government had offered to send 6,000 members of the National Guard to secure its southern border with Guatemala.

He said migration talks would continue on Friday.

Trump rattled global markets, Mexican officials and his fellow Republicans in Congress last week by threatening 5% tariffs on Mexican imports starting on Monday if Mexico did not step up efforts to stem an increase in migrants heading for the U.S. southern border.

Wall Street futures signaled a positive opening for U.S. markets on Friday after stocks rebounded on Thursday amid optimism that a deal could be close. Still, it remained unclear if Mexican pledges to curb migration flows would persuade Trump to drop his tariff threat.

Mexico in recent days moved to block and detain mostly Central American migrants crossing its own southern border headed for the United States. It also acted to block the bank accounts of more than two dozen people allegedly linked to human trafficking.

The U.S. president is eager to show progress on his 2016 campaign pledge to take a hard line on immigration as he seeks re-election in 2020 on his “America First” platform.

But Trump has also staked his tenure on the success of the U.S. economy, and many economists see trade tensions and a tilt toward protectionism as increasing recession risks.

Economic officials on Thursday warned global trade tensions and rising tariffs could threaten U.S. expansion and the global economy.

Analysts have also warned that tariffs could spark a recession in Mexico, something Mexican officials have said could increase the number of migrants fleeing to the United States.

(Reporting by Susan Heavey; Editing by Doina Chiacu and Steve Orlofsky)

Source: OANN

Mexico's Foreign Minister Ebrard speaks to reporters after U.S.-Mexico talks at State Department in Washington
Mexico’s Foreign Minister Marcelo Ebrard exits the U.S. State Department to speak to reporters after a meeting between U.S. and Mexican officials on immigration and trade in Washington, U.S., June 6, 2019. REUTERS/Leah Millis

June 7, 2019

WASHINGTON (Reuters) – U.S.-Mexico migration talks were set to resume on Friday as Mexican officials continue their push to reach an agreement that would avert U.S. tariffs set to take effect next week.

Vice President Mike Pence said progress has been made after two days of talks but gave no specifics. He said President Donald Trump, who returns from a week-long trip to Europe on Friday afternoon, would have final say on any deal.

“There has been some movement on their part. It’s been encouraging,” Pence said on Thursday.

Mexican Foreign Minister Marcelo Ebrard said the Mexican government had offered to send 6,000 members of the National Guard to secure its southern border with Guatemala.

He said migration talks would continue on Friday.

Trump rattled global markets, Mexican officials and his fellow Republicans in Congress last week by threatening 5% tariffs on Mexican imports starting on Monday if Mexico did not step up efforts to stem an increase in migrants heading for the U.S. southern border.

Wall Street futures signaled a positive opening for U.S. markets on Friday after stocks rebounded on Thursday amid optimism that a deal could be close. Still, it remained unclear if Mexican pledges to curb migration flows would persuade Trump to drop his tariff threat.

Mexico in recent days moved to block and detain mostly Central American migrants crossing its own southern border headed for the United States. It also acted to block the bank accounts of more than two dozen people allegedly linked to human trafficking.

The U.S. president is eager to show progress on his 2016 campaign pledge to take a hard line on immigration as he seeks re-election in 2020 on his “America First” platform.

But Trump has also staked his tenure on the success of the U.S. economy, and many economists see trade tensions and a tilt toward protectionism as increasing recession risks.

Economic officials on Thursday warned global trade tensions and rising tariffs could threaten U.S. expansion and the global economy.

Analysts have also warned that tariffs could spark a recession in Mexico, something Mexican officials have said could increase the number of migrants fleeing to the United States.

(Reporting by Susan Heavey; Editing by Doina Chiacu and Steve Orlofsky)

Source: OANN

FILE PHOTO: Italian Prime Minister Giuseppe Conte and Italian Economy Minister Giovanni Tria attend a debate at the Senate in Rome
FILE PHOTO: Italian Prime Minister Giuseppe Conte and Italian Economy Minister Giovanni Tria attend a debate at the Senate in Rome, Italy, December 19, 2018. REUTERS/Tony Gentile/File Photo

June 7, 2019

By Giselda Vagnoni

ROME (Reuters) – Italy’s prime minister and economy minister have formed an unofficial alliance with the president to prevent the euro zone’s third-largest economy being dragged into financial crisis by its ruling parties, sources say.

Prime Minister Giuseppe Conte and Economy Minister Giovanni Tria, both technocrat appointees, have held private conversations with President Sergio Mattarella in recent days on ways of shielding Italy from a gathering political and financial storm, according to two Italian officials with knowledge of the matter.

Conte and Tria are acting with Mattarella, who has a role in ensuring political stability, to effectively curb the behavior of their own government — a populist coalition whose party leaders are railing against EU budget rules.

The coalition’s confrontation with the European Commission, which has flagged possible disciplinary action over Rome’s big-spending fiscal policies, has sent a shiver through Italian bonds and rekindled fears of a full-blown financial crisis.

“Mattarella is trying to keep the boat afloat,” said one senior government official.

Though the coalition’s dominant political force is League leader Matteo Salvini, the prime minister is in charge of negotiating with Brussels over budget policy, and both he and Tria could do serious damage to the government if they were to wield the ultimate political weapon.

Both Salvini and his coalition partner Luigi Di Maio, leader of the 5-Star party, know that the resignations of two men seen by markets as Italy’s main guarantee of fiscal prudence would be likely to send the value of its debt tumbling, and neither wants to risk this.

‘ITALY CAN’T BE TAKEN SERIOUSLY’

Conte has already threatened this week to resign, saying EU rules should be respected. Tria, a former academic, told Reuters that daily quarrels between Salvini and Di Maio were damaging Italy.

“What’s going on is weakening my negotiating power with the EU,” Tria said on the sidelines of a ceremony at the Quirinale presidential palace. “It means that Italy is not a country that can be taken seriously.”

As for Mattarella – the presidency is mostly a figurehead role, but it has the power during political crises to make or break governments. Neither the League nor 5-Star would want to make an enemy of the president.

The League, rooted in rich northern regions, and 5-Star, whose voters mainly live in the poorer south, forged their alliance a year ago, but last month’s European Parliament elections have given Salvini the upper hand.

The League doubled its vote from the 2018 general election and Salvini has been acting as de facto prime minister, vowing not to bow to budget pressure from Brussels. On Thursday, Di Maio agreed to back the League’s tax-cutting plan as a priority.

With a debt of 2.3 trillion euros ($2.6 trillion), Italy is viewed by most economists as too big to fail, and financial instability there could endanger the stability of the entire euro zone.

“The main concern of the president is who will draw up the 2020 budget and what’s in Salvini’s mind,” said another official.

The fact that Italian debt continues to rise as a proportion of GDP prompted the European Commission on Wednesday to start a process that could lead to financial sanctions and stricter oversight of fiscal policy.

TAMING SALVINI

Investors are already asking for interest rates some 0.7 percentage points higher than a year ago to buying Italian 10-year sovereign bonds.

In October, the gap between Italian 10-year bond yields and those from Germany, the euro zone’s benchmark, spiked to over 3.4 percentage points after the EU rejected the government’s 2019 budget. A compromise defused the crisis – but another showdown between Rome and Brussels would send these premiums soaring again.

The worst-case scenario for Mattarella would be a government collapse later this year that prevented the approval of the 2020 budget by the end of December, as required by law.

One of the top officials who spoke to Reuters on condition of anonymity said that Brussels had asked Rome to cut its 2019 deficit by around 0.2 percentage points of GDP, or some 3 billion euros ($3.4 billion).

“We need to stop talking against Europe and show convincing numbers over the deficit and debt trends,” this official said.

Late last year, Tria, Conte and Mattarella, backed by Bank of Italy Governor Ignazio Visco, succeeded in persuading Salvini and Di Maio to trim the 2019 deficit target to avoid EU fines. Visco also has a direct line to his predecessor and current head of the European Central Bank, Mario Draghi.

Conte’s office said on Wednesday that Italy’s deficit-to-GDP ratio for 2019 was already set to come in at 2.1%, well below the official 2.4% target.

Salvini’s growing self-confidence has fueled speculation that he will abandon 5-Star and seek a new election, though he has denied this. But he may not be in a mood to make another compromise on his anti-austerity budget plans.

The League’s economics chief, Claudio Borghi, told Reuters this week that it had only agreed to back down in December because it was the junior partner. The EU vote showed it was now the top dog, he said.

(Editing by Kevin Liffey)

Source: OANN

FILE PHOTO: A security guard walks past in front of the Bank of Japan headquarters in Tokyo
FILE PHOTO: A security guard walks past in front of the Bank of Japan headquarters in Tokyo, Japan January 23, 2019. REUTERS/Issei Kato/File Photo

June 7, 2019

FUKUOKA (Reuters) – A prominent JPMorgan Securities economist, who predicted the Bank of Japan’s communication tweak in April, said the central bank could take interest rates deeper into negative territory in September amid growing global economic risks.

Hiroshi Ugai, the major securities firms’ chief economist and a former Bank of Japan official, wrote in a research note released on Friday that the BOJ will cut its short-term interest rate target to -0.3% from the current -0.1%.

The move would be aimed at staving off an unwelcome spike in the yen that could hurt Japan’s export-reliant economy and would be triggered by a possible rate cut by the U.S. Federal Reserve, Ugai said in the research note.

Expectations are rising in the markets that the Fed may cut interest rates in the coming months to shore up growth that has come under pressure from U.S. President Donald Trump’s trade war with China and tariff threats against other countries.

“Global economic growth will be hurt by Trump’s trade war with China and Mexico,” Ugai said. The anticipated Fed rate cuts in September and December could cause the yen to appreciate, potentially forcing the BOJ to respond, he added.

Ugai said he does not expect the BOJ to cut the 10-year government bond yield target, even if it were to deepen negative rates in September.

A BOJ cut in its short-term rate target is still a minority view among market participants, as many say such a move would narrow financial institutions’ already thinning margins.

Ugai was among few economists who predicted the BOJ’s decision in April to set a timeframe for the first time on how long it will keep interest rates super-low.

Under a policy dubbed yield curve control, the BOJ pledges to guide short-term rates at -0.1% and 10-year bond yields around zero percent.

(Reporting by Tetsushi Kajimoto; Editing by Kim Coghill)

Source: OANN

FILE PHOTO: A security guard walks past in front of the Bank of Japan headquarters in Tokyo
FILE PHOTO: A security guard walks past in front of the Bank of Japan headquarters in Tokyo, Japan January 23, 2019. REUTERS/Issei Kato/File Photo

June 7, 2019

FUKUOKA (Reuters) – A prominent JPMorgan Securities economist, who predicted the Bank of Japan’s communication tweak in April, said the central bank could take interest rates deeper into negative territory in September amid growing global economic risks.

Hiroshi Ugai, the major securities firms’ chief economist and a former Bank of Japan official, wrote in a research note released on Friday that the BOJ will cut its short-term interest rate target to -0.3% from the current -0.1%.

The move would be aimed at staving off an unwelcome spike in the yen that could hurt Japan’s export-reliant economy and would be triggered by a possible rate cut by the U.S. Federal Reserve, Ugai said in the research note.

Expectations are rising in the markets that the Fed may cut interest rates in the coming months to shore up growth that has come under pressure from U.S. President Donald Trump’s trade war with China and tariff threats against other countries.

“Global economic growth will be hurt by Trump’s trade war with China and Mexico,” Ugai said. The anticipated Fed rate cuts in September and December could cause the yen to appreciate, potentially forcing the BOJ to respond, he added.

Ugai said he does not expect the BOJ to cut the 10-year government bond yield target, even if it were to deepen negative rates in September.

A BOJ cut in its short-term rate target is still a minority view among market participants, as many say such a move would narrow financial institutions’ already thinning margins.

Ugai was among few economists who predicted the BOJ’s decision in April to set a timeframe for the first time on how long it will keep interest rates super-low.

Under a policy dubbed yield curve control, the BOJ pledges to guide short-term rates at -0.1% and 10-year bond yields around zero percent.

(Reporting by Tetsushi Kajimoto; Editing by Kim Coghill)

Source: OANN

FILE PHOTO: A shopper holding plastic bags walks out from a greengrocer's at Tokyo's Sugamo district, an area popular with the Japanese elderly, in Tokyo
FILE PHOTO: A shopper holding plastic bags walks out from a greengrocer’s at Tokyo’s Sugamo district, an area popular with the Japanese elderly, in Tokyo, Japan, March 14, 2016. REUTERS/Yuya Shino/File Photo

June 7, 2019

TOKYO (Reuters) – Revised Japanese growth data is expected to show the world’s third-biggest economy grew at the same pace as initially thought, with the overall picture highlighting a soft underbelly as global trade war concerns hurt corporates and consumers.

A Reuters poll of 17 economists forecast Japan’s gross domestic product (GDP) expanded an annualized 2.1 percent in January-March, unchanged from the preliminary reading last month. GDP grew an annualized 1.6% in the fourth quarter.

The revised GDP data, to be released by the Cabinet Office on June 10 at 8:50 a.m. Japan time (2350 GMT, June 9), is also expected to show capital spending rose 0.5%, which if realized will provide some cheer given the initial release showed a 0.3% contraction from the fourth quarter.

Partially offsetting that were a downgrade in the contribution of pubic investment and factory inventories from the preliminary reading, analysts predicted.

Kentaro Arita, senior economist at Mizuho Research Institute, said the final GDP data will continue to point to slackening economic momentum with rising risks of a slump.

“If the U.S.-China trade friction intensifies further, the economy may contract as business investment and exports could weaken.”

The international trade tensions have weighed on Japan’s exports and factory output, raising doubts about whether the government will go ahead with a twice-delayed plan to hike a sales tax to 10 percent from 8 percent in October.

There have been growing calls from some former policymakers to delay the tax hike in the face of worsening domestic and external conditions. However, authorities have said a delay is unlikely unless there is an economic shock on the scale of the collapse of Lehman Brothers in 2008.

The initial GDP had showed imports fell faster than exports in the first quarter, underlining the broadening pressure across the economy as consumers have also been reluctant to spend.

The annualized increase in the growth would translate into a 0.5 percent quarter-on-quarter expansion, also steady from the initial estimate, the poll found.

Other data on tap is unlikely to offer much encouragement to policymakers.

Core machinery orders, which will be issued on June 12, are forecast to have slipped 0.8% in April from the previous month, the poll found, the first fall in three months.

Compared with a year earlier, core orders, a highly volatile data series regarded as a leading indicator of capital spending, likely dropped 5.3% in April, down for four straight month.

“Corporations, especially manufacturers, will continue to be cautious about capital spending on uncertainty over the global economy and the prospect for the U.S.-China trade conflicts,” said Yutaro Suzuki, economist at Daiwa Institute of Research.

(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)

Source: OANN

Estate agent boards are displayed outside a property in London
Estate agent boards are displayed outside a property in London, Britain July 7, 2017. REUTERS/Neil Hall

June 7, 2019

LONDON (Reuters) – British house prices rose at the fastest annual rate since the start of 2017 during the three months to the end of May, mortgage lender Halifax said on Friday, though it added the figure was flattered by weak growth a year ago.

Halifax said house prices in the three months to May were 5.2% higher than in 2018, up from 5.0% annual growth in the three months to April, their highest since January 2017 and beating a forecast in a Reuters poll of economists.

Britain’s housing market has slowed since 2016’s Brexit referendum, driven by price falls in London and neighboring areas, exacerbated by higher purchase taxes on homes costing over 1 million pounds ($1.27 million) and on second homes and small landlords.

Halifax said prices rose 0.5% on the month in May, in contrast to predictions of a fall, and April’s monthly house price growth was revised up to 1.2% from 1.1%.

“The overall message is one of stability,” Halifax managing director Russell Galley said.

“Despite the ongoing political and economic uncertainty, underlying conditions in the broader economy continue to underpin the housing market, particularly the twin factors of high employment and low interest rates,” he added.

Since the start of this year, Halifax house price data have been consistently stronger than figures from rival mortgage lender Nationwide, which reported annual price growth of just 0.6% in April.

The most recent official data showed house price inflation of 1.4% in the year to March, and Pantheon Macroeconomics economist Samuel Tombs said he expected price growth to remain around this level for the rest of this year..

“Households’ real incomes still are rising at a solid rate, while the recent decline in interest rate expectations should reduce mortgage rates soon,” he said.

(Reporting by David Milliken; Editing by Alistair Smout)

Source: OANN

Dunkirk port industries are seen during sunset, in Leffrinckouke
Dunkirk port industries are seen during sunset in Leffrinckoucke, France, February 25, 2019. REUTERS/Pascal Rossignol

June 7, 2019

PARIS (Reuters) – French industrial output rose marginally more than expected in April as energy production rebounded, the INSEE official statistics office said on Friday.

Industrial production rose 0.4% from March, when output had fallen 1.1%, INSEE said. Economists polled by Reuters had expected on average an increase of 0.3% in April.

Energy and utilities output rose 3.2% in April, bouncing back from a small decline in March when warm weather kept the need for heating down.

Excluding energy, manufacturing production was flat in April, after falling 1.1% in March.

(Reporting by Leigh Thomas, Editing by Inti Landauro)

Source: OANN

FILE PHOTO: Brochures are displayed for job seekers at the Construction Careers Now! hiring event in Denver
FILE PHOTO: Brochures are displayed for job seekers at the Construction Careers Now! hiring event in Denver, Colorado U.S. August 2, 2017. REUTERS/Rick Wilking/File Photo

June 7, 2019

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth likely increased solidly in May, with wage gains expected to pick up, showing strength in the labor market before an escalation in trade tensions that analysts have cautioned could pressure an already slowing economy.

With the trade war drums beating loudly in the background, a strong employment report from the Labor Department on Friday will probably do little to dial back market expectations that the Federal Reserve will cut interest rates this year. Fed Chairman Jerome Powell said on Tuesday the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

President Donald Trump in early May slapped additional tariffs of up to 25% on $200 billion of Chinese goods, which prompted retaliation by Beijing. Last week, Trump said he would impose a tariff on all goods from Mexico in a bid to stem the tide of migrants across the U.S.-Mexican border.

Talks are ongoing to prevent the duties from kicking in at 5% on June 10.

Nonfarm payrolls probably increased by 185,000 jobs last month after surging 263,000 in April, according to a Reuters survey of economists. That would be well above the roughly 100,000 needed per month to keep up with growth in the working-age population.

“The trade wars the United States finds itself ensnared in are going to cause hiring to slow as business sentiment eases, productivity-enhancing capital expenditures fall off, and the damage eventually spills over into the consumer sector,” said Joseph Brusuelas, chief economist at RSM US in New York.

Manufacturing payrolls will be watched closely for signs of the impact of the tariffs on the economy. Factory output has been weak and sentiment dropped to a 31-month low in May, with manufacturers worried mostly about the trade tensions.

But May’s job growth could disappoint after a report on Wednesday from payrolls processing firm ADP showed the smallest gain in private payrolls in nine years last month. Another report this week showed a drop in online adverts by businesses looking for help.

The ADP report, however, has a poor record predicting the private payrolls component of the government’s employment report because of methodology differences. Other labor market measures such as weekly applications for unemployment benefits and the Institute for Supply Management’s services employment gauge have suggested solid employment gains in May.

SOME WAGE INFLATION

Monthly wage growth is expected to have pushed higher in May, with average hourly earnings forecast increasing 0.3% after rising 0.2% in April. Wages were forecast advancing 3.2% in the 12 months to May. The workers are also likely put in more hours last month.

While the steady wage growth would support the Fed’s optimism that inflation would return to the U.S. central bank’s 2% target, economists said that was likely to take a backstage to the uncertainty wrought by the trade tensions.

“With the ongoing trade dispute front and center, worries that worsening household and business confidence will lead to people closing their pocketbooks may give the Fed one more reason to do a preemptive rate cut,” said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings.

Financial markets are pricing in two rate cuts this year. Despite slower job growth as workers become more scarce, labor market strength is likely to support the economy. Growth is cooling as the massive stimulus from last year’s tax cuts and spending increases fades.

The Atlanta Fed is forecasting gross domestic product rising at a 1.5% annualized rate in the second quarter. The economy grew at a 3.1% pace in the first quarter.

The unemployment rate is expected to have remained near a 50-year low of 3.6% in May. The jobless rate was partly pushed down by workers dropping out of the labor force over the last four months. A rebound is expected in the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one.

Employment gains in May were likely across all sectors, though the pace probably slowed from April.

Manufacturing payrolls are forecast to have increased by 5,000 last month, but the auto industry probably shed more jobs as assembly plants cut production of some models to address declining sales and an inventory bloat.

Another month of job gains is expected in the construction sector after employers hired 33,000 workers in April. Government payrolls are forecast increasing by at least 10,000 jobs in May, but hiring for the 2020 Census is a wild card to the estimate.

(Editing by Lisa Shumaker)

Source: OANN

Customers shop at a supermarket in Rio de Janeiro
FILE PHOTO: Customers shop at a supermarket in Rio de Janeiro, Brazil July 28, 2018. REUTERS/Sergio Moraes

June 6, 2019

By Jamie McGeever

BRASILIA (Reuters) – Brazil’s annual rate of inflation likely eased in May, according to a Reuters poll of economists, falling for the first time this year in a sign that it may have peaked, while remaining well above the central bank’s target.

The median estimate from 15 economists was for consumer price inflation to fall to 4.72% in the 12 months through May from 4.90% in April, driven by weaker food and fuel prices.

The monthly rise is seen slowing to 0.20% from 0.57% in April, according to the poll, a rate that would be the lowest this year.

“We anticipate food deflation to have gained momentum in the second half of May, which underpins our expectation for (monthly) inflation to have moderated to 0.21% in May,” said Barclays economists in a note to clients. “If our forecast is correct, annual inflation should decelerate to 4.7%.”

Central bank policymakers will be hoping the forecasts are right. April’s annual inflation of 4.9% was the highest in more than two years, above the central bank’s year-end target of 4.25% and brought a break above the 5.0% threshold closer into view.

Policymakers earlier this year said inflation would peak around April or May before returning to target. But minutes of their May 7-8 meeting showed they had softened that view slightly, and now see inflation peaking “in the short term.”

In broad terms, Brazil’s economy is generating few inflationary pressures. Activity contracted in the first quarter for the first time since 2016 and the indications are the current quarter is not much better. Recession risks are rising.

In addition, unemployment remains high, at 12.5%, with more than 13 million Brazilians out of work and a huge degree of spare productive capacity across the economy.

On the other hand, Brazil’s currency weakened to 4.12 per dollar <BRBY> in May, the worst in eight months, pushing up import prices and input costs. That has put the squeeze on companies weighing whether to pass higher prices along to consumers.

IHS Markit said this week that exchange rate pressures kept input price inflation at “elevated” levels in May, but companies raised their prices only “marginally” in comparison.

“Across the private sector, charge (price) inflation eased to a three-month low,” it said.

(Reporting by Jamie McGeever; Additional reporting by Gabriel Burin in Buenos Aires; Editing by Brad Haynes and Steve orlofsky)

Source: OANN

A ship is unloaded using Super Post Panamax cranes in Miami
FILE PHOTO: A ship is unloaded using Super Post Panamax cranes in Miami, Florida, U.S., May 19, 2016. REUTERS/Carlo Allegri/File Photo

June 6, 2019

WASHINGTON (Reuters) – The U.S. trade deficit unexpectedly narrowed in April as imports of goods dropped to a 15-month low, offsetting an aircraft-led decline in exports.

The Commerce Department said on Thursday the trade deficit fell 2.1% to $50.8 billion. Data for March was revised up to show the trade gap increasing to $51.9 billion instead of the previously reported $50.0 billion. The government revised trade data from 2014. Economists polled by Reuters had forecast the trade gap widening to $50.7 billion in April.

The goods trade deficit with China, a focus of President Donald Trump’s “America First” agenda, increased 29.7% to $26.9 billion.

Trump in early May escalated the trade fight with China, slapping additional tariffs of up to 25% on $200 billion of Chinese goods, which prompted retaliation by Beijing.

While Washington has secured a trade pact with Mexico and Canada, there are fears that could be scuttled by Trump’s announcement last week that he would impose a tariff on all goods from Mexico in a bid to stem the tide of illegal immigration across the U.S.-Mexican border. The tariff would start at 5% on June 10.

In April, goods imports fell 2.5% to $208.7 billion, the lowest level since January 2018. Imports fell broadly in April. Imports of consumer goods dropped $1.1 billion. There were also decreases in imports of motor vehicles and capital goods. Weak imports could be flagging weak domestic demand.

Goods exports dropped 3.1% to $136.9 billion. The percentage decline was the largest since January 2015. Civilian aircraft exports plunged $2.3 billion. Boeing <BA.N> in March suspended deliveries of its 737 MAX jet after the aircraft was grounded indefinitely following two deadly crashes in five months. Production of the troubled plane has been cut.

There were also decreases in exports of consumer goods and motor vehicles. Exports of soybeans fell in April and further declines are likely following the recent heightening of tensions between Washington and Beijing.

China, the world’s biggest buyer of soybeans, has previously targeted the crop in the trade war, only relenting when trade negotiations appeared to be progressing.

When adjusted for inflation, the goods trade deficit fell to $81.9 billion in April from $83.00 billion in the prior month. The drop in the so-called real goods trade deficit suggested that trade could add to economic growth.

Overall, the economy is slowing in the second quarter.

Manufacturing production and home sales fell in April, while consumer spending increased moderately. The Atlanta Federal Reserve is forecasting GDP rising at a 1.3% annualized rate in the April-June quarter. The government reported last month that the economy grew at a 3.1% pace in the first quarter, boosted by strong exports, an inventory accumulation and defense spending.

(Reporting by Lucia Mutikani Editing by Paul Simao)

Source: OANN

FILE PHOTO: File photo of a job-seeker completing an application at a career fair in Philadelphia
FILE PHOTO: A job-seeker completes an application at a career job fair in Philadelphia, Pennsylvania, U.S. July 25, 2013. REUTERS/Mark Makela/File Photo

June 6, 2019

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits was unchanged last week, suggesting the labor market remains on solid footing despite slowing economic activity.

Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 218,000 for the week ended June 1, the Labor Department said on Thursday. Data for the prior week was revised to show 3,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims would be unchanged at 215,000 in the latest week. The Labor Department said no states were estimated.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,500 to 215,000 last week.

The claims data has no bearing on May’s employment report, which is scheduled for release on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 185,000 jobs in May after surging by 263,000 in April.

The pace of job growth is well above the roughly 100,000 needed per month to keep up with growth in the working age population. The unemployment rate is forecast to be unchanged near a 50-year low of 3.6 percent.

Sustained labor market strength is seen supporting growth amid signs that economic activity is slowing after a temporary boost from volatile exports and inventory accumulation in the first quarter. Manufacturing production and home sales slumped in April, and consumer spending increased moderately.

The Atlanta Federal Reserve is forecasting gross domestic product rising at a 1.3% pace in the second quarter. The economy grew at a 3.1% annualized rate in the January-March quarter.

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid rose 20,000 to 1.68 million for the week ended May 25. The four-week moving average of the so-called continuing claims slipped 1,000 to 1.67 million.

(Reporting by Lucia Mutikani Editing by Paul Simao)

Source: OANN

Containers are seen at a port in Ningbo, Zhejiang
Containers are seen at a port in Ningbo, Zhejiang province, China May 28, 2019. REUTERS/Stringer

June 6, 2019

BEIJING (Reuters) – China is expected to report a sharper drop in exports for May as higher U.S. tariffs bite, while imports are likely to contract in a further sign of weakening domestic demand that could spark more stimulus measures.

If Monday’s trade data are in line with the gloomy forecasts, it could add to fears of a global economic recession as the U.S.-China trade war intensifies.

Factory activity contracted in most Asian countries last month, weighed down by slowing demand, while that in the United States slowed to its weakest pace in over two years.

China’s exports in May are expected to have declined 3.8 percent from a year earlier, according to the median estimate of 13 economists in a Reuters poll, worsening from a 2.7 percent fall in March.

Trade tensions between Washington and Beijing escalated sharply last month after the Trump administration accused China of having “reneged” on promises to make structural changes to its economic practices.

U.S. President Donald Trump on May 10 slapped higher tariffs of up to 25% on $200 billion of Chinese goods and then took steps to levy duties on all remaining $300 billion Chinese imports. Beijing retaliated with tariff hikes on U.S. goods.

“The time window for China and the U.S. to address trade tensions is narrowing,” said analysts at Morgan Stanley in a note on Wednesday.

If the U.S. imposes 25% tariffs on the remaining $300 billion of imports from China, China’s GDP growth could decelerate to 6.0% in 2019 despite more aggressive stimulus, with quarterly growth dropping below 6.0% by the second half of this year, they said.

Analysts at Nomura, however, believe China’s May exports could rise 1.0%, due partly to a jump in U.S.-bound shipments as exporters race to avoid potential tariffs on goods on the looming $300 billion list. Similar “front loading” kept Chinese exports strong for much of last year.

Further inflaming tensions between the economic giants, the U.S. has put Chinese telecom equipment Huawei Technologies Co Ltd on a trade blacklist, prompting retaliation from Beijing to target foreign companies that it says have harmed Chinese firms’ interests.

WEAK DEMAND AT HOME AS WELL

May import data is expected to show domestic demand is still sputtering despite a raft of growth boosting measures rolled out since last year.

Analysts forecast imports fell 3.8% from a year earlier, reversing an expansion of 4% in April, which some analysts had suspected was related to a cut in the value-added tax (VAT).

Import orders contracted at a quicker pace in May, an official survey of manufacturing activity showed last week.

If Washington imposes tariffs on the remaining $300 billion of Chinese goods in coming months, analysts at Bank of America Merrill Lynch expect Beijing will roll out a comprehensive and sizable stimulus package before the end of 2019, aimed especially at boosting property and infrastructure investment to support economic and social stability.

“On the monetary front… Multiple RRR cuts and 3 interest rate cuts would be likely before the end of 2019, and another 1 rate cut could be seen in 2020,” BAML said in a note on Wednesday.

China has already cut banks’ reserve requirements (RRR) six times since early 2018 and guided interest rates lower, while keeping ample liquidity in the banking system. But mounting economic pressures have led some analysts to call for bolder stimulus measures.

Unlike past downturns, Beijing has so far refrained from massive stimulus programs to jumpstart the slowing economy, possibly due to concerns about rising debt. It has fast-tracked infrastructure projects, cut taxes for companies and raised export tax rebates, along with rolling out targeted cuts in banks’ reserve requirements.

(Reporting by Stella Qiu and Ryan Woo; Editing by Kim Coghill)

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FILE PHOTO: Chinese 100 yuan banknotes in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing
FILE PHOTO: Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, in this March 30, 2016 file picture. REUTERS/Kim Kyung-Hoon/File Photo

June 6, 2019

BEIJING (Reuters) – New bank loans in China likely picked up modestly in May after slowing the previous month as the central bank tries to spur faster credit growth in the wake of a sharp escalation in the U.S.-Sino trade war.

Contrary to market expectations, China’s economy has yet to bottom out despite a flurry of stimulus measures since last year, and Beijing is expected to ease policy further in coming months to bolster business confidence.

Chinese banks are expected to have extended 1.225 trillion yuan ($32.55 billion) in net new yuan loans in May, up from 1.02 trillion yuan in April and above 1.15 trillion yuan in the same month last year, a median estimate in a Reuters survey of 20 economists showed.

Frustrated by a lack of progress in trade talks with China, U.S. President Donald Trump raised tariffs last month on $200 billion worth of Chinese goods and threatened to slap tariffs of up to 25% on another $300 billion of Chinese imports, prompting Beijing to retaliate.

The International Monetary Fund (IMF) on Wednesday cut its 2019 economic growth forecast for China to 6.2% on heightened uncertainty around trade frictions, saying that more monetary policy easing would be warranted if the trade war intensifies.

Earlier last month, the People’s Bank of China (PBOC) announced a cut in three phases in the reserve requirement ratio for regional banks in a further bid to reduce small companies’ financing costs. The PBOC has now delivered six RRR cuts since early 2018, lowering the ratio to 13.5 percent for big banks and 11.5 percent for small-to medium-sized lenders.

Outstanding yuan loan growth on a year-on-year basis likely held steady at 13.5% from April, and broad M2 money supply was seen rising fractionally to 8.6% on-year, from 8.5% in April, the poll showed.

TSF, a broad measure of credit and liquidity in the economy, was estimated to have picked up to 1.41 trillion yuan in May from 1.36 trillion in the previous month.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

OPENING THE TAPS

The central bank injected the most cash into the banking system in four months at the end of May to stabilize nervous money markets after the government seized control of troubled regional lender Baoshang Bank, the first state takeover of a bank in two decades.

The PBOC sought to calm investors by saying Baoshang was an standalone case, but the move added to worries about rising bad debt and systemic financial risks as Washington ramps up trade pressure and the economic downturn wears on.

Corporate bond defaults in China are on track for another record year.[nL5N22B7PG.]

Bank of America Merrill Lynch analysts said on Tuesday they expect the U.S. and Chinese central banks to cut domestic interest rates in coming months as the economic fallout from the trade war grows.

They projected the Federal Reserve would cut key U.S. borrowing costs by 75 basis points by early 2020, beginning in September, giving room for the PBOC to lower rates twice later in 2019 and once in 2020 with less risk of triggering capital outflows.

Factory activity in May contracted more than expected in the face of weaker demand at home and abroad, an official survey showed last week, adding urgency for more support measures, analysts said.

While the PBOC has guided interest rates lower over the past year through various means, many analysts believe it has less room to loosen policy after it cut RRRs and interest rates aggressively in past downturns.

More forceful easing measures and a sharp jump in liquidity would add to debt risks and put more pressure on the yuan currency, which fell than 2.5% against the dollar in May amid the unexpected deterioration in trade negotiations.

(Reporting by Lusha Zhang and Beijing Monitoring Desk; Editing by Kim Coghill)

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FILE PHOTO: The logos of Amazon, Apple, Facebook and Google
FILE PHOTO: The logos of Amazon, Apple, Facebook and Google in a combination photo from Reuters files. REUTERS

June 5, 2019

By Jan Wolfe

(Reuters) – The arcane topic of antitrust law is getting more attention with the U.S. government gearing up to investigate whether Alphabet Inc’s Google, Facebook Inc, Apple Inc, and Amazon.com Inc compete fairly.

The Federal Trade Commission (FTC) and the Department of Justice, which both have jurisdiction to enforce antitrust laws, have divided oversight over the four companies, with Amazon and Facebook under the watch of the FTC, and Apple and Google under the Justice Department, sources told Reuters.

The potential investigations have been welcomed by some consumer advocates, who say big technology companies stifle competition and hold too much sway over speech and commerce.

But some legal experts said the investigations may not lead to major reforms, noting that U.S. law makes it difficult to prove an antitrust violation.

The following answers some questions about the basics of U.S. antitrust law and what regulators will focus on:

What are antitrust laws for?

Antitrust laws seek to promote fair competition.

A law from 1914, the Clayton Act, lets the government block mergers that would harm consumers.

The Sherman Act, passed in 1890, prohibits price-fixing conspiracies and other agreements that restrain competition.

The Sherman Act also lays out rules regarding monopoly power. It is these laws that the Justice Department and the FTC would likely focus on if they initiate investigations of the technology companies, legal experts said.

Why would Google, Facebook, Amazon, and Apple face scrutiny?

The Justice Department’s focus is expected to be on allegations that Google favors its own products in search results and abuses its clout in the online advertising market, although it is expected to look at all of the company’s businesses, sources told Reuters.

It is not known what aspects of Amazon, Facebook, and Apple could be investigated.

Google has said that changes to its search algorithms are made with consumers in mind, and that it is transparent in how it promotes its own services.

Facebook has been called a social media monopoly by co-founder Chris Hughes, who said in a New York Times op-ed that it should be forced to sell off subsidiaries WhatsApp and Instagram.

Facebook spokesman Nick Clegg, in his own op-ed, said, “In this competitive environment, it is hard to sustain the claim that Facebook is a monopoly.”

Clegg wrote that Facebook is responsible for the sort of rapid, consumer-friendly innovation antitrust law is meant to encourage.

In the United States, half of all online shopping transactions happen on Amazon, giving the ecommerce company sway over merchants that use its platforms.

But in a 2018 letter to shareholders, Chief Executive Officer Jeff Bezos said “Amazon remains a small player in global retail” because most commerce still happens offline.

Finally, some software developers argue Apple has a monopoly on its app marketplace, and uses this power to demand hefty commissions and engage in other anticompetitive practices.

Apple Chief Executive Officer Tim Cook told CBS News in an interview that aired on Tuesday that Apple does not have a dominant position in any market.

What would the U.S. government need to prove to bring a case against the tech companies?

It is difficult to show a violation of U.S. antitrust law, legal experts said.

It is not enough for regulators to establish that a company has monopoly power. They must also show anticompetitive conduct – an abuse of that dominant position aimed at bypassing fair competition.

“You can get a monopoly just by being a good competitor and that’s fine,” said Chris Sagers, a professor of antitrust law at Cleveland State University.

The Department of Justice and the FTC also need to show that consumers are being harmed, something that in recent decades has typically been measured by whether prices are going up and innovation is slowing.

Using these metrics, it could be difficult to prove that technology companies, which do not charge money for many of their services, are hurting consumers, some legal experts said.

But Charlotte Slaiman, an antitrust lawyer with consumer rights group Public Knowledge, said there is a growing consensus among economists and the public that it is misleading to call services such as Google and Facebook free.

“What is really going on is that consumers are bartering with their data in exchange for a service,” Slaiman said.

In 2013, the FTC closed an investigation into Google’s search practices. The agency said that, while Google’s changes to how it displayed search results likely harmed some rivals, there was “ample evidence” that Google was trying to improve user experience.

What can the U.S. government do if investigators find an antitrust violation?

The FTC and Justice Department can both file civil lawsuits in federal court and ask judges to order changes to a company’s business model.

The Justice Department can also bring criminal antitrust cases, but those prosecutions usually relate to cartels and price-fixing, making charges against big technology firms unlikely.

(Reporting by Jan Wolfe and Diane Bartz; Editing by Noeleen Walder and Grant McCool)

Source: OANN

FILE PHOTO: The logos of Amazon, Apple, Facebook and Google
FILE PHOTO: The logos of Amazon, Apple, Facebook and Google in a combination photo from Reuters files. REUTERS

June 5, 2019

By Jan Wolfe

(Reuters) – The arcane topic of antitrust law is getting more attention with the U.S. government gearing up to investigate whether Alphabet Inc’s Google, Facebook Inc, Apple Inc, and Amazon.com Inc compete fairly.

The Federal Trade Commission (FTC) and the Department of Justice, which both have jurisdiction to enforce antitrust laws, have divided oversight over the four companies, with Amazon and Facebook under the watch of the FTC, and Apple and Google under the Justice Department, sources told Reuters.

The potential investigations have been welcomed by some consumer advocates, who say big technology companies stifle competition and hold too much sway over speech and commerce.

But some legal experts said the investigations may not lead to major reforms, noting that U.S. law makes it difficult to prove an antitrust violation.

The following answers some questions about the basics of U.S. antitrust law and what regulators will focus on:

What are antitrust laws for?

Antitrust laws seek to promote fair competition.

A law from 1914, the Clayton Act, lets the government block mergers that would harm consumers.

The Sherman Act, passed in 1890, prohibits price-fixing conspiracies and other agreements that restrain competition.

The Sherman Act also lays out rules regarding monopoly power. It is these laws that the Justice Department and the FTC would likely focus on if they initiate investigations of the technology companies, legal experts said.

Why would Google, Facebook, Amazon, and Apple face scrutiny?

The Justice Department’s focus is expected to be on allegations that Google favors its own products in search results and abuses its clout in the online advertising market, although it is expected to look at all of the company’s businesses, sources told Reuters.

It is not known what aspects of Amazon, Facebook, and Apple could be investigated.

Google has said that changes to its search algorithms are made with consumers in mind, and that it is transparent in how it promotes its own services.

Facebook has been called a social media monopoly by co-founder Chris Hughes, who said in a New York Times op-ed that it should be forced to sell off subsidiaries WhatsApp and Instagram.

Facebook spokesman Nick Clegg, in his own op-ed, said, “In this competitive environment, it is hard to sustain the claim that Facebook is a monopoly.”

Clegg wrote that Facebook is responsible for the sort of rapid, consumer-friendly innovation antitrust law is meant to encourage.

In the United States, half of all online shopping transactions happen on Amazon, giving the ecommerce company sway over merchants that use its platforms.

But in a 2018 letter to shareholders, Chief Executive Officer Jeff Bezos said “Amazon remains a small player in global retail” because most commerce still happens offline.

Finally, some software developers argue Apple has a monopoly on its app marketplace, and uses this power to demand hefty commissions and engage in other anticompetitive practices.

Apple Chief Executive Officer Tim Cook told CBS News in an interview that aired on Tuesday that Apple does not have a dominant position in any market.

What would the U.S. government need to prove to bring a case against the tech companies?

It is difficult to show a violation of U.S. antitrust law, legal experts said.

It is not enough for regulators to establish that a company has monopoly power. They must also show anticompetitive conduct – an abuse of that dominant position aimed at bypassing fair competition.

“You can get a monopoly just by being a good competitor and that’s fine,” said Chris Sagers, a professor of antitrust law at Cleveland State University.

The Department of Justice and the FTC also need to show that consumers are being harmed, something that in recent decades has typically been measured by whether prices are going up and innovation is slowing.

Using these metrics, it could be difficult to prove that technology companies, which do not charge money for many of their services, are hurting consumers, some legal experts said.

But Charlotte Slaiman, an antitrust lawyer with consumer rights group Public Knowledge, said there is a growing consensus among economists and the public that it is misleading to call services such as Google and Facebook free.

“What is really going on is that consumers are bartering with their data in exchange for a service,” Slaiman said.

In 2013, the FTC closed an investigation into Google’s search practices. The agency said that, while Google’s changes to how it displayed search results likely harmed some rivals, there was “ample evidence” that Google was trying to improve user experience.

What can the U.S. government do if investigators find an antitrust violation?

The FTC and Justice Department can both file civil lawsuits in federal court and ask judges to order changes to a company’s business model.

The Justice Department can also bring criminal antitrust cases, but those prosecutions usually relate to cartels and price-fixing, making charges against big technology firms unlikely.

(Reporting by Jan Wolfe and Diane Bartz; Editing by Noeleen Walder and Grant McCool)

Source: OANN

Livestock is pictured at the facilities of the Chihuahua cattle breeder's union before being exported to the U.S., at the San Jeronimo/Teresa border crossing point, on the outskirts of Ciudad Juarez
Livestock is pictured at the facilities of the Chihuahua cattle breeder’s union before being exported to the U.S., at the San Jeronimo/Teresa border crossing point, on the outskirts of Ciudad Juarez, Mexico June 4, 2019. Picture taken June 4, 2019. REUTERS/Jose Luis Gonzalez

June 5, 2019

By Tom Polansek

CHICAGO (Reuters) – U.S. President Donald Trump’s plan to slap tariffs on imports of Mexican goods could slow another, often overlooked migration: the more than 1 million cows exported by Mexico across the border each year which become part of the U.S. beef supply.

Tariffs on cattle crossing the border could raise costs for U.S. meat producers and processors, ranchers and economists said, particularly in border states like New Mexico and Texas that supplement more of their herds with Mexican cattle. Those fees could also contribute to more expensive barbecues for U.S. consumers.

Nationwide, the imported livestock account for about 4% of the U.S. supply of young cows, known as feeder cattle. But in parts of the U.S. South and Southwest, more than a quarter of the cattle in feed yards at any given time can originate in Mexico, making those regions among the most vulnerable to Trump’s unilateral tariff plan.

If the duties are imposed, U.S. cattle feeders will import fewer cows due to the increased cost, said Derrell Peel, agricultural economist at Oklahoma State University, a situation that may leave them with empty space in their feed yards or paying more for U.S.-born cattle.

Texas-based Cactus Feeders, one of the largest U.S. cattle feeding companies, has fed up to 150,000 Mexican cattle in its feed lots at once, said Surcy Peoples, a Cactus cattle buyer and director of customer service. The lots have a capacity for 525,000 cattle.

“We would not have the number of cattle that we typically have available to place into feed lots” if the tariffs are imposed, Peoples said.

Trump last week said he will implement a blanket tariff on all Mexican goods from June 10 as he attempts to pressure Mexico into stopping U.S.-bound migrants, mostly from Central America. Levies would start at 5%, but could reach as high as 25% if Mexico does not comply with Trump’s demands.

BILATERAL RISKS

The tariffs threaten major economic damage to Mexico, which sends about 80% of its exports to the United States.

The financial risk for U.S. meat producers also show how the tariffs could harm American business.

Mexican officials will seek to persuade the White House in high-stakes talks hosted by U.S. Vice President Mike Pence on Wednesday that their government has done enough to stem immigration and avoid looming tariffs.

Ahead of those talks, Pence was looking for a comprehensive suite of “tangible measures” from visiting officials about stopping the surge of Central American migrants, according to a White House official.

Chipotle Mexican Grill on Monday estimated a $15 million hit from Trump’s proposed tariffs, and said it may cover that by raising burrito prices by around 5 cents to offset higher costs for imported avocados.

The United States last year imported about 1.3 million feeder cattle from Mexico, the most since 2012, according to data analyzed by the Livestock Marketing Information Center, an industry group.

Mexican cattle in the United States are raised in feed yards from Texas to California and Colorado until they grow large enough to be slaughtered by U.S. processors, like Tyson Foods Inc and JBS USA.

Tyson declined to comment and JBS USA did not respond to request for comment. Cargill Inc, a major U.S. supplier of ground beef, said it was assessing the potential impact of tariffs.

Trump’s 5% tariff could threaten profits for some U.S. cattle-feeding businesses that operate on thin margins, said Jim Robb, senior economist for the center.

“Often in the cattle business, 5% is the difference between profit and loss,” Robb said.

TRADE DISPUTES WEIGH

U.S. livestock producers have already come under pressure as trading disputes with Mexico and China slowed pork exports last year.

New Mexico, Texas and Arizona imported 603,488 head of Mexican feeder through May 31, up 20% from a year earlier, according to the U.S. Department of Agriculture. Almost half went to New Mexico, where 400- to 500-pound Mexican steers cost as much as $163 per head, down about 7% from 2018.

Meat from some of the cattle may end up back in Mexico, the third-biggest export market for U.S. beef. But that export demand could ease if Mexico imposes retaliatory tariffs on U.S. farm products in response to Trump’s tariffs.

“It scares me that they would start putting tariffs on U.S. beef,” said Pete Bonds, a cattle rancher and president of Bonds Ranch in Saginaw, Texas.

Mexico could also reduce beef purchases from the United States if tariffs on Mexican goods result in Mexican cattle producers shipping fewer animals north of the border, ranchers said.

“If they are fed in Mexico, they will develop their own customer base that could eventually lead to them becoming competitive in nature to our beef market,” said Jesse Larios, manager at Foster Feed Yard in Brawley, California.

On Saturday, Larios watched an auction of Mexican cattle that was livestreamed on Facebook. He did not buy any, but said he is impressed by the sturdiness and health of Mexican cattle.

“They are delivering to the U.S. border cattle that cattle feeders like myself can purchase that the American consumer is going to want,” Larios said.

(Reporting by Tom Polansek; editing by Caroline Stauffer and Simon Webb)

Source: OANN

Customers sit in a crepe restaurant in Somerville
FILE PHOTO: Customers sit in a crepe restaurant in Somerville, Massachusetts, U.S., November 27, 2017. REUTERS/Brian Snyder

June 5, 2019

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. services sector activity expanded at a brisk pace in May and industries hired more workers, offering some respite for an economy that is slowing following a temporary boost from exports and an accumulation of inventories in the first quarter.

The survey from the Institute for Supply Management (ISM) on Wednesday followed a raft of weak reports on consumer spending, housing and manufacturing that suggested a sharp loss of momentum in economic growth early in the second quarter.

Slowing growth, worsening trade tensions between the United States and China, and looming U.S. tariffs on goods imported from Mexico have led some economists to expect the Federal Reserve to cut interest rates this year.

The U.S. central bank early this year suspended its three-year monetary policy tightening campaign. Fed Chairman Jerome Powell on Tuesday said the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

“Though this won’t completely dismiss the rate-cut-this-year speculation, the much better-than-expected nonmanufacturing ISM print helps,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. 

The ISM said its non-manufacturing activity index rose 1.4 points to a reading of 56.9 in May. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index would be unchanged at 55.5 last month.

The May increase in services industry activity reflected a jump of 1.7 points in the production subindex. Activity was also boosted by gains in the new orders measure.

A gauge of services industry employment surged 4.4 points to a seven-month high. The ISM said while businesses in the services sector were mostly optimistic about overall business conditions, “concerns remain about tariffs and employment resources.”

President Donald Trump in early May slapped additional tariffs of up to 25% on $200 billion of Chinese goods, which prompted retaliation by Beijing. Trump announced last week that he would impose a tariff on all goods from Mexico in a bid to stem the tide of illegal immigration across the U.S.-Mexican border. The tariff would start at 5% on June 10.

The ISM said 16 industries, including utilities, real estate, finance and insurance, healthcare and social assistance, information, and professional, scientific and technical services reported growth last month. The only industry reporting contraction was agriculture, forestry, fishing and hunting.

Businesses in the utilities industry said they were “waiting to see the impact of Chinese import tariff,” while their counterparts in the mining sector said because of the trade war, “it has been very difficult to plan in a long term ahead.”

Stocks on Wall Street were trading higher. The dollar was little changed against a basket of currencies, while U.S. Treasury prices were mixed.

FADING STIMULUS

The trade tensions and fading stimulus from the White House’s tax cuts and spending increases are slamming the brakes on the economy. The Atlanta Fed is forecasting gross domestic product to rise at a 1.3% annualized rate in the second quarter.

The economy grew at a 3.1% pace in the first quarter, lifted by increases in exports, inventories and defense spending. Goods exports fell sharply in April and the inventory overhang, which is mostly concentrated in the auto sector, is weighing on production at factories.

Last month’s jump in hiring by services sector businesses suggested that a sharp slowdown in private payrolls growth in May shown in another report on Wednesday was probably a fluke.

The ADP National Employment Report showed private employers added only 27,000 jobs in May, the fewest since March 2010, after creating 271,000 positions in April.

The ADP figures came ahead of the Labor Department’s more comprehensive nonfarm payrolls report on Friday, which includes both public- and private-sector employment.

The ADP report, which is jointly developed with Moody’s Analytics, has a poor record predicting the private payrolls component of the government’s employment report.

Economists polled by Reuters are looking for private payroll employment to have grown by 175,000 jobs in May, down from 236,000 the month before. Total nonfarm employment is expected to have grown by 185,000. The unemployment rate is forecast to stay steady at the 3.6 percent recorded a month earlier.

“Our hunch is that the drop-off in ADP’s estimate of private payrolls growth is likely a blip,” said Roiana Reid, an economist at Berenberg Capital Markets in New York. “If the May employment report also exhibits similar weakness, that would provide a more forceful indication that companies are scaling back hiring because of concerns about the economic outlook.”

According to the ADP report, employment in the goods-producing sector fell by 43,000 jobs in May, the first drop in nearly 2-1/2 years. Manufacturing payrolls decreased 3,000 and construction shed 36,000 positions, the most since 2010.

The services sector added 71,000 jobs last month, concentrated in professional and education and health services.

(Reporting by Lucia Mutikani; Additional reporting by Dan Burns in New York; Editing by Chizu Nomiyama and Paul Simao)

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