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The euro zone’s fragmented banking industry

Supporters for more consolidation in the euro zone’s banking sector have been watching Spanish lender BBVA (BME:)’s hostile bid for Sabadell, alongside comments from some supervisors and lawmakers supporting the idea of more tie-ups. Regulators are keen for more consolidation – both within and across countries – because they believe fewer, stronger lenders will boost the economy and enable euro area banks to compete more effectively with larger, more profitable rivals in the United States and Asia. Yet big banking takeovers have been rare since the 2008-09 global financial crisis, ...

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UK grocery inflation edges lower again ahead of election, Kantar says

UK grocery inflation fell for a sixteenth month in a row in June, industry data showed on Tuesday, providing a little cheer for Prime Minister Rishi Sunak ahead of next month’s election. Market researcher Kantar said annual grocery price inflation was 2.1% in the four weeks to June 9, down from 2.4% in the previous four-week period. In campaigning ahead of the July 4 election, Sunak has sought to take credit for more than halving overall inflation. However, there has been little sign of an opinion poll boost for his ...

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France would feel lonely if debt crisis hit

France has the largest public debt load in Europe, at 2.3 trillion euros, so investors’ concerns over a far-right victory in upcoming elections are understandable. If Marine Le Pen’s Rassemblement National (RN) comes out as the clear winner of the first round of voting on June 30, markets will become even more turbulent. With the European Central Bank on the sidelines and Brussels wary of a eurosceptic government, France will feel lonely in a crisis. Yields on French 10-year government bonds are now at 3.1% FR10YT=RR, a level last seen ...

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German investor morale rises modestly in June, ZEW says

The recovery in German investor morale tapered off in June, the ZEW economic research institute said on Tuesday, reporting a modest rise in its economic sentiment index that fell short of forecasts. The economic sentiment index rose to 47.5 points from 47.1 points in May. Analysts polled by Reuters had forecast a June reading of 50.0. The assessment of the current economic situation in Germany slightly deteriorated in June, falling to minus 73.8 points from minus 72.3. ZEW president Achim Wambach said that the inflation expectations of respondents had increased, ...

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Ukraine’s debt woes during wartime

Ukraine has suffered a setback in its quest to complete the outline of a debt restructuring before the end-of-August expiry of a two-year payment freeze agreed by private holders of near $20 billion in outstanding international bonds. The government announced on Monday it had not reached agreement with a group of bondholders, raising the specter that the war-torn country might slip into default. Here is a timeline of events related to the debt impact of Russia’s wars with Ukraine. 2014 February – Russia invades Ukraine’s Crimean peninsula. The invasion, as ...

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Cyprus minister tells banks to cut rates, says people in ‘distress’

Cyprus’ finance minister on Tuesday urged banks to take “drastic action” to reduce lending rates, saying the high level was crimping demand and could stifle the island’s growth potential. Earlier overtures to commercial banks to lower their charges had had a slight impact but they should get the ball rolling now the ECB has started to lower rates, Makis Keravnos said. “I must convey in the most vehement manner the cries of distress from households and businesses about borrowing rates which is a key factor inhibiting growth, and in dealing ...

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Getting the global economy out of the slow lane

With global growth stabilizing for the first time in three years, inflation reaching a three-year low, and financial conditions brightening, the global economy seems to be on its final approach for a “soft landing.” But this positive news cannot obscure the grim reality: more than four years after the COVID-19 pandemic began, the world—especially developing economies—has yet to embark on a promising path toward prosperity. As a new World Bank Group report shows, the rate at which annual global growth is stabilizing—2.7 percent, on average, through 2026—is significantly lower than ...

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Fed’s Williams expects rates to come down as inflation pressures ease

New York Federal Reserve President John Williams said on Tuesday interest rates will come down gradually over time, but he declined to say when the U.S. central bank can kick off its monetary policy easing. “I expect interest rates to come down gradually over the next couple of years, reflecting the fact that inflation is coming back to our 2% target and the economy is moving in a very strong sustainable path,” Williams said in an interview on the Fox Business television channel. Asked if the Fed will meet the ...

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Fed’s Musalem signals cautious approach to cutting rates in debut speech

The U.S. central bank should only start to cut interest rates after “months, and more likely quarters” of falling inflation, moderating demand and expanding supply, St. Louis Federal Reserve President Alberto Musalem said on Tuesday, in his first public comments on monetary policy since becoming head of the regional Fed bank. “I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more ...

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ECB’s De Guindos sees rate decisions every three months as best course

The European Central Bank’s vice president, Luis de Guindos, said on Tuesday that the best time to make rate decisions was coinciding with the release of the bank’s updated macroeconomic projections, the next of which is slated for September. The ECB lowered its key rate by 25 basis points from a record high to 3.75% on June 6, its first cut in five years. However, it raised its inflation forecasts and President Christine Lagarde declined to confirm it had entered a phase of “dialling back” its restrictive monetary policy. “The ...

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US business inventories rebound in April

U.S. business inventories rebounded in April, potentially setting up inventory investment to contribute to economic growth this quarter after being a drag since the fourth quarter. Inventories increased 0.3% after dipping 0.1% in March, the Commerce Department’s Census Bureau said on Tuesday. The rebound in inventories, a key component of gross domestic product, was in line with economists’ expectations. Inventories rose 1.0% year-on-year in April. Private inventory investment has been a drag on GDP for two straight quarters, slicing off 0.45 percentage point from growth in the January-March quarter, the ...

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Fed’s Barkin: we’ll learn a lot more over next “several months” of economic data

Richmond Fed President Thomas Barkin said on Tuesday that before he considers supporting a rate cut he needs to parse several more months of economic data. “We are clearly on the back side of inflation,” Barkin said in an interview with MNI Webcast. “We will learn a lot more over the next several months and I think we are well positioned from a policy standpoint to react.” “For me, it’s sustainment and broadening (that) are the two themes. Sustainment means that headline and core (inflation) continue to go on a ...

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US manufacturing production surges in May

Production at U.S. factories increased more than expected in May, recouping all the declines in the prior two months, but the momentum is unlikely to be sustained amid higher interest rates and softening demand for goods. Manufacturing output jumped 0.9% last month following a downwardly revised 0.4% drop in April, the Federal Reserve said on Tuesday. Economists polled by Reuters had forecast factory output rebounding 0.3% after a previously reported 0.3% fall in April. Production at factories had declined in March and April. It gained 0.1% year-on-year in May. Manufacturing, ...

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ECB’s Lane sees no need for any French bond rescue

The European Central Bank’s chief economist said there was no need for the ECB to come to France’s rescue by buying bonds because recent market turmoil fuelled by political uncertainty was “not disorderly”. In a Reuters NEXT Newsmaker interview, Philip Lane said he remained confident inflation will fall back to the ECB’s 2% target in 2025 after four years of unusually brisk price growth following the COVID pandemic and Russia’s invasion of Ukraine. French financial markets endured a brutal sell-off late last week as investors cut their positions ahead of ...

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ECB pays attention to good functioning of markets, Lagarde says, after France spooks investors

The European Central Bank pays close attention to the smooth functioning of financial markets, ECB President Christine Lagarde said, after French President Emmanuel Macron’s call for a snap parliamentary vote last week spooked investors. Investors were demanding a 77-basis-point premium for lending to AA-rated France over triple-A Germany for 10 years in Monday morning trade, little changed from Friday after climbing 29 bps last week in its biggest weekly rise since 2011. Asked if the spread was a concern, Lagarde told reporters at an event near Paris: “Price stability goes ...

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