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Traders see rising chance Fed defers first rate cut beyond June

Traders of futures contracts tied to the Federal Reserve policy rate pared bets on Friday that the U.S central bank will start cutting interest rates in June after a government report showed wholesale prices rose more than expected in January. Before the report, which showed the core measure of the producer price index shot up 0.5% from a month earlier, traders put about a 75% probability on the Fed’s first rate cut coming in June. After the report the probability of a June rate cut fell to just over 50%, ...

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US sanctions against Houthis over Red Sea attacks take effect

U.S. “Specially Designated Global Terrorist” sanctions against Houthis for their ties to attacks on commercial shipping in the Red Sea took effect on Friday, the U.S. Department of Treasury said in a statement on its website. The U.S. government last month said it was returning the Yemen-based rebel groups to the global list of terrorist groups in an effort to stem attacks on international shipping. Source: Reuters

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US consumer sentiment steady in February

U.S. consumer sentiment was little changed in February while one-year inflation expectations ticked up, a survey showed on Friday. The University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 79.6 this month, compared to 79.0 in January. Economists polled by Reuters had forecast a preliminary reading of 80.0. “The fact that sentiment lost no ground this month suggests that consumers continue to feel more assured about the economy, confirming the considerable improvements in December and January across various aspects of the economy,” said Surveys ...

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ECB’s Villeroy: should not hold off first rate cut for too long

There are several compelling reasons why the European Central Bank should not hold off for too long on an initial interest rate cut this year, ECB member and Bank of France head Francois Villeroy de Galhau said on Friday. “It’s not a question of rushing into things; but acting gradually and pragmatically may be preferable to deciding too late and then having to over-adjust,” Villeroy told Belgian paper L’Echo. Villeroy’s comments came in response to a question as to whether his position was to favour rapid interest rate cuts and ...

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US banks face $35 bln hit from ‘Basel Endgame’, says Oliver Wyman

U.S. banks could lose up to $35 billion in revenues in 2025 under current proposals for new capital rules that could “relevel the playing field” for European lenders, a study showed on Thursday. The ‘Basel III Endgame’ standards, the final leg of international bank capital rules that followed the global financial crisis, could impact U.S. banks disproportionately, according to consultancy firm Oliver Wyman. Each country decides how it will apply the globally agreed Basel rules, leading to some differences in practice, and current proposed U.S. rules are more punitive than ...

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No lunch in Ginza: Japan’s scaled-back spending helps push economy to recession

To grasp the dynamics that bumped Japan into recession and off its perch as the world’s third largest economy on Thursday, look no further than Risa Shinkawa’s dining habits. Unlike unionised workers at big manufacturers such as Toyota Motor (NYSE:), the 32-year-old aesthetician isn’t expecting a pay rise anytime soon. Rather, her salary has been cut, a reflection of the squeeze on the services sector, especially at the smaller companies that employ some 70% of Japan’s workforce. She’s duly cut back on discretionary spending, which on Thursday meant no buying ...

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South Korea prepares $57 billion corporate financial support programme

South Korea has prepared a financial support programme of 75.9 trillion won ($56.97 billion) for companies increasing investment in key sectors as well as small businesses struggling with the impact of high interest rates. The programme includes 15 trillion won worth of cheap policy loans from a state-run bank for key industries, such as semiconductor and battery, while commercial banks will also provide 20 trillion won to support small and medium-sized businesses, the Financial Services Commission said in a statement on Thursday. “Our banks need to start making efforts to ...

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Japan unexpectedly slips into recession, Germany now world’s third-biggest economy

Japan unexpectedly slipped into a recession at the end of last year, losing its title as the world’s third-biggest economy to Germany and raising doubts about when the central bank would begin to exit its decade-long ultra-loose monetary policy. Some analysts are warning of another contraction in the current quarter as weak demand in China, sluggish consumption and production halts at a unit of Toyota Motor (NYSE:) Corp all point to a challenging path to an economic recovery. “What’s particularly striking is the sluggishness in consumption and capital expenditure that ...

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Russia’s reserves dwindle, but fiscal safety net could last years

Russia’s war in Ukraine is draining state coffers, but the fiscal buffers Moscow has built up over the last two decades will be enough to last for years, even if oil prices slump as low as $60 a barrel. The liquid part of Russia’s National Wealth Fund (NWF) has more than halved, falling by $58 billion since the February 2022 invasion of Ukraine, as the government used the money to finance its budget deficit and support state-owned companies. The NWF, a rainy-day fund of accumulated energy revenues, held $55 billion, ...

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Japan: 4Q23 GDP unexpectedly contracted for a second quarter

Weak domestic demand was the main reason for the ongoing contraction Japan’s 4Q23 GDP unexpectedly dropped -0.1% QoQ (0.2% market consensus), while 3Q23 GDP was revised down to -0.8% (vs -0.7% previously). Domestic demand was particularly weak. Private consumption dropped -0.2% (vs revised -0.3% in 3Q23). Durable goods consumption gained solidly (6.4%) but semi-durable (-1.7%) and non-durable (-0.3%) goods consumption declined. The downside surprise came from service consumption, which fell -0.6%. This could be a temporary drop after having risen for five consecutive quarters, and we expect service consumption to ...

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BoE’s Greene says recession news won’t shift her views by much

Bank of England rate-setter Megan Greene said news that Britain had fallen into recession had not shifted her views on policy by much, given the figures were broadly similar to expectations. Gross domestic product (GDP) contracted by 0.3% in the fourth quarter of 2023, having shrunk by 0.1% in the third quarter, official data showed – confirming a recession. The BoE had pencilled in a flat reading for the quarter. “The surprise on GDP data was pretty minor, so that wouldn’t shift my view that much,” Greene said after delivering ...

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EU Commission cuts 2024 euro zone growth forecast, sees smaller inflation

The euro zone economy will grow slower than expected this year after price growth eroded purchasing power and high ECB interest rates curbed credit, but inflation in 2024 will also be slower than expected, the European Commission said on Thursday. The EU executive forecast that gross domestic product in the 20 countries sharing the euro currency would increase only 0.8% in 2024 rather than 1.2% it expected last November, but it would still be up from a 0.5% rise in 2023. In 2025, economic growth should accelerate to 1.5%, the ...

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US retail sales tumble in January; weekly jobless claims fall

U.S. retail sales fell by the most in nearly a year in January, but economists cautioned against reading too much into the decline, noting that winter storms as well as technical factors had distorted the data. The larger-than-expected drop in retail sales reported by the Commerce Department on Thursday also reflected a sharp fall in receipts at services stations because of lower gasoline prices. Consumer spending remains supported by a fairly healthy labor market, which is keeping wage growth elevated. “It was a weak start to the year for consumers ...

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Recession in Japan makes Germany third largest economy

Germany overtook Japan as the world’s third-biggest economy, official data showed on Thursday, as fresh figures from Tokyo showed Japan’s economy slipping into a recession. Japan’s nominal gross domestic product (GDP) for 2023 stood at $4.2 trillion in dollar terms, government data showed, compared to Germany’s $4.5 trillion, according to the latest figures. The yen slumped more than 18% against the dollar in 2022 and 2023. This includes a 7% depreciation last year, partly because the Bank of Japan (BOJ) has maintained negative interest rates. Meanwhile the euro used in ...

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Fed’s Barr: ‘Bumpy’ path to 2% inflation means soft landing jury still out

Hotter-than-expected inflation in January shows that the United States’ path back to 2% inflation “may be a bumpy one,” Fed Vice Chair for Supervision Michael Barr said on Wednesday, adding it was too early to be assured price stability will be restored without a significant blow to jobs or economic growth. “It’s very early to say whether we end up with a soft landing or not,” Barr said, referring to the Fed’s hoped-for outcome where inflation returns to the Fed’s target without a large rise in the unemployment rate. “I’d ...

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