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In March, depositors fled Silicon Valley Bank (SIVB.O), withdrawing $42 billion in 24 hours, some via their mobile phones. Information about the bank's difficulties spread fast online, creating a social media-driven bank run. Officials said the bank turbulence added urgency to discussions of a European Commission proposal to broaden the EU's bank resolution framework, now applied to just over 100 of the biggest European banks, to smaller and medium-sized lenders. The proposal, called Crisis Management and Deposit Insurance (CMDI) was requested by EU finance ministers in mid-2022. It would ensure that the resolution of smaller banks could be paid for from the EU's resolution fund, financed by banks, rather than by taxpayers.

Cost inflation rose during the COVID-19 pandemic and was exacerbated by Russia's invasion of Ukraine, which sent energy prices to record highs last year. Energy costs have since dropped, however, while global prices for some commodities are rising more slowly. Companies like Nestle (NESN.S), Reckitt Benckiser (RKT.L) and Danone (DANO.PA) continued to raise prices sharply in the first quarter even though input costs are easing. First quarter price/mix, a basket of variables the company uses to help determine what prices to charge, rose 12.4% while sales volumes declined 4.5%. Similarly, Nestle increased its prices by 9.8% during the quarter and sales volumes - which the company calls real internal growth - fell only 0.5%.

☆ Analysis: China rebound buoys hopes for stronger-than-expected US, Europe earnings
▼ + stars: | 2023-04-24 | by ( Joice Alves | ) www.reuters.com time to read: +6 min

But recent data and upbeat comments from major companies like LVMH (LVMH.PA), Europe's most valuable listed company, about business in China have given investors some cause for optimism. Refinitiv I/B/E/S data points to a 2.5% decline in earnings growth in the first quarter for STOXX 600 (.STOXX) companies, down from a forecast for 5.4% growth prior to the banking chaos. Europe is headed for a recession too, the data shows, with a drop in earnings of 5.4% expected in the second quarter. But stubbornly high inflation means major central banks are expected to continue to hike rates, at least in May. European financials are expected to report first-quarter earnings growth of 31%, according to Refinitiv.

Summary German public sector secures 5.5% rise for 2024Deal sets precedent, piles pressure on ECB's forecastsECB to raise rates on May 4FRANKFURT, April 24 (Reuters) - The "very generous" pay rise secured by Germany's public sector workers may complicate the European Central Bank's fight against inflation, analysts said on Monday. "The permanent increase next year may raise some eyebrows at the ECB because wages were supposed to peak this year," Natixis economist Dirk Schumacher said. Other economists noted the German public sector pay agreement followed a period of falling real wages, when prices grow faster than salaries. "Doves may argue that the deal comes after a period of wage restraint and is reasonably front-loaded," Christian Schulz, an economist at Citi, said. "This means that it will probably take at least another five years for public sector wages to recover this loss of purchasing power and for employees to have the standard of living they had in 2021," Fratzscher said.

Gucci is part of French luxury goods group Kering (PRTP.PA). The European Commission said on Tuesday that antitrust regulators had raided companies in the fashion sector in several EU countries. The Commission, which acts as the competition enforcer in the 27-country EU, did not name the companies or the countries, in line with its policy. The European Commission declined to comment on Wednesday. Companies found guilty of breaching EU rules face fines of as much as 10% of their global turnover.

☆ ECB market rate bets: still some unfinished business for the hawks
▼ + stars: | 2023-04-19 | by ( Stefano Rebaudo | ) www.reuters.com time to read: +4 min

Having firmly scaled-back rate expectations amid last month's market turmoil, investors no longer expect borrowing costs to stay higher for longer and are cautious about pricing in a deposit rate above 4%. The November 2023 ECB euro short-term rate (ESTR) forward rose to 3.65% on Wednesday, implying expectations for a deposit rate of around 3.75%. Citi meanwhile argued that the June ESTR or money market contract was less appealing from a hedging standpoint while markets were pricing a peak of 3.75%. bundfuturevolBut Bund futures volumes declined after March 15 as markets once more revised their rate expectations upwards. This means that the smaller the gap between the current benchmark rate and the expected rate, the lower the volatility, and vice versa.

MILAN/BRUSSELS, April 19 (Reuters) - EU antitrust regulators and Italian tax police inspected a facility of luxury goods company Gucci as part of a European Union investigation spanning several countries and companies, two sources with knowledge of the matter said on Wednesday. Gucci is part of French luxury goods group Kering (PRTP.PA). The second source said other fashion companies outside the Kering group had been targeted by similar inspections. The European Commission said on Tuesday that antitrust regulators had raided companies in the fashion sector in several EU countries. The European Commission declined to comment on Wednesday.

☆ Analysis: Rates shift gives European currencies fresh legs
▼ + stars: | 2023-04-19 | by ( Alun John | ) www.reuters.com time to read: +5 min

But markets expect another 75 bps of European Central Bank rate hikes, with the deposit rate rising to a peak in the autumn. Expectations for higher official interest rates typically drag money market and government bond yields higher, attracting investor cash into a country and boosting its currency. "An interest rate differential that is flat between the two regions would be equivalent to a euro/dollar move up to around 1.20." TURNAROUNDThe Federal Reserve's relentless rate hikes sent the dollar to 20-year highs last year as other big central banks moved more slowly. "But interestingly last month has seen the pound stronger, because of limited spillovers and declining U.S. and European rate expectations."

☆ Amid risk of stalling in EV race, Spain's rebooted aid scheme gets warm reception
▼ + stars: | 2023-04-11 | by ( Joan Faus | ) www.reuters.com time to read: +6 min

Madrid will launch a new, more flexible version of the PERTE scheme around July, worth 2 billion euros ($2.2 billion) after last year's initial funding round flopped, with only 27% of an earmarked 2.9 billion euros allocated. Stellantis already manufactures EVs in Spain and received 67 million euros from the first PERTE, but could request more funds to boost production. Griffiths said using the EU funds is "essential" for Spain's future as some investments would otherwise be non-viable. Unlike Germany, Europe's leading car producer, Spain lacks a domestic manufacturer to champion the EV cause. In last year's PERTE round, VW-SEAT received the highest payout, of 357 million euros, but had hoped for more.

☆ WTO sees "subpar" 2023 trade growth with multiple risks
▼ + stars: | 2023-04-05 | by ( ) www.reuters.com time to read: +3 min

Summary WTO raises 2023 global trade growth f/cast to 1.7% (prev 1.0%)2022 goods trade growth 2.7% vs Oct forecast of 3.5%WTO chief urges countries to limit export curbs on foodGENEVA, April 5 (Reuters) - The World Trade Organization raised its forecast for global trade growth this year, but still predicted a slowdown and warned of risks from the Ukraine war, geopolitical tensions, food insecurity, inflation and monetary policy tightening. The Geneva-based trade body said on Wednesday that merchandise trade volumes would increase by a "subpar" 1.7% in 2023. For 2022, it said a downturn in the final quarter resulted in trade growth of 2.7%, lower than its previous 3.5% forecast. The WTO said goods trade growth should rebound to 3.2% in 2024 as economic expansion picks up, but warned this forecast was particularly uncertain, with multiple downside risks. The WTO said trade growth had held up despite global tensions and the threat of fragmentation into competing trading blocs, which could reduce global economic output by 5%, had so far been avoided.

☆ Analysis: Grievances mount in Europe with future wealth in doubt
▼ + stars: | 2023-04-04 | by ( Mark John | ) www.reuters.com time to read: +5 min

That year-old conflict, the COVID-19 pandemic and an inflation-fuelled cost of living crisis have now brought things to a head. While many low-income U.S. workers discovered that post-lockdown labour shortages gave them leverage to negotiate solid wage increases, European workers initially prioritised job security over higher pay. Meanwhile the bump in corporate profits and shareholder gains started to aggravate a sense of inequality. The other option - allowing debt to rise further - looks tricky: European Union limits on deficits that were suspended after the pandemic will re-apply from 2024. The Macron and Scholz governments are seeking ways to allay the grievances, with Macron in particular suffering damage to his already weak personal popularity.

☆ Explainer: Oil price surge changes ECB narrative only at the margins
▼ + stars: | 2023-04-03 | by ( ) www.reuters.com time to read: +4 min

The following examines how higher crude prices - which jumped around 5.5% on Monday following the OPEC+ decision - could impact ECB policy. IS AN OIL PRICE SURGE INFLATIONARY? Part of the issue is that high energy prices slow growth further out and thus become deflationary because they reduce households' and businesses' purchasing power. "The case for more ECB rate hikes is still intact," UniCredit said in a note. If high energy prices spook the Fed, rate-cut bets will unwind and push up the dollar.

☆ Stubborn inflation keeps ECB on course for more rate hikes
▼ + stars: | 2023-03-31 | by ( Francesco Canepa | ) www.reuters.com time to read: +3 min

"The pressure on the ECB to continue raising interest rates remains high," Commerzbank economist Christoph Weil said. Consumer prices in the euro zone rose by 6.9% in March after an 8.5% increase in February, implying the biggest drop since Eurostat started collecting data in 1991. Analysts polled by Reuters had expected headline inflation in the 20 countries that share the euro to come in at 7.1% and core inflation at 7.5%. Strengthening the case for more tightening, euro zone unemployment remained stubbornly low at 6.6%. This is a concern for policymakers who fear it could give workers greater bargaining power in salary negotiations and lead to higher wage increases that could perpetuate high inflation.

☆ Euro zone inflation posts record drop but core prices accelerate
▼ + stars: | 2023-03-31 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, March 31 (Reuters) - Inflation in the euro zone dropped by the most on record in March but growth in core prices accelerated, Eurostat data showed on Friday, likely strengthening the case for more interest rate hikes by the European Central Bank. Consumer prices rose by 6.9% in March after an 8.5% increase in February, implying the biggest deceleration since Eurostat started collecting data in 1991. But an index that excludes energy and food prices, known by economists as core inflation and seen as a better gauge of the underlying trend, accelerated slightly to 7.5% from 7.4% in February. Analysts polled by Reuters had expected headline inflation in the 20 countries that share the euro to come in at 7.1% and core inflation at 7.5%. After a record streak of rate rises, the ECB has refrained from committing to more hikes, saying this will depend on whether the current turmoil in the banking sector subsides and on data including underlying inflation.

Despite the improvement, British economic output remained 0.6% below its level of late 2019, the only G7 economy not to have recovered from the COVID-19 pandemic. Ruth Gregory at Capital Economics said Friday's figures showed high inflation had taken a slightly smaller toll than previously thought. But the picture could darken again if recent turmoil in the global banking sector leads to lenders reining in loans. BUSINESS INVESTMENT FALLSThe data suggested businesses remained cautious. The ONS said increased foreign earnings by companies, particularly in the energy sector, helped narrow the deficit.

☆ ECB's Enria says market nervousness is a concern
▼ + stars: | 2023-03-28 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, March 28 (Reuters) - Recent volatility in Deutsche Bank (DBKGn.DE) shares was concerning as it showed investors were on edge and could be spooked by moves in the small market for credit default swaps (CDS), European Central Bank supervisor Andrea Enria said on Tuesday. The German bank's shares tumbled last Friday as the cost of insuring its debt against the risk of default jumped to a more than four-year high, intensifying worries about the health of Europe's financial sector. Enria said the CDS market is relatively small and illiquid, but that a selloff there could have broader ramifications for the much larger share market. "What concerned me really was the amount of nervousness, disquiet that I perceived in the market and among investors," Enria told a conference in Frankfurt. Enria argued that central clearing for credit default swaps would improve transparency, reducing the risk of volatility.

The fresh price falls in Europe came as investors were looking to see how far U.S. authorities would go to shore up the banking sector, particularly fragile regional lenders. REUTERS/Dado Ruvic/Illustration/File Photo 1 2CDS surge on banking sector turmoilUBS CHALLENGESThe global banking sector has been shaking since the sudden collapse this month of SVB and Signature Bank. But the worries spread quickly, and on Sunday UBS (UBSG.S) was rushed into taking over Swiss rival Credit Suisse after it lost the confidence of investors. Separate sources told Reuters that UBS has promised retention packages to Credit Suisse wealth management staff in Asia to stem a talent exodus. Standard Chartered (STAN.L) Chief Executive Bill Winters said on Friday the wipeout of Credit Suisse bondholders had "profound" implications for global bank regulations.

The global banking sector has been rocked since the sudden collapse this month of two U.S. regional banks sparked fears of contagion to other lenders. Separate sources told Reuters that UBS has promised retention packages to Credit Suisse wealth management staff in Asia to stem a talent exodus. Credit Suisse and UBS declined to comment, while the Justice Department did not immediately respond to Reuters' emailed requests for comment. The takeover of Credit Suisse has also ignited broader concerns about investors' exposure to a fragile banking sector. Standard Chartered (STAN.L) Chief Executive Bill Winters said on Friday the wipeout had "profound" implications for global bank regulations.

☆ Analysis: End of central bank rate hikes now firmly on the horizon
▼ + stars: | 2023-03-23 | by ( Balazs Koranyi | ) www.reuters.com time to read: +5 min

The U.S. Federal Reserve, the European Central Bank and the Bank of England all raised rates as expected in the last week, but each of them signalled caution about their next move, leaving investors unsure where borrowing costs are going. Central banks have also been quick. This is lightning-fast by central banking standards and ECB's Knot said policymakers needed to have a deeper look at how it is affecting lenders. Combined, these factors suggest that big central banks are nearly done, and that upcoming rate moves may be their last. If so, our view is that it could indeed substitute for further rate hikes," Michael Gapen at Bank of America said.

Fed Chairman Jerome Powell sought to reassure investors about the soundness of the banking system, saying that the management of Silicon Valley Bank "failed badly," but that the bank's collapse did not indicate wider weaknesses in the banking system. "These are not weaknesses that are running broadly through the banking system," he said, adding that the takeover of Credit Suisse seemed to have been a positive outcome. The Federal Open Market Committee policy statement also said the U.S. banking system is "sound and resilient." The much-anticipated rate cut by the Fed, which had delivered eight previous rate hikes in the past year, sought to balance the risk of rampant inflation with the threat of instability in the banking system. The banking sector has been in turmoil after California regulators on March 10 closed Silicon Valley Bank in the largest U.S. bank failure since the 2008 financial crisis.

The latest move to restore calm to restive regional bank stocks came as Pacific Western Bank (PACW.O), one of the regional lenders caught up in the market volatility, said it had raised $1.4 billion from investment firm Atlas SP Partners. While that deal brought some respite to battered banking stocks, First Republic (FRC.N) remains firmly in the spotlight. For now, the rescue of Credit Suisse appears to have calmed the worst fears of systemic contagion, boosting shares of European banks (.SX7P) and U.S. lenders (.SPXBK). Reuters Graphics Reuters Graphics'HEAD IN SAND'The wipeout of Credit Suisse's Additional Tier-1 (AT1) bondholders has sent shockwaves through bank debt markets. Seeking to boost confidence among investors rattled by its $3 billion Credit Suisse rescue, UBS said on Wednesday it would buy back 2.75 billion euros ($2.96 billion) worth of debt it issued less than week ago.

March 22 (Reuters) - U.S. authorities are set to explore ways to bolster financial stability, along with steps to tackle the problems facing First Republic Bank, as central banks assess whether turmoil in banking makes interest rate rises less pressing. SVB's collapse kicked off a tumultuous 10 days for banks which led to the 3 billion Swiss franc ($3.2 billion) Swiss engineered takeover of Credit Suisse by rival UBS (UBSG.S). While that deal brought some respite to battered banking stocks, U.S. lender First Republic (FRC.N) remains firmly in the spotlight. Reuters Graphics Reuters Graphics'HEAD IN SAND'The wipeout of Credit Suisse's Additional Tier-1 (AT1) bondholders has sent shockwaves through bank debt markets. For now, the Swiss bank rescue appears to have assuaged the worst fears of systemic contagion, boosting shares of European banks (.SX7P) and U.S. lenders (.SPXBK).

But an unexpected jump in UK inflation last month led investors to bet heavily that the Bank of England will raise interest rates by at least another 25 bps on Thursday. SVB's collapse kicked off a tumultuous 10 days for banks which led to the 3 billion Swiss franc ($3.2 billion) Swiss regulator-engineered takeover of Credit Suisse by rival UBS. While that deal brought some respite to battered banking stocks, U.S. lender First Republic remains firmly in the spotlight. First Republic (FRC.N) shares fell 9% in extended trade on Tuesday, having surged as much as 60% at one stage. For now, the Swiss bank rescue appears to have assuaged the worst fears of systemic contagion, boosting shares of European banks (.SX7P) and U.S. lenders (.SPXBK).

☆ Analysis: Market turmoil is doing central bankers' jobs for them
▼ + stars: | 2023-03-21 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +5 min

European Central Bank President Christine Lagarde reckons market turmoil may do some of the ECB's tightening for it if it dampens demand and inflation. Financial conditions reflect the availability of funding in an economy, so they dictate spending, saving and investment plans of businesses and households. Central banks have been trying to tighten them by raising rates to slow rising prices. Signs of tightening financial conditions were plentiful. "Central banks no longer have a good idea about the true tightness of monetary policy," he said.

Credit Suisse staff had already been seeking to jump ship in recent weeks, sources told Reuters. "Many Credit Suisse bankers had already been talking to a lot of people for a while [about leaving the Swiss bank]. An executive at a rival London-based wealth manager said they had seen a steady flow of CVs coming in from Credit Suisse bankers. UBS told Credit Suisse wealth bankers on Monday that it was weighing financial sweeteners for them to stay, as it seeks to reassure key staff. Some experts have said Britain's financial services industry could ultimately benefit from recent bouts of turmoil in the United States and Switzerland.

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