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☆ Sticky inflation fuels some of ECB's worst fears
▼ + stars: | 2023-03-02 | by ( Balazs Koranyi | ) www.reuters.com time to read: +4 min

Overall inflation eased a touch to 8.5% last month from 8.6% in January, data on Thursday showed. But nearly all the drop came from lower energy costs, while prices for most other items - including food, services and durable goods - surged again, confirming the worst fears of some ECB policymakers. A jump in underlying inflation - to 5.6% from 5.3% - reinforces already copious evidence that past price rises are filtering down into the broader economy, including via wages. "Core inflation and other measures of underlying inflation were likely to be stickier, with only limited evidence of a stabilisation so far," the ECB said in the accounts of the Feb. 1-2 meeting. "In particular, we upgrade (the rate hike view in) May from 25bp to 50bp, which takes our terminal rate forecast to 3.75% in June."

☆ Euro zone inflation eases in February but core prices surge
▼ + stars: | 2023-03-02 | by ( ) www.reuters.com time to read: +3 min

Indeed, underlying inflation, which filters out volatile food and fuel prices, an indicator closely watched by the ECB, jumped to 5.6% from 5.3%, coming well above expectations for a steady reading. Price growth in services, the biggest component in core inflation, accelerated to 4.8% from 4.4%, a big worry since the sector is especially sensitive to wage growth and the rise suggests an acceleration in labour costs. "High wage increases could imply that especially service price inflation could remain elevated in 2023-2024," Nordea analysts said in a note. "Given that the weight of services in the headline inflation is 44% and in core inflation 62%, elevated service price inflation will keep also the aggregate level inflation high." Industrial goods inflation meanwhile picked up to 6.8% from 6.7% while unprocessed food price growth surged to 13.6% from 11.3%.

[1/5] An employee prepares online grocery orders in the storage area of Czech online grocer Rohlik Group in Prague, Czech Republic February 1, 2023. HUGE GROWTH POTENTIAL Rohlik, founded in 2014, leads the Czech market by mainly targeting customers in big cities through its string of distribution warehouses. "Competition is still mainly driven by stationary retail but a small number of online grocery players are gearing up in each market to become leading e-grocery platforms." KOSIK TURNS EASTAs Rohlik bets on Germany, Kosik is looking eastward, entering the Slovak market and expanding in Bulgaria. CEO Ivan Utesil said the company would also seek to cut into Czech market share by capitalising on its tie-in with German wholesaler Metro (B4B.DE) in some regional areas.

[1/2] Customers shop at a mall ahead of the Chinese Lunar New Year, in Beijing, China January 15, 2023. REUTERS/Tingshu Wang/File PhotoLONDON/MILAN/FRANKFURT/NEW YORK, March 1 (Reuters) - The world's top consumer and luxury goods companies have seen sales of everything from cosmetics to condoms grow in China since Beijing ended strict COVID-19 curbs, another sign that the world's No. Tourism from China was helping sales in neighbouring Macau, Hong Kong, Taiwan and even Japan, he added. Reckitt Benckiser, which makes Nurofen tablets, cold remedy Lemsip and Durex, saw a pick-up in China after a decline in volumes because of lockdowns. U.S. retailer Walmart Inc (WMT.N), which operates nearly 400 retail and wholesale stores in China, reported strong traffic in its stores since reopening.

☆ Medical tourism looking sickly as patients watch their spending
▼ + stars: | 2023-02-27 | by ( Joanna Plucinska | ) www.reuters.com time to read: +5 min

"People are more cautious," Knott told Reuters, staring at the empty building across the street from his existing Kreativ Dental clinic. Rising air fares and fewer flights - and the memory of last summer's travel chaos - are also putting off would-be patients, clinic operators and analysts told Reuters. A hip or knee replacement at Nordorthopaedics in Lithuania is about 15% more expensive now than five years ago, the clinic told Reuters. Lyfboat, an Indian company providing medical services for foreign patients, told Reuters it has collaborated with a fundraising platform called ImpactGuru to help patients pay for essential surgeries. ACUTE VS ELECTIVEThe International Medical Travel Journal, published by market intelligence service LaingBuisson, estimates the medical tourism market is currently worth around $21 billion, less than pre-pandemic, although editor Keith Pollard warned data is poor.

☆ Wealthy G7 nations gearing up for new volley of sanctions on Russia
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +2 min

Leaders of the bloc of developed nations will meet virtually on Friday with Ukrainian President Volodymyr Zelenskiy to mark the one-year anniversary of Russia's invasion, and are expected to announce the sanctions package. Current G7 president Japan said it was considering new measures, without giving any details, and called for a unified stance towards Moscow. "Russia is refusing to change their hardline stance," Japanese Prime Minister Fumio Kishida said at a news conference to mark the anniversary. India, which has maintained a neutral stance on the conflict, does not want the G20 to discuss additional sanctions on Russia. Speaking at the G20, U.S. Treasury Secretary Janet Yellen accused Russian officials of being "complicit" in atrocities in Russia's invasion of Ukraine.

☆ Analysis: Russian economy holding up but the road back to prosperity may be long
▼ + stars: | 2023-02-23 | by ( Alexander Marrow | ) www.reuters.com time to read: +6 min

"The Russian economy and system of governance proved to be much stronger than the West supposed," President Vladimir Putin told Russia's political, military and business elite this week. 'GUNS NOT BUTTER'He also argued for sustainable domestic development and a self-sufficient economy, recalling a criticism levelled against Soviet leaders so focused on military spending they ignored people's welfare. But Russia is ramping up military spending, and diverting funds from hospitals and schools will ultimately hamper the development of civilian economic infrastructure. Prokopenko, who also highlighted the opportunity cost to the economy, said Russia's financial leadership had become used to navigating crises. Putin can be proud of his 'Fortress Russia' that his financial leadership built for him," she said.

☆ ECB posts loss as it pays price for its own rate hikes
▼ + stars: | 2023-02-23 | by ( ) www.reuters.com time to read: +2 min

While the 1.6 billion euro ($1.7 billion) loss was entirely covered by provisions, it raises questions about whether the ECB might one day run out of such buffers and who will foot the bill of its past largesse now that inflation is back and rates high. Most of the loss revealed on Thursday came from writedowns in the ECB's relatively small own-funds and U.S. dollar portfolio, and from the interest it paid to central banks of euro zone member countries. The central bank for the euro zone, which now has 20 member countries, has still 6.6 billion euros worth of provisions, 8.9 billion euros of capital and 36.1 billion euros in a "revaluation account" designed to cover market losses. If these buffers were to become depleted, it could ask its shareholders - the 20 national central banks of the euro zone - for a capital increase or, more likely, carry the losses forward into future years. Some of the euro zone's largest national central banks will also present their annual reports in the coming weeks.

☆ Analysis: Shock of war hits a world economy at the crossroads
▼ + stars: | 2023-02-10 | by ( Mark John | ) www.reuters.com time to read: +6 min

But its deeper impact will be felt in how the conflict plays into shifts that were already reshaping the global economy before Russia's tanks rolled in. Economic sanctions on Moscow came as hurdles to world trade were mounting after an era of rapid globalisation. Reuters GraphicsReuters GraphicsReuters GraphicsNO ENDGAME IN SIGHTSome might conclude that means the world economy has taken the conflict in its stride. That would take the outlook for both the global economy and wider peace into uncharted territory. For the economy, the risk is that energy prices - and hence inflation - will be squeezed higher if shortfalls are not met.

☆ What is Bank of England watching as it considers peak in rates?
▼ + stars: | 2023-02-06 | by ( Andy Bruce | ) www.reuters.com time to read: +3 min

At a news conference on Thursday, BoE officials outlined the economic indicators they will be watching most closely as they weigh up whether to raise rates again, or leave them at 4%. Official wage growth data also shows record growth in private sector earnings, excluding the coronavirus pandemic period when pay was distorted by government support. Long-run inflation expectations, as measured by the Citi/YouGov survey, have returned within touching distance of their pre-pandemic norm of just above 3%. The strength of inflation in services - which largely reflects domestic price pressures, unlike goods which are typically imported - is one source of unease. Members of the Monetary Policy Committee see that data as a gauge of underlying inflation in the economy.

☆ ECB lays out balance sheet run-off, will further favour green firms
▼ + stars: | 2023-02-02 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +3 min

The ECB is laying out details after it announced in December it would run bonds off its balance sheet at an average pace of 15 billion euros per month from March through June. The ECB will allocate proceeds remaining after the rundown proportionally to upcoming maturities across its public sector, corporate, covered bond and asset-backed security portfolios, it said in a statement. For its public sector holdings, it will reinvest in proportion to upcoming redemptions by each country and across governments versus supranational debt, the bank said. The ECB said it will also would skew remaining corporate debt reinvestments "more strongly" towards companies with a better climate performance, enhancing a process it first started in October. By raising longer-term borrowing costs, the winding-down of its bond portfolio should tighten financial conditions, making it more expensive for firms and governments to borrow.

Softening their forecasts of recession this year, the BoE's nine interest rate-setters voted 7-2 to increase Bank Rate to 4.0% - its highest since 2008 - from 3.5%. The announcement comes a day after the U.S. Federal Reserve slowed the pace of its rate hikes with a smaller quarter-point move, but said it expected further increases would be needed. The European Central Bank raised rates by a half a percentage point on Thursday to 2.5%. They said further interest rate hikes would hinge on evidence of more persistent price pressures appearing. That represented a signal to investors that its sharp run of rate hikes might be coming to an end.

☆ ECB governors see at least two more rate hikes, sources say
▼ + stars: | 2023-02-02 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, Feb 2 (Reuters) - European Central Bank policymakers left Thursday's meeting expecting at least two more rate hikes, although differences remained about their pace and final destination, two members of the ECB's rate-setting Governing Council told Reuters. That was seen a possible terminal rate by some policymakers while others envisaged rate increases continuing through the summer to even higher levels. The sources said Thursday's decision was easily reached, with only a small minority of policymakers feeling it was too early to commit to a March rate hike worth 50 basis points. At a news conference after Thursday's decision, ECB President Christine Lagarde said the central bank had "ground to cover" in raising rates and that disinflation hadn't started yet in the euro zone. Reporting by Francesco Canepa and Balazs Koranyi; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

This would take the rate the ECB pays on bank deposits to the highest level since November 2008, after a steady climb from a record low of -0.5% in July. Reuters GraphicsThe ECB said in December that rates would be increased "at a steady pace" until it is happy inflation is heading back down to its 2% target. BNP Paribas also thought the ECB might take out the reference to a "steady pace" of rate hikes or offset it so that a 50-basis-point increase would be "not predetermined (but) still a possible outcome". And an ECB survey showed banks were tightening access to credit by the most since the 2011 debt crisis - usually the harbinger of lower growth and slowing inflation. To some observers, this meant the ECB would be wise not to commit to any future policy move.

☆ Sticky underlying inflation set to keep ECB on its toes
▼ + stars: | 2023-02-01 | by ( ) www.reuters.com time to read: +4 min

The drop in headline inflation is unlikely to expunge concerns among conservative policymakers that rapid price growth is becoming entrenched, a worry reinforced by high underlying inflation on Wednesday. Inflation excluding volatile food and fuel prices picked up to 7% from 6.9% while an even narrower measure watched closely by the ECB held steady at 5.2%, exceeding forecasts for 5.1%. Underlying inflation was driven by a jump in processed food and industrial goods prices but services inflation, a key worry because it reflects wage growth, eased a touch. Euro zone unemployment held steady at 6.6% in December, its lowest rate on record, separate data showed on Wednesday. Markets now expect ECB rates to peak at 3.5%, the highest rate in over 20 years, suggesting another 100 basis points of hikes after Thursday's move.

In recent years some euro zone countries have sought to rein in temporary contracts to promote stable jobs. It also plans to reduce the labour tax costs to employers of temporary contracts, which were raised in 2018. The reform reversed the easy hire-and-fire regime put in place after the sovereign debt crisis a decade ago by abolishing most forms of temporary contracts. Within that total, the number of temporary workers has jumped by 25% from 2.4 million to 3.0 million. Stable contracts should be the norm, not the exception," she said.

☆ Euro zone economy unexpectedly expands in Q4, avoids recession
▼ + stars: | 2023-01-31 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, Jan 31 (Reuters) - The euro zone eked out growth in the final three months of 2022, avoiding a recession even as sky-high energy costs, waning confidence and rising interest rates took a toll on the currency bloc's economy, data from Eurostat showed on Tuesday. Gross domestic product in the euro zone expanded by 0.1% in the fourth quarter, outperforming expectations in a Reuters poll for a 0.1% drop. Among the bloc's biggest countries, Germany and Italy recorded negative growth rates for the quarter but France and Spain expanded, Eurostat added, based on a flash estimate that is subject to revisions. Russia's nearly year-old war in Ukraine has proved costly for the euro zone, which now spans 350 million people in 20 countries, given some members' heavy reliance on cheap energy. But the economy has displayed some unexpected resilience, too, much like during the COVID-19 pandemic, when growth outperformed expectations as businesses adjusted faster to changed circumstances than policymakers had predicted.

☆ Euro zone economy unexpectedly grows in Q4 but weak 2023 looms
▼ + stars: | 2023-01-31 | by ( Balazs Koranyi | ) www.reuters.com time to read: +3 min

Among the biggest euro zone countries, Germany and Italy recorded negative growth rates for the quarter but France and Spain expanded, Eurostat added, based on a flash estimate that is subject to revisions. Russia's nearly year-old war in Ukraine has proved costly for the euro zone, which now spans 350 million people in 20 countries, given some members' heavy reliance on cheap energy. The overall picture nevertheless remains weak, with meagre growth forecast for 2023 due to a large drop in real incomes and surging interest rates. Ireland's 3.5% Q4 growth figure distorted the overall picture as it was driven largely by activity among big foreign companies based there for tax reasons, economists said, adding that without Ireland, euro zone growth would have been zero. "We continue to expect the euro area economy to contract slightly in the first half of the year, and the recovery expected in the second half is likely to be weak."

☆ H&M highlights fast-fashion gloom as luxury takes hit in China
▼ + stars: | 2023-01-27 | by ( ) www.reuters.com time to read: +4 min

Shares in H&M, the world's No. 2 fashion retailer, fell as much as 6% in early trade after quarterly operating profit sank to 821 million Swedish crowns ($79.7 million) from 6.26 billion a year earlier. Zara has outperformed rivals after selling higher-priced garments and enticing shoppers who might have otherwise spent money at luxury stores. Disappointment over the impact of the China disruptions on its margins caused a record-breaking run in LVMH shares to briefly halt on Friday. The luxury industry is nevertheless expected to be one of the biggest winners from the loosening of restrictions that kept shoppers out of stores in China for months.

☆ Europe Inc earnings offer market optimists more hope
▼ + stars: | 2023-01-25 | by ( ) www.reuters.com time to read: +5 min

Shares in ASML were lower after the results, having rallied recently to hit their highest since last April. Helped by strong orders in Europe, French train maker Alstom (ALSO.PA) posted an 8% rise in third-quarter sales. While it is still early in the corporate earnings season, the results offer some hope that recent economic data which has buoyed equities this month is grounded in reality. Swiss asset manager GAM (GAMH.S) meanwhile warned on profits after experiencing negative asset flows, knocking its shares 2.5% lower in early morning trading. ($1 = 0.8115 pounds)Reporting by Reuters newsroom; Writing by Josephine Mason; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

"That would be a problem for any central bank." TUG OF WARLagarde's commitment also puzzled ECB-watchers because the central bank had previously said it wouldn't make such public predictions - known as forward guidance - anymore, but instead take each decision based on incoming data. This of course leads to a tug of war between the ECB and the markets on the narrative," he added. ING's Brzeski said the ECB lacked a clear thought-leader on its Governing Council who could steer markets like Lagarde's predecessor, Mario Draghi. "The cacophony of diverging voices and the lack of clarity on who is the leading voice keeps hurting the ECB," Brzeski said.

☆ Italy set to appoint veteran economist Barbieri as new Treasury head
▼ + stars: | 2023-01-19 | by ( Giuseppe Fonte | ) www.reuters.com time to read: +3 min

SummarySummary Companies Barbieri to replace Rivera, who failed to win over MeloniPrevious Treasury chiefs include former PM DraghiBureaucrats in Italy get substantial say in policy-makingROME, Jan 19 (Reuters) - Italy's government is set to appoint veteran economist Riccardo Barbieri as director general of the Treasury, replacing Alessandro Rivera in the influential position, the economy ministry said on Thursday. The move marks a victory for newly installed Prime Minister Giorgia Meloni, who was looking to remove Rivera and put her stamp on key positions. "A cosmopolitan former banker and chief economist, Barbieri is one of the Treasury senior officials who liaises more frequently with Brussels," said Francesco Galietti, head of political risk consultancy Policy Sonar. MPS is 64%-owned by the Treasury following a 2017 bailout that cost taxpayers 5.4 billion euros ($5.8 billion). Rivera spent much of his career within the economy ministry, specialised in the handling of banking and financial crises.

☆ Davos 2023: China recovery could be very quick -IMF's Gopinath
▼ + stars: | 2023-01-18 | by ( ) www.reuters.com time to read: +2 min

DAVOS, Switzerland, Jan 18 (Reuters) - China could see a sharp recovery in economic growth from the second quarter onwards based on current infection trends after the dismantling of most COVID-19 restrictions, IMF Deputy Managing Director Gita Gopinath said on Wednesday. "We expect growth in China to come back, to rebound," Gopinath told Reuters in an interview at the World Economic Forum in Davos. Economists polled by Reuters see Chinese growth in 2023 at around 4.9%, with some of them recently upgrading forecasts to around 5.5%. "But if growth in China comes in much more strongly, which is a possibility, then we could see another spike in oil prices or energy prices," she said. Reporting by Alessandra Galloni and Mark John in Davos; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

☆ Exclusive: ECB union says staff losing faith in leadership over inflation, pay
▼ + stars: | 2023-01-18 | by ( Francesco Canepa | ) www.reuters.com time to read: +5 min

The responses underline that even central banks, whose primary responsibility is fighting inflation, are not immune to staff dissatisfaction with the sharply rising cost of living. Results of IPSO's survey, which largely focused on pay and remote-working arrangements but also included questions about trust in the board, were sent to ECB staff on Tuesday in an email, seen by Reuters. INFLATION SURGE, PAY BATTLESThe survey was the first by IPSO to ask about trust in top management since Christine Lagarde took over as ECB President in late 2019. The most recent Bank of England staff survey, also conducted in 2019, showed 64% of respondents had "trust and confidence in the Bank's leadership". "The ECB might be preaching lower real wages, but this is not our stance as your staff union," it wrote in its message to ECB employees.

☆ Luxury eyes focused on China after Richemont's Q3 sales miss
▼ + stars: | 2023-01-18 | by ( John Revill | ) www.reuters.com time to read: +3 min

SummarySummary Companies Q3 sales rise by 8% but miss market forecastsMainland China sales drop 24%Company says customer demand in China now picking upAll eyes on China for luxury sector, say analystsZURICH, Jan 18 (Reuters) - Cartier jewellery maker Richemont (CFR.S) missed market forecasts during its latest quarter as the resurgence of COVID-19 in China hit sales there, highlighting the country's importance for the luxury sector. Richemont, whose other brands include Swiss watchmakers IWC and Jaeger-LeCoultre, has been seeing strong sales growth in Europe, the Middle East and Japan, particularly for jewellery. But the mainland Chinese market - which accounts for about a fifth of the group's sales, according to Zuercher Kantonalbank estimates - struggled with sales down 24% in constant currency terms. The prospect of a pickup in Chinese sales meant analysts were not too worried by Richemont's quarterly miss. "The catch-up from Chinese consumers will come as strong as sales decelerated in 3Q, as they were able to save money during the lockdowns."

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