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Europe-wide inflation data is due at 0900GMT. French inflation data on Friday also came in a whisker above expectations, and Dutch inflation also rose. "Inflation data in the eurozone will be an important driver, (for the euro)" said Francsco Pesole, FX strategist at ING, who expects the euro to reach $1.10 some time next week, after consolidating today. The dollar has also been dragged back as the focus on the U.S. banking sector in March caused U.S. interest rate markets to dramatically reprice the outlook. Both currencies found support from expanding Chinese manufacturing activity, though data on Friday showed the pace was slowing down.

☆ Slower China factory activity growth challenges economic recovery prospects
▼ + stars: | 2023-03-31 | by ( ) www.reuters.com time to read: +4 min

China's economic activity picked up in the first two months of 2023 as consumption and infrastructure investment drove a recovery after the end of COVID-19 disruptions and retail sales swung back to growth. "However, amid rapidly worsening geopolitical tensions and financial concerns outside of China, this may not last long," they added in a note. While business and consumer sentiment is starting to pick up, the manufacturing sector remains under pressure amid sluggish global demand and stubbornly high costs. Any fallout from a recent crisis of confidence in the global banking sector could also affect demand for China's goods, adding to pressure on manufacturers. Factory activity was hit by slowing growth in production and customer demand, with the output and new orders sub-indexes showing declines from February's levels.

☆ Japan unveils fresh childcare plan but funding unclear
▼ + stars: | 2023-03-31 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

Under the plan, the government will take steps such as expansion of child allowances to be given without income limits. While the government has earmarked 6.1 trillion yen ($45.90 billion) for steps to arrest the declining number of children, a senior ruling party lawmaker was quoted by media as demanding an additional 8 trillion yen to fund the new measures. "A boost to child allowances alone could cost 2-3 trillion yen. "Everyone acknowledges childcare support is important given Japan's need to boost the growth rate. "Opposition parties also have no objection to boost childcare spending," said political analyst Atsuo Ito.

☆ China's debt-heavy local governments look for new ways to raise cash
▼ + stars: | 2023-03-27 | by ( Evelyn Cheng | ) www.cnbc.com time to read: +5 min

Future Publishing | Future Publishing | Getty ImagesBEIJING — Debt-heavy local governments in China need new ways to raise money under a central regime that's made clear its priority is to reduce financial risks. "We should ... prevent a build-up of new debts while working to reduce existing ones," the report said regarding local governments' situation. S&P and other analysts estimate land sales account for about a quarter of local governments' total revenue. But local governments still have bills and public services to pay for. Historically, local governments were responsible for more than 85% of expenditure but only received about 60% of tax revenue, Rhodium Group said in 2021.

The remainder was equity checks by the private equity firms. Typically, debt accounts for between 60% and 80% of the deal consideration, allowing the buyout firms to juice returns. REFINANCING RISKTo be sure, a handful of private equity firms have already been accustomed to this kind of refinancing risk. An upside to the shift toward equity financing, dealmakers say, is that the companies owned by the private equity firms have more cushion to absorb losses if their business deteriorates. Many of the leveraged buyouts that became bankruptcies in the wake of the 2008 financial crisis were the result of private equity firms saddling companies with debt to the hilt.

NEW YORK, March 23 (Reuters) - A U.S. judge on Thursday denied Archegos Capital Management LP founder Bill Hwang's effort to dismiss an indictment accusing him of fraud in the collapse of his once-$36 billion firm. U.S. District Judge Alvin Hellerstein in Manhattan rejected arguments that the 11-count indictment should be tossed because prosecutors deceived Hwang into cooperating with their probe and because Hwang's trading activity had been lawful. Authorities said Hwang concealed the size and riskiness of his bets by spreading his borrowing among several banks. When the prices of some stocks fell, Hwang was unable to meet margin calls, leading banks to dump stocks backing his swaps, and causing losses for Archegos and others. The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No.

☆ Most Asian shares reverse early losses after US Fed raises rates by a quarter point
▼ + stars: | 2023-03-23 | by ( Juliana Liu | ) edition.cnn.com time to read: +1 min

Hong Kong CNN —Most Asia Pacific shares pared early losses on Thursday, after the US Federal Reserve reaffirmed its dedication to bring down inflation. The broader Topix index was 0.3% lower, reversing some of its early morning losses. South Korea’s Kospi was 0.2% higher, while Australia’s S&P ASX 200 advanced by half a percentage point. Asian shares had opened broadly lower, tracking losses on Wall Street. The Fed raised rates by a quarter point at the conclusion of its two-day meeting, even though its historic rate hiking campaign was a contributing factor in the banking crisis.

Last year it breached liquidity requirements at some of its entities after an unsubstantiated social media report sparked client exits. In the U.S., the decision to insure all bank deposits after SVB was shuttered surprised many. QUICKLY DISAPPEARSome in the banking industry play down the risks of another SVB-style downfall spurred by social media. Regulators will also need to monitor social media and develop a set of protocols to guide how they respond, according to Patricia McCoy, a law professor at Boston College. "They need to be looking for any signs of unsubstantiated rumors, panic starting to mount on social media, and they've got to do it around the clock," she said.

☆ UK inflation sucker-punches the BoE, while sterling bulls cheer
▼ + stars: | 2023-03-22 | by ( Amanda Cooper | ) www.reuters.com time to read: +4 min

British consumer price inflation (CPI) rose to 10.4% in February from January's 10.1%, above all economists' forecasts in a Reuters poll and almost back to where it was in December. "Core CPI missed by 0.5% - that's one of the biggest, if not the biggest misses on CPI in the recent series of inflation data. "The market is going to be second-guessing (the BoE) right now - it's difficult to assume there's just one more rate hike left in the tank," she said. RLAM's Nicholl noted recent data, such as employment, business activity and manufacturing, had shown strength, and consumer spending has held up. Derek Halpenny, EMEA head of research for global markets at Nomura said January and February's combined annual inflation rate of 9.67% makes for a "mildly supportive" outlook for the pound.

☆ Credit Suisse reinforces Japan’s offshore anxiety
▼ + stars: | 2023-03-21 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

HONG KONG, March 21 (Reuters Breakingviews) - The crisis at Credit Suisse has traders wondering who’s next. Japanese lenders, with their staid depositor bases, look like unlikely targets for bank runs. Yet the rising cost of short-term dollar and euro credit, combined with extreme yen volatility, have made hedging much more expensive. Domestic commercial lenders alone held $600 billion of international debt securities at the end of 2022, and some look overexposed. Take Japan Post Bank (7182.T), a $32 billion institution whose parent is partly owned by the Ministry of Finance.

☆ Global banking turbulence prompts Wall Street banks to trim hawkish Fed bets
▼ + stars: | 2023-03-20 | by ( Susan Mathew | ) www.reuters.com time to read: +3 min

Peer Citigroup sees a smaller 25 bps hike, down from a 50 bps hike forecast earlier in the month. The brokerage started with a 50 bps hike and then changed to a pause following the collapse of SVB Financial. It now sees a 25 basis points hike. Nomura expects a 25 bps rate cut at the end of the Fed's two-day meeting on Wednesday. Major investment banks now expect the ECB to deliver a 25 bps hike in May.

☆ A 27-year market vet warns that regional banks will be more reluctant to loan money to their communities in the wake of the Silicon Valley Bank closure — pulling forward a recession and causing stocks
▼ + stars: | 2023-03-18 | by ( William Edwards | ) www.businessinsider.com time to read: +6 min

Depositors at other banks may fear for the security of their money, and rush to withdrawal all at once. "If those lending standards tighten, that's going to cramp consumer spending — 70% of the economy — you drag forward the recession." Naturally, such a drag on consumer spending will hurt corporate earnings, leading investors to discount forward earnings expectations, Roberts said. Right now, the median 2023 earnings per share target among major Wall Street strategists is $210. That probability level is low relative to the rest of Wall Street, according to a Wall Street Journal survey that show a median probability of 65%.

NEW YORK, March 17 (Reuters) - Whipsawed U.S. stocks have gained an unexpected ally in recent days - a historic plunge in bond yields. The volatility in fixed income markets has unsettled investors, and falling yields can reflect expectations that the Fed will cut rates because of a hit to growth. The index finished up 1.4% for the week, with strength in technology stocks outweighing sharp declines in bank shares. Tech stocks vs US bond yieldsThe near-term trajectory of yields will likely hinge on next week's Federal Reserve meeting. The S&P 500 trades at 17.5 times forward earnings estimates compared to its historic average P/E of 15.6 times, according to Refinitiv Datastream.

That would come after the European Central Bank's decision on Thursday to follow through with a 50 basis point rise it pre-announced in February, prioritizing sticky inflation. Only five respondents in the latest Fed poll expected a pause, including four primary dealers, with only one bank, Nomura, expecting a 25 basis point cut. "The past week's financial turmoil will give the Fed some misgivings about pushing rates much higher," said Bill Adams, chief economist at Comerica Bank. Mericle expects more hikes however, with a peak rate of 5.25%-5.50% in Q3, higher than the poll median. Meanwhile the labor market is showing few signs of weakness, with unemployment rate forecasts broadly lower compared with last month's poll.

☆ Japan's big firms offer largest pay rises in decades
▼ + stars: | 2023-03-15 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +4 min

The Rengo umbrella labour group has called for a 5% pay increase. The JERC survey showed that excluding seniority-based pay, base compensation that boosts fixed labour costs accounts for just 1.08%. "We need to focus on base pay. Workers from Japan's largest group of trade unions last week struck early agreements for hefty wage hikes. Unions have historically tended to settle for relatively meagre pay hikes around 2% in recent years, as unions are inclined to cooperate with management in keeping job security rather than aggressively demanding pay rises.

☆ The SVB crisis may prompt the Bank of Japan to delay policy changes, says former board member
▼ + stars: | 2023-03-15 | by ( Jihye Lee | ) www.cnbc.com time to read: +1 min

"The second half of next year is [the] possible timing for when the Bank of Japan will end its negative interest rate policy," said former Bank of Japan board member Takahide Kiuchi (pictured here in 2017). Japan's central bank could delay any changes to its monetary policy in light of the turmoil that the Silicon Valley Bank crisis has triggered in financial markets, a former board member told CNBC. And any changes to its ultra-dovish stance could be delayed by as much as a year, said Nomura Research Institute economist Takahide Kiuchi, who served on the Bank of Japan's policy board from 2012 to 2017. "I think that the new governor's monetary policy could be affected by the financial market conditions if the current instability of the financial markets continue," Kiuchi said in an interview with CNBC. "The second half of next year is [the] possible timing for when the Bank of Japan will end its negative interest rate policy," he said.

☆ Japan's big firms set to offer biggest pay rises in decades
▼ + stars: | 2023-03-14 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

Given that consumer inflation, at 4.1%, outpace wage hikes, pay rises of 3% or more need to continue in the coming years to sustain price stability at 2%, said Hisashi Yamada, senior economist at Japan Research Institute. "Average wage hikes that are consistent with the central bank's 2% price target are 3% which can be met this year albeit temporarily," Yamada said. Kishida's government will likely hold a joint three-party meeting with labour and management for the first time in eight years on Wednesday to ensure structural wage hikes. Workers from Japan's largest group of trade unions last week struck early agreements for hefty wage hikes. 1 automaker, and Honda, have also secured their biggest pay rises in decades.

Worries about potential contagion had also slammed bank shares in Asia and Europe as investors re-examined their risks, despite assurances from U.S. President Joe Biden and other global policymakers that the financial system is safe. In Europe, where some see lenders as less vulnerable, the banking index (.SX7P) first fell then recovered to rise 2.7%. Asian banking stocks had extended their declines overnight, with Japanese banks hard-hit despite reassurances from the Bank of Japan said about their capital buffers. Regulator FDIC had moved swiftly to close New York's Signature Bank SBNY.O as well as taking control of SVB. Citing people familiar with the matter, the WSJ said the investigators are also examining stock sales that SVB Financial Group's executives made days before SVB failed, adding that the Justice Department's probe involves the department's fraud prosecutors in Washington and San Francisco.

Banking giants Citi (C.N), Wells Fargo (WFC.N) and JP Morgan (JPM.N) were also 1%-3% higher in the pre-market. Japanese financial institutions have sufficient capital buffers to absorb losses caused by external factors, including risks caused by SVB's collapse, the Bank of Japan said. Traders currently see a 50% chance of no rate hike at that meeting, with rate cuts priced in for the second half of the year. The prospect of higher rates had been "the reason investors have been really excited about Japan bank stocks", Ikeda added. We just ask for a little bit of time because of the volume," FDIC employee Luis Mayorga told waiting customers.

[1/2] Customers wait in line outside a branch of the Silicon Valley Bank in Wellesley, Massachusetts, U.S., March 13, 2023. REUTERS/Brian SnyderMarch 14 (Reuters) - Silicon Valley Bank's collapse continued to pound global bank stocks on Tuesday as investors fretted over the financial health of some lenders, despite assurances from U.S. President Joe Biden and other policymakers. The European banks index (.SX7P) fell 0.6% after posting its biggest percentage loss in more than a year on Monday. "Bank runs have started (and) interbank markets have become stressed," said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey. The prospect of higher interest rates had been "the reason investors have been really excited about Japan bank stocks", Ikeda added.

Starbucks (SBUX.O) warned of a "cautious" recovery in its China sales. "Consumers have become more meticulous in their spending," its chief executive, Xu Lei, said in an earnings call on Thursday. "Now the Chinese tourists are either super rich or very poor," said the owner, who spoke on condition of anonymity. "This suggests that once the initial reopening rebound has happened, we shouldn't expect a further surge in consumer spending," he wrote in a note to clients. ($1 = 6.8780 Chinese yuan renminbi)Editing by Marius Zaharia and Bradley PerrettOur Standards: The Thomson Reuters Trust Principles.

"Bank runs have started (and) interbank markets have become stressed," said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey. A furious race to reprice interest rate expectations also buffeted markets as investors bet the Federal Reserve will be reluctant to hike next week. Traders currently see a 50% chance of no rate hike at that meeting, with rate cuts priced in for the second half of the year. The prospect of higher interest rates had been "the reason investors have been really excited about Japan bank stocks." After marathon weekend talks, HSBC HSBA.L said it was buying the British arm of SVB for one pound ($1.21).

☆ The Fed's been aggressively hiking rates over the past year. The banking crisis could force them to halt the hikes — or even cut them, analysts say.
▼ + stars: | 2023-03-14 | by ( Huileng Tan | ) www.businessinsider.com time to read: +3 min

Nomura economists expect the Fed to cut interest rates by 0.25 percentage points next week. That's because bond prices and yields have an inverse relation, so when interest rates drop, prices bond prices tend to go up, which could alleviate losses. The Fed hiked interest rates eight times over the past year to its targeted levels of 4.5% to 4.75% now. On Sunday, investment banking giant Goldman Sachs said it doesn't expect the Fed to hike interest rates at its next meeting. The investment banking giant was previously expecting the US central bank to hike the rate by 0.25 percentage points.

☆ The Fed faces a 'no-win situation' but must keep raising interest rates anyway, former FDIC and Fed official says
▼ + stars: | 2023-03-14 | by ( Matt Egan | ) edition.cnn.com time to read: +3 min

It’s a no-win situation for them,” Hoenig, the former vice chair of the Federal Deposit Insurance Corporation, told CNN in a phone interview on Monday. Raising interest rates at the Fed’s monetary policy meeting next week could add to the financial pressure facing the banking system, in part by further depressing the value of the bonds that banks are sitting on. But Hoenig, who led the Kansas City Fed during the 2008 financial crisis, urged the Fed to keep hiking rates because inflation hasn’t gone away. Nomura is going a step further, predicting the Fed will completely reverse course and start cutting interest rates next week and halt the shrinkage of its balance sheet. Hoenig said he would be “disappointed” if the Fed started to cut interest rates now, warning of “long-run consequences” that could invite a repeat of 1970s-style runaway inflation.

☆ Bank runs don’t change Fed’s focus on high prices
▼ + stars: | 2023-03-14 | by ( Ben Winck | ) www.reuters.com time to read: +3 min

The federal government took emergency action to stave off other implosions, but SVB’s collapse cast a shadow over the Fed’s next rate decision. Economists at Goldman Sachs and Barclays scrapped their forecasts for a rate hike and now expect the central bank to hold rates steady when it meets on March 22. That is three times the central bank’s inflation target. Inflation remains much too hot for the Fed’s liking, and the central bank has more reason to repeat February’s 25-basis-point hike than to deviate from it. Its last policy meeting concluded with the central bank lifting the federal funds rate by 25 basis points to a range of 4.5% to 4.75%.

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