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☆ Morning Bid: Markets labor under recession cloud
▼ + stars: | 2023-04-05 | by ( ) www.reuters.com time to read: +5 min

A look at the day ahead in U.S. and global markets from Mike Dolan. If the tight U.S. labor market is finally unwinding, markets suspect the Federal Reserve's job may well done after all - but at the cost of a looming recession. With Wednesday's private sector jobs reading for March and Friday's national payrolls report ahead, U.S. interest rate markets were jolted again on Tuesday by surprisingly soft data on job vacancies that suggested cooling demand for staff. More decisively, the two-year Treasury yield plunged more than 20 basis points intraday to hover just above 3.8% on Wednesday. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Aussie central bank fix will paper over inflation
▼ + stars: | 2023-04-04 | by ( Antony Currie | ) www.reuters.com time to read: +3 min

MELBOURNE, April 4 (Reuters Breakingviews) - Australia’s central bank is getting the builders in – literally and figuratively. The Reserve Bank of Australia’s 1960s Sydney headquarters is currently clad in scaffolding, part of what is supposed to be a two-year, A$200 million-plus ($135 million) renovation. For a central bank, the RBA is particularly quirky. Another major task for the review panel was assessing how the bank combats inflation, which hit 7.8% in the year to December. Treasurer Jim Chalmers on March 31 received the final report on the review of the country’s central bank that he unveiled last July.

☆ Australia pauses rate hikes to assess tightening impact, Q1 inflation in focus
▼ + stars: | 2023-04-04 | by ( Stella Qiu | ) www.reuters.com time to read: +4 min

Wrapping up its April policy meeting, the Reserve Bank of Australia (RBA) did warn that "some further tightening of monetary policy may well be needed" to ensure that inflation returns to target. Markets had been wagering on a pause, while analysts were split on whether the bank would hike again given the still high level of inflation. Three-year bond futures were up 9 ticks to 97.14, with futures now also leaning towards a pause in May, implying hikes are essentially over. "The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt." Bill Evans, chief economist at Westpac, said there isn't sufficient evidence for the bank to change its terminal rate forecast of 3.85%, after Tuesday's pause.

☆ Australian PM says inflation numbers 'pleasing' amid cost of living pressures
▼ + stars: | 2023-04-01 | by ( ) www.reuters.com time to read: +2 min

SYDNEY, April 1 (Reuters) - Prime Minister Anthony Albanese said on Saturday he was pleased to see inflation retreating in Australia, but cautioned that cost of living pressures remained nationwide. "It was pleasing the results, the trend going in the right direction this week with the figures but we know cost of living pressures are there," Albanese told reporters in Melbourne. Inflation remained "a real issue" and "a global phenomenon", he said, campaigning alongside the Labor Party's candidate for the federal seat of Aston, in Victoria state, where a by-election was taking place. Amid persistent inflation, cost of living has become a key political issue, and was a focus of last weekend's election in New South Wales, the country's most populous state. It was won by Albanese's state Labor counterpart Chris Minns who campaigned in part on providing cost of living relief.

☆ 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.

☆ Euro zone price rises cool significantly in March, but core inflation posts small uptick
▼ + stars: | 2023-03-31 | by ( Silvia Amaro | ) www.cnbc.com time to read: +2 min

Inflation in the euro zone dropped significantly in March as energy prices continued to fall. Headline inflation in the 20-member bloc came in at 6.9% in March, according to preliminary figures released by Eurostat Friday. By comparison, in February, headline inflation stood at 8.5%. ECB Member Isabel Schnabel said Thursday that headline inflation has started to decline, but core inflation is proving sticky. The ECB raised rates by 50 basis points in March, bringing its main benchmark rate to 3%.

☆ Australian PM says would welcome inflation-matching minimum wage rise
▼ + stars: | 2023-03-30 | by ( Lewis Jackson | ) www.reuters.com time to read: +2 min

Changes to the national minimum wage are reviewed annually by the independent Fair Work Commission (FWC), which last year delivered an increase largely in line with inflation. "If the Fair Work Commission makes that decision then I would welcome it, but it is an independent decision of government. The FWC decision, expected in June, also covers minimum wages and conditions for specific industries and occupations, known as awards. Roughly 2.7 million Australians are covered by awards, compared to around 180,000 on the minimum wage. Catherine Birch, a senior economist at ANZ, said the FWC would likely lift the minimum wage further than award wages, given the latter's broader reach.

☆ Australia treasurer: Some central bank review proposals may need legislative changes
▼ + stars: | 2023-03-29 | by ( ) www.reuters.com time to read: +1 min

SYDNEY, March 30 (Reuters) - Australian Treasurer Jim Chalmers said on Thursday some recommendations from an independent review of the Australian central bank's monetary policy decision-making and board make-up may require legislative changes to enact. But the RBA has made 10 straight rate hikes since May to tame surging inflation. Chalmers said he would release the report with the government's initial views next month, ahead of the federal budget in May. "So I'd like to put it out in April, and people can go through it and see what they think about it," he said. Reporting by Renju Jose in Sydney; Editing by Cynthia OstermanOur Standards: The Thomson Reuters Trust Principles.

☆ Euro zone underlying inflation sticky, ECB's Schnabel says in Washington
▼ + stars: | 2023-03-29 | by ( ) www.reuters.com time to read: +2 min

WASHINGTON, March 29 (Reuters) - Underlying inflation in the euro zone is proving sticky and the recent fall in energy costs may not pull it down as fast as some expect, European Central Bank board member Isabel Schnabel said on Wednesday, highlighting the bank's chief concern. Overall inflation in the 20 nations sharing the euro currency is falling quickly but core prices, which exclude volatile fuel and food costs, is still rising, suggesting rapid price growth could prove durable and difficult to break. Schnabel, head of the ECB's market operations, said last year's energy price spike seeped into the broader economy quickly but the reversal may take longer. Schnabel said the ECB has some flexibility in reaching its 2% target and did not want to create needless pain by acting too quickly. Conservative policymakers have said underlying inflation is now increasingly driven by domestic factors, particularly more expensive services, and they are wary of wage growth, which at 5-6% lags inflation but remains inconsistent with the ECB's 2% inflation target.

☆ ECB rates will need to rise but possibly at a slower pace - policymakers
▼ + stars: | 2023-03-29 | by ( ) www.reuters.com time to read: +3 min

FRANKFURT, March 29 (Reuters) - European Central Bank interest rates will likely have to rise further to contain inflation, policymakers said on Wednesday, but at least one outspoken conservative floated the idea of a slowdown in the pace of increases. ECB chief economist Philip Lane, who makes the formal policy proposals to his 25 colleagues, said that his baseline is for the turmoil to dissipate and then rates would need to rise several times. "If the financial stress we see is non-zero, but turns out to be still fairly limited, interest rates will still need to go up." Slovak central bank chief Peter Kazimir, a proponent of rapid rate increases, meanwhile made the case for slower rises following three straight 50-basis point hikes. Reporting by Balazs Koranyi, Jan Lopatka, Jason Hovet and Robert Muller; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

☆ Australia retail sales level off in Feb as shoppers rein in spending
▼ + stars: | 2023-03-28 | by ( Stella Qiu | ) www.reuters.com time to read: +3 min

SYDNEY, March 28 (Reuters) - Australian retail sales levelled off in February after wild swings around the year-end holidays, suggesting consumers are reining in spending in the face of higher living costs and rising interest rates. Data from the Australian Bureau of Statistics (ABS) on Tuesday showed retail sales rose just 0.2% in February, compared to a revised 1.8% rise in January. Sales of A$35.14 billion ($23.48 billion) were 6.4% higher than a year earlier. The figure beat median forecasts of a 0.1% rise, pushing the local dollar higher to $0.6674 , up 0.4% for the day. Australia employment rebounded strongly in February, the jobless rate eased back to near 50-year lows, and business conditions remained resilient.

☆ Central banks stick to rate hikes with eye on market turmoil
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +5 min

Overall, 10 developed economies have raised rates by a combined 3,290 basis points (bp) in this cycle to date. Reuters Graphics1) UNITED STATESThe Fed raised rates by a quarter point on Wednesday, continuing its most aggressive series of hikes since the 1980s. After setting its policy rate to 4.75%-5.00%, the Fed hinted it may soon pause rate rises. Reuters Graphics3) CANADAThe Bank of Canada on March 8 became the first major central bank to halt monetary tightening during this cycle. Reuters Graphics5) AUSTRALIAAustralia's central bank raised its key rate by a quarter point to 3.6% in March, the highest since May 2012, but hinted rate hikes may be over for now.

☆ Morning Bid: Central banks try to see through stress
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike DolanEven with a nod to greater banking stress, the major central banks all seem determined to tighten the monetary screw another notch. With Treasury Secretary Janet Yellen's pushback against suggestions of a blanket insurance of all U.S. banking deposits unnerving investors again after the Fed decision, few believe the financial stress has fully dissipated. Even though stock markets swooned after the Yellen comments on Wednesday, S&P500 futures were back up smartly ahead of Thursday's open. European bourses and banking stocks were only a touch lower in the face of the latest European rate rises. The dollar hit its lowest since early February but regained its footing ahead of the U.S. open and BoE decision.

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).

☆ ECB to look for signs of stress but banking crisis unlikely
▼ + stars: | 2023-03-22 | by ( ) www.reuters.com time to read: +3 min

Summary Lagarde says rate hikes are just starting to biteLane says full-blown banking crisis is unlikelyFRANKFURT, March 22 (Reuters) - The European Central Bank will watch for signs of stress in bank lending from the ongoing financial turmoil but a full-blown crisis is unlikely for now, the ECB's top brass said on Wednesday. But that's pretty much a tail scenario at this point in time," Lane told a conference on Wednesday. "For inflationary pressures to ease, it is important that our monetary policy works robustly in the restrictive direction," she said. Lane said he expected core prices to ease over time as lower fuel costs filter through to other sectors. Reporting By Francesco Canepa and Balazs Koranyi; Editing by Toby Chopra and Christina FincherOur Standards: The Thomson Reuters Trust Principles.

☆ Morning Bid: Leaning back to Fed hike, UK inflation jolt
▼ + stars: | 2023-03-22 | by ( ) www.reuters.com time to read: +5 min

Two weeks of U.S. and European banking stress and failures leaves the Federal Reserve and other major central banks in the unenviable position of choosing between stabilising financial systems and fighting still historically high inflation. On top of that, the latest quarterly economic projections from Fed policymakers may reveal a big dispersion of views. Beyond the Fed, the dire UK inflation reading seems to have solidified expectations of another BoE rate rise on Thursday and a further move later in the year. If nothing else, it underlines in red ink just how all central banks are totally dependent now on incoming data evidence on what's happening in the real economy. With the U.S. dollar lower across the board ahead of the Fed meeting, sterling hit its highest level since early February.

☆ Euro pushes higher as ECB chief Lagarde says inflation is still too high
▼ + stars: | 2023-03-22 | by ( Silvia Amaro | ) www.cnbc.com time to read: +2 min

The euro traded higher against the U.S. dollar Wednesday, following comments from the European Central Bank President Christine Lagarde that inflation is "still high." However, inflation is still high, and uncertainty around its path ahead has increased. "With high uncertainty, it is even more important that the rate path is data-dependent," she said. This implies additional uncertainty around the baseline for both growth and inflation," Lagarde said. Her comments follow remarks by Joachim Nagel, German central bank chief and ECB member, who noted that the fight against high inflation "is not over".

☆ ECB goes big on rates but bank turmoil clouds central banks' outlook
▼ + stars: | 2023-03-16 | by ( ) www.reuters.com time to read: +5 min

Overall, 10 big developed economies have raised rates by a combined 3,165 basis points (bps) in this cycle to date. Reuters Graphics3) CANADAThe Bank of Canada on March 8 became the first major central bank to halt monetary tightening during this cycle. Reuters Graphics6) NORWAYNorway's central bank meets next week and is expected to raise rates by 25 bps to contain above-target inflation. Reuters Graphics10) JAPANThe Bank of Japan, the most dovish major global central bank, maintained ultra-low interest rates at its March meeting, the final one for retiring BOJ governor Haruhiko Kuroda. The BOJ resisted changing its controversial yield curve control policy, which it uses to cap interest rates on longer-term debt.

Markets have ramped up bets on further rate increases after the ECB has already tightened monetary policy by 3 percentage points since July. ECB President Christine Lagarde reckons a 50 basis points (bps) rate hike "is very, very likely". "The ECB is prioritising getting policy rates as high as needed and nothing else is as important," Pictet Wealth Management's head of macroeconomic research Frederik Ducrozet, said. Signs of economic resilience suggest ECB growth forecasts, also out on Thursday, could be revised upwards for 2023. Falling energy prices and a stronger euro, up around 6% in trade-weighted terms from August lows, suggest headline inflation forecasts could be revised lower.

☆ Analysis: Wage catch-up to prolong Europe's inflation battle
▼ + stars: | 2023-03-10 | by ( Balazs Koranyi | ) www.reuters.com time to read: +6 min

"Part of the wage increase is understandable," said Jens Ulbrich, chief economist at Germany's Bundesbank. Yet the rapid wage growth underway now will hamper the European Central Bank's efforts to get inflation back to its 2% target, and possibly force it to keep interest rates high for longer. "We are taking a first step, but much more is needed to reverse the years of lopsided wage growth," Kager added. "The inflation trend, food and especially energy prices are tearing deep holes in our workers' budgets," ver.di Chairman Frank Werneke said. "The high levels of wage growth projected for 2023 and 2024 can be expected to make wages an increasingly dominant driver of underlying inflation in the euro area," Lane says.

☆ Dollar towers on lingering effects of Powell's testimony
▼ + stars: | 2023-03-09 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

In the second day of his testimony to Congress on Wednesday, Powell reaffirmed his hawkish message, though struck a cautious note that debate on the scale and path of future rate hikes was still underway and would be data-dependent. As a result, the U.S. dollar index , which measures the greenback against a basket of six peers, slipped 0.02% to 105.61. Conversely, the Bank of Canada on Wednesday left its key overnight interest rate on hold at 4.50%, becoming the first major central bank to suspend its monetary tightening campaign. The Canadian dollar stood at 1.3808 per U.S. dollar on Thursday, after having weakened to a more than four-month low in the previous session following the decision. Elsewhere, the kiwi rose 0.03% to $0.6107, having slumped to a near four-month low in the previous session.

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