Aurelia Butler

The restructured rules, which came into force on April 30 after they were agreed upon by lawmakers in Brussels earlier this year, have been widely viewed by economists as a push to persuade the EU’s 27 member governments to rein in expenditures and ratchet down debt.This week, the European Central Bank warned that high debt piles may crimp the ability of European countries to address shocks from geopolitical tensions or elevated interest rates. This vulnerability, the ECB added, could have “negative financial stability effects” and worry investors, particularly ahead of a host of elections across the EU this year and next.The ECB itself has itself said it may not allow countries who do not comply with Brussels debt-busting recommendations to participate in its as yet untested bond purchasing program.But the BofA analysts flagged that under the EU’s reformed fiscal framework “the hands of national fiscal policy are likely to remain tied in the areas of critical investment” for the region, such as green energy, defense, and digitalization.As a result, they noted that the investment gap in these strategic areas will likely stay “untouched” at the EU-wide level.”Ideally, a shortfall can become an opportunity: ‘more Europe’ should step in to fill the gap,” they wrote. “From a political standpoint, the bar is high. But exogenous geopolitical events (including U.S. elections) may push for earlier action (or at least we hope).” More

The financial services group now anticipates a series of 25 basis point reductions in June, September, and December of this year, followed by similar cuts in March, June, and September of the following year.Nomura’s decision to alter its ECB rate cut forecast is based on several economic indicators. The labor market and wages have shown resilience, and services inflation remains persistent. Moreover, economic growth is on an upswing, and the ECB’s rhetoric has recently become more hawkish. These factors have led Nomura to expect a more gradual approach to rate cuts by the ECB.The firm maintains its terminal rate forecast at 2.50%, indicating that it still expects the ECB to lower rates to the upper range of what it considers neutral. This revision includes the addition of a rate cut in September of the following year to align with this terminal rate view.Nomura’s analysis indicates that with stronger economic activity data, robust demand, an encouraging labor market, higher-than-anticipated wage growth, and persistent services inflation, the ECB is likely to adopt a more measured pace of rate reductions to preserve a degree of monetary restrictiveness.Furthermore, Nomura noted that even traditionally dovish members of the ECB Governing Council are advocating for fewer rate cuts this year, supporting a slower pace of easing than initially anticipated. While the ECB’s actions remain data-dependent and could shift to more aggressive cuts if economic conditions deteriorate, Nomura believes that a gradual pace of three cuts this year is currently the most probable scenario.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Market participants will be paying close attention to the Bank’s new economic projections and any changes in its forward-looking statements. Unlike its peers, the RBNZ operates with less frequent policy announcements and relies on quarterly inflation and job data, which can lead to swift shifts in its policy stance.Inflation in New Zealand has been persistently high, with non-tradeable inflation, a particular area of concern, registering at 5.8% in the first quarter, exceeding the RBNZ’s forecast of 5.3%. The overall inflation rate was 4.0%, marginally above the Bank’s prediction of 3.8%. Although a softening labor market suggests a potential decrease in headline inflation to around 3.6% year-on-year for the second quarter, the RBNZ is expected to closely monitor non-tradeable inflation, where risks might still be tilted upwards.Economic indicators show a contrasting picture, with growth and employment weakening. The unemployment rate rose to 4.3% in the first quarter, wage growth decelerated, and the country faced a recession with GDP shrinking by 0.1% quarter-on-quarter. Despite these signs of a cooling economy, the RBNZ’s sole focus on inflation since its mandate change in December means these factors may not directly influence its immediate policy decisions.The RBNZ is likely to maintain a hawkish stance in May, keeping its rate projection profile largely intact. This would indicate no rate reductions and a small possibility of another rate increase in 2024, followed by approximately 75 basis points of easing in 2025. The Bank is expected to reiterate the need for interest rates to stay at a restrictive level for an extended period to bring annual consumer price inflation back within the 1 to 3 percent target range.While the RBNZ is optimistic about inflation returning to the target range by year-end, the likelihood of rate cuts before the fourth quarter is considered low, given the delay in data and the persistent risks of non-tradeable inflation. Nevertheless, if the Federal Reserve eases by 75 basis points as predicted, the RBNZ might consider one or two rate cuts in the fourth quarter of 2024.The New Zealand dollar (NZD), having surged by 3.7% since the beginning of May, has been the top-performing currency, buoyed by lower US yields, improved risk sentiment, and a domestic monetary policy that continues to offer attractive carry. While the RBNZ’s May decision may not significantly impact the market, a reaffirmation of its hawkish position could lead to a recalibration of domestic rate expectations and further strengthen the NZD’s position. However, the NZD’s trajectory will likely remain closely tied to Federal Reserve policy and upcoming New Zealand economic data, with critical reports due on 16 July (CPI) and 6 August (jobs report), and another RBNZ meeting scheduled for 10 July.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

(Reuters) -Wall Street’s main indexes were set to open marginally higher on Friday, looking to extend this week’s rally on growing expectations of U.S. interest-rate cuts this year.The S&P 500 and Nasdaq were on course for a fourth straight week of gains, while the blue-chip Dow was on track for its fifth weekly advance, supported by strong quarterly results and slowing inflation data that has bolstered the case for rate cuts from the Federal Reserve. All three main indexes touched record highs on Thursday and the Dow briefly crossed the 40,000 milestone, before reversing gains and closing in the red.”(Equities) are just trying to sort of digest the past week’s economic data,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.”People are now looking at the next catalyst. Most likely it’s going to be whether or not the Fed actually cuts. So you got PCE (personal consumption expenditures) coming up, and if that’s below expectations then probably see the market continue to trend higher.”Investors will parse comments from Fed officials Christopher Waller and Mary Daly, expected after the opening bell, for further cues on the central bank’s monetary policy path. Traders currently see a 68% chance of the first rate cut in September, according to the CME FedWatch Tool. At 08:04 a.m. ET, Dow e-minis were up 6 points, or 0.01%, S&P 500 e-minis were up 1.75 points, or 0.03%, and Nasdaq 100 e-minis were up 18.25 points, or 0.1%.Advanced Micro Devices (NASDAQ:AMD) gained 2.3% in premarket trading after Microsoft (NASDAQ:MSFT) said it plans to offer its cloud computing customers a platform of AMD artificial intelligence chips that will compete with components made by Nvidia (NASDAQ:NVDA).Reddit rose 13% on partnering with OpenAI to bring its content to ChatGPT.GameStop (NYSE:GME) erased early gains to shed 23% after filing for a mixed-shelf offering and saying it expects first-quarter net sales to drop from a year ago.The stock is still set for sharp weekly gains, along with fellow retail investor darling AMC Entertainment (NYSE:AMC), on excitement over the social media return of “Roaring Kitty”, who was the central figure in the 2021 meme-stock rally. More