Aurelia Butler

“Prices are expected to have moderated slightly after three months of surprising increases, exceeding expectations from the consensus of analysts,” noted Link Securities. “If the projections are met, European and US bond and equity markets will react positively, while if, as has recently happened, the readings exceed expectations, we believe it will create some tension in the markets,” these analysts add.”In our opinion, if the reading falls within the range of +3.4%/+3.5%, then nothing significant is likely to happen. However, the probability of an increase is not negligible, which would cool down both stock and bond markets in the short term. Despite the Federal Reserve having considerable leeway, a renewed surge in inflation would prompt its members to adopt a more hawkish/tougher stance that could weigh on a market whose annual gains have been more than generous for stocks,” stated Bankinter.”Meanwhile, bonds seem to be well supported at current levels: T-Note ~4.50% and Bund ~2.50%,” these experts added.”The markets will focus on the inflation of services excluding housing, which stood at 8.7% annually in the first quarter of this year, compared to 5.1% in the fourth quarter of 2023,” emphasized Ronald Temple, Chief Market Strategist at Lazard (NYSE:LAZ) AM. This expert acknowledges that while some factors driving this inflation seem unsustainable, such as auto insurance costs, predicting the timing of the slowdown is difficult. He expects any increase in core CPI of similar magnitude or higher than the 36 basis points in March to provoke a negative market reaction, while any significant downside surprise will relieve investors and increase the likelihood of further Fed rate cuts by year-end.Taking a broader perspective, inflation figures are “intolerably” high relative to the Fed’s 2% inflation target, but the slowdown to date is “impressive,” Temple underscored.A key factor in this expert’s optimism about disinflation is housing, a component that represents approximately 45% of core CPI and slightly less than 20% of core personal consumption expenditure (PCE) deflator. Private market data indicate that housing inflation has sharply declined without yet being reflected in CPI data, so we should see a significant deceleration in housing-driven inflation in 2024,” explained the expert.”However, it is worth noting that this afternoon also sees the release of US retail sales figures for the month of April, figures which in our opinion are very relevant as they could, if worse than expected – a slight monthly increase is expected – ‘set off some alarms’ regarding the strength of private consumption, the most relevant component of the US GDP (it accounts for approximately 70% of it) and, therefore, reopen the debate about the potential entry of this economy into stagflation, that is, a phase of low growth and high inflation, a scenario that would be very negative for the stock markets,” warned Link Securities.”We expect market activity to be subdued, at least until this afternoon when the aforementioned macroeconomic indicators in the US are announced, indicators which, in our opinion, have the capacity to largely determine the course of Western markets in the short term,” stated Link Securities.In a volatile context, having the best market information that could affect our stock portfolio is essential. In this regard, the professional tool InvestingPro can help you. With InvestingPro, you will have firsthand market data and factors for and against that may affect stocks.How to invest considering macro risks? Seize the opportunity HERE AND NOW to get the annual plan of InvestingPro for less than 9 euros per month. Use the code INVESTINGPRO1 and get a 40% discount on your 1-year subscription. Less than what you pay for a Netflix (NASDAQ:NFLX) subscription! (And it also makes more out of your investments). With this, you will get:Act quickly and join the investment revolution! Get your OFFER HERE! More

(Reuters) – Neuralink’s disclosure last week that tiny wires inside the brain of its first patient had pulled out of position is an issue the Elon Musk company has known about for years, according to five people familiar with the matter. The company knew from animal testing it had conducted ahead of its U.S. approval last year that the wires might retract, removing with them the sensitive electrodes that decode brain signals, three of the sources said. Neuralink deemed the risk low enough for a redesign not to be merited, the sources added.Neuralink is testing its implant to give paralyzed patients the ability to use digital devices by thinking alone, a prospect that could help people with spinal cord injuries. The company said last week that the implant’s tiny wires, which are thinner than a human hair, retracted from a patient’s brain in its first human trial, resulting in fewer electrodes that could measure brain signals. The signals get translated into actions, such as moving a mouse cursor on a computer screen. The company said it managed to restore the implant’s ability to monitor its patient’s brain signals by making changes that included modifying its algorithm to be more sensitive. The sources declined to be identified, citing confidentiality agreements they had signed with the company. Neuralink and its executives did not respond to calls and emails seeking comment.The U.S. Food and Drug Administration was aware of the potential issue with the wires because the company shared the animal testing results as part of its application to begin human trials, one of the people said. The FDA declined to comment on whether it was aware of the issue or its possible significance. The agency told Reuters it would continue to monitor the safety of patients enrolled in Neuralink’s study. Were Neuralink to continue the trials without a redesign, it could face challenges should more wires pull out and its tweak to the algorithm proves insufficient, one of the sources said.But redesigning the threads comes with its own risks. Anchoring them in the brain, for example, could result in brain tissue damage if the threads dislodge or if the company needs to remove the device, two of the sources said. The company has sought to design the threads in a way that makes their removal seamless, so that the implant can be updated over time as the technology improves, current and former employees say. In January, Neuralink implanted the device in the brain of its first patient, Noland Arbaugh, who is paralyzed from the shoulders down due to a 2016 diving accident.In the weeks after the surgery, “a number of threads retracted from the brain,” Neuralink said in a blog update last week. The post made no mention of adverse health effects to Arbaugh and did not disclose how many of the device’s 64 threads pulled out or stopped collecting brain data. So far, the device has allowed Arbaugh to play video games, browse the internet and move a computer cursor on his laptop by thinking alone, according to company blog posts and videos. Neuralink says that soon after the surgery, Arbaugh surpassed the world record for the speed at which he can control a cursor with thoughts alone.It is common for medical device companies to troubleshoot different designs during animal trials and for issues to arise during animal and clinical testing, according to outside researchers and sources who have worked at Neuralink and other medical device companies.Specialists who have studied brain implants say the issue of threads moving can be hard to solve, partly due to the mechanics of how the brain moves inside the skull.Robert Gaunt, a neural engineer at the University of Pittsburgh, described the movement of the wires so soon after the surgery as disappointing but said that is not unforeseen. “In the immediate days, weeks, months after an implant like this, it’s probably the most vulnerable time,” he said.PIG HEAVINGIn 2022, the FDA initially rejected Neuralink’s application to begin human trials, and raised safety concerns about the threads, Reuters exclusively reported last year.Neuralink conducted additional animal testing to address those concerns, and the FDA last year granted the company approval to begin human testing.The company found that a subset of pigs implanted with its device developed a type of inflammation in the brain called granulomas, raising concerns among Neuralink’s researchers that the threads could be the cause, according to three sources familiar with the matter and records seen by Reuters.Granulomas are an inflammatory tissue response that can form around a foreign object or an infection. In at least one case, a pig developed a severe case of the condition. Company records reviewed by Reuters show that the pig developed a fever and was heaving after surgery. Neuralink’s researchers did not recognize the extent of the problem until examining the pig’s brain post-mortem.Inside Neuralink, researchers debated how to rectify the issue and commenced a months-long investigation, said the sources familiar with the events.Ultimately, the company could not determine the cause of the granulomas, but concluded that the device and the attached threads were not to blame, one of the sources said. More

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BEIJING (Reuters) – The U.S. move to raise tariffs on Chinese goods is a case of “typical bullying” and “shows that some people in the United States have reached the point of losing their minds,” China’s foreign minister said on Wednesday.”The U.S.’s suppression of China does not prove that the U.S. is strong, but rather exposes that the U.S. has lost its self-confidence and is out of order,” Minister Wang Yi said, according to state broadcaster CCTV. More

The release of the crucial monthly U.S. consumer price report is the main event Wednesday, as it’s likely to influence the Federal Reserve’s near-term policy path.April’s consumer price index is due out during the U.S. trading morning, and economists expect that it rose 0.4% in April on a month-over-month basis, or 3.4% from 12 months earlier.The core reading, which excludes volatile food and energy prices, is expected to show underlying inflation rising 3.6% on a year-over-year basis, which would be the smallest increase in over three years, a monthly rise of 0.3%.Investors have had to dial back their expectations of U.S. rate cuts this year due to sticky inflation and are now pricing in 43 basis points of easing this year, compared with 150 bps of easing anticipated at the start of 2024.Federal Reserve Chair Jerome Powell emphasised the point that inflation was proving difficult to tame in a speech at the Foreign Bankers’ Association’s Annual General Meeting in Amsterdam on Tuesday.”Inflation in Q1 was notable for the lack of further progress,” Powell said. “Confidence in inflation moving back down is lower than it was. My confidence on that is not as high as it was before.”U.S. producer prices increased more than expected in April, data showed on Tuesday, indicating that inflation remained stubbornly high early in the second quarter.U.S. stock futures traded little changed Wednesday, amid caution ahead of the release of key inflation data, which could influence the Fed’s future monetary policy. By 04:30 ET (08:30 GMT), the Dow Jones Futures contract was 10 points, or 0.1%, higher, S&P 500 Futures traded largely unchanged, while Nasdaq 100 futures fell 10 points, or 0.1%.The main Wall Street indices had a winning session on Tuesday, despite April producer prices rising by more than expected, but the more widely-watched consumer price index is likely to have a more significant impact if it differs from consensus [see above].Other economic reports due out Wednesday include retail sales figures for April, May’s Empire State manufacturing survey and the housing market index.In the corporate sector, footwear retailer Boot Barn (NYSE:BOOT) stock dropped more than 5% premarket on disappointing guidance for the full year, while solar tracker manufacturer Nextracker (NASDAQ:NXT) gained 12% on better-than-expected revenue.The so-called meme stocks, such as GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), have continued to rise, with their Frankfurt-listed shares soaring Wednesday, in a continuation of this week’s rally.Cinema chain AMC gained 32% on Wall Street Tuesday, while video game retailer Gamestop surged 60%.This followed a series of cryptic posts on social media platform X on Sunday from “Roaring Kitty” Keith Gill, a central figure behind the 2021 meme stock frenzy, following a three-year gap.The posts didn’t mention any company names, instead included clips from movies including Pirates of the Caribbean, Tombstone, V For Vendetta, and a comic of a man sitting up in a chair. Legendary investor Bill Gross commented on the sharp gains by companies favored by many retail investors on the social media platform X:”“Gamestonk” is passe. What could be a better buy signal than a cartoon man sitting upright in his chair?””Buy? Sell? Not me. Sell 400% annualized volatility,” he wrote.The buying craze is “frankly stupid,” said Cole Smead, CEO of Smead Capital Management which has around $6 billion of assets under management, in an interview with CNBC on Tuesday. “It is gambling.”Cisco is scheduled to release its latest quarterly earnings after the close of trading Wednesday, and investors will be looking to see how the digital communications technology conglomerate has integrated Splunk (NASDAQ:SPLK), having closed the acquisition of the software company in March. Analysts expect a year-over-year decline in both the top and bottom lines in its fiscal third quarter, with the company’s campus networking business continuing to face challenges.“We forecast the core business to decline at a low- to-mid single-digit rate organically for the year, with the consolidation of Splunk driving the aggregate revenue growth of +3% y/y in FY25,” said analysts at JPMorgan, in a note.“While F3Q results are typically too early for the company to provide an update about FY25, we believe there remains a potential opportunity that the company opts to provide more than typical guidance given that it will have to be otherwise an essential part of the discussion at the June 4 investor day,” the bank added.Crude prices rose Wednesday, as industry data showed a drop in U.S. inventories and boosted expectations of tighter global markets. By 03:30 ET, the U.S. crude futures traded 0.7% higher at $78.54 a barrel, while the Brent contract climbed 0.6% to $82.83 per barrel.Data from the American Petroleum Institute indicated on Tuesday that U.S. oil inventories shrank 3.1 million barrels in the week to May 10, with the data also showing a decline in gasoline stockpiles.If confirmed by the official data later Wednesday, this would suggest U.S. fuel demand was picking up with the advent of the travel-heavy summer season – a trend that could help tighten global crude supplies, even as U.S. production remains at record highs.Expectations of tighter North American markets were also furthered by a swathe of devastating wildfires near Fort McMurray, a major Canadian oil sands city.This optimism has overshadowed the International Energy Agency trimming its forecast for 2024 oil demand growth earlier Wednesday.The Paris-based energy watchdog lowered its growth outlook for this year by 140,000 barrels per day to 1.1 million bpd, largely citing weak demand in developed OECD nations.  More

LONDON (Reuters) – Big public debts typically stem from big economic and political junctures that require government to spend big – but reining them back risks ‘creative’ solutions markets may struggle to price.The cumulative cost of post-pandemic public spending amid new geopolitical realities – including anything from green energy investment, chip-making security or Ukraine-related defence bills for example – are now getting plotted into years ahead of outsize government deficits and debt projections.The uncomfortable question of debt sustainability is top of mind again for many in financial markets.Although an issue across the Western world, much of the sound and fury about mounting debts centres on the United States – and for good reason.The Congressional Budget Office projects a 17 percentage point jump in the U.S. public debt-to-GDP ratio over the next 10 years to 116% – twice the average level of the past 20 years – and then rising even further to 166% by 2054.Describing it as a ‘non-controversial’ statement, Federal Reserve Chair Jerome Powell on Tuesday said U.S. fiscal policy was on an ‘unsustainable path’.While that may be stating the obvious, it’s a bald statement from the most powerful public servant presiding over the rising cost of that debt pile.And this is where the whole issue risks looping.Having hit a record low in April 2021, the average interest cost on the U.S. public debt has more than doubled since then to 3.23% – the highest in 14 years – as the Fed has hiked interest rates to contain the post-pandemic inflation spike.The persistence of brisk growth and above-target inflation despite that monetary tightening is, for many economists, at least partly down to the demand stimulus created by those unchecked deficits. And it argues, in turn, for tighter Fed policy than many had hoped.And even though the CBO’s long-term debt projections are explosive, they are based unnervingly on relatively modest expectations for borrowing costs ahead – with the average debt servicing cost only getting back above the 20-year average of 3.7% in 2054.The problem comes from the debt accumulated in the interim and the fact the CBO can’t see a ‘primary’ budget gap that excludes interest costs returning back below 2.0% of GDP – also the average of the 1994-2023 period – for the next 30 years.What’s more, total debt servicing costs start to exceed its projected nominal GDP growth projections from 2044 onwards – breaching an oft-cited debt sustainability red line on the need to keep “r minus g”, or the interest rate minus growth, in negative territory.The CBO is not alone of course. The International Monetary Fund doesn’t see the overall annual U.S. deficit back below 6% of GDP for the next five years at least – even if slightly off this year’s eye-watering 7.1%.What’s for sure is that no one sees any fiscal retrenchment in this election year. And the level of Fed easing expected has been scaled back sharply as inflation gets stuck above target, adding to renewed bond market angst over the past month.What happens after the election is another question – but don’t hold your breath.NEEDS BE…Justification for the fiscal largesse has started to take on a different tone in the meantime – even in Europe where the deficit and debt trajectories are more contained over the coming five years.UniCredit’s chief economic advisor Erik Nielsen this week recounted an anecdote from the recent IMF meeting during which an unnamed U.S. Treasury official told him people were looking at ‘debt sustainability’ the wrong way – describing what appeared to be a ‘war economy’ rationale for heavy spending.Existential threats to U.S. democracy and institutions and the priorities of tense geopolitical rivalry, it was argued, required the outsize public spend to bolster the economy longer-term and to garner internal and external support for American status quo and its position in the world.Narrow debt sustainability, as a result, was merely a subset of that goal and basically irrelevant if the overarching goals failed.As to whether the maths eventually add up, there seemed to some hopes the Fed will smooth the path and that growth holds up.”This may lead to a higher debt burden to GDP for longer – and into the next generations,” Nielsen said, recounting the chat. “But, if managed properly, it’ll be a future generation still living in the world’s leading liberal democracy, as opposed to in a country in chaos … and/or potentially dominated in several key areas by China or other non-democracies.”French President Emmanuel Macron made a similar point about Europe last month in a speech in which he claimed: “There is a risk our Europe might die.”Urging the central bank to help ensure that didn’t happen was one of his many solutions and he called for an expansion of the European Central Bank’s mandate to go beyond inflation and target faster growth and address climate too.Stopping short of endorsing a wider ECB mandate, UniCredit’s Nielsen also reckoned the bank had been too severe in its recent tightening relative to the needs of retooling the euro economy and that the resulting recession had undermined investment.”After all, if – just if – a central bank’s reaction function causes unnecessary economic pain inside the electoral cycle, then it runs the risk of a political reaction.”So much for centrist voices.In conservative quarters, the knives are also out for central bank independence.The Wall Street Journal reported late last month that allies of Republican U.S. presidential candidate Donald Trump are drafting proposals that would attempt to erode Fed independence if the Republican former president wins – arguing Trump should be consulted on rate decisions and have the authority to remove the Fed Chair before his term ends.And ruling British conservatives trailing in opinion polls ahead of an imminent general election there are also reported to be keen to lean on the Bank of England too to aid their cause.If the imperatives of fiscal retrenchment and electoral cycles don’t quite mix, the easier option may well be to ensure monetary policy makers keep the whole show on the road. Stressing a ‘war footing’ may just increase those risks.The opinions expressed here are those of the author, a columnist for Reuters. More

LONDON (Reuters) – Two wars and high borrowing costs have trimmed expected growth in countries covered by the European Bank for Reconstruction and Development (EBRD), the bank said in a semi-annual report released on Wednesday. The EBRD, which covers economic trends across emerging Europe, central Asia, the Middle East and Africa, still expects economic growth of 3% across the 40 or so countries it covers, above 2.5% in 2023. But that forecast is 0.2 percentage points lower than in its September report. “This year is going to be better. But of course there is a lot of uncertainty,” EBRD Chief Economist Beata Javorcik told Reuters.”The sad news is that our countries of operation are now affected by a fallout of not one, but two wars: the war in Ukraine and the war in Gaza.” The downward revision is due in part to slower-than-expected growth in central Europe and the Baltic states, a knock-on effect from Germany’s weak growth. Gaza spillovers and slowing reform progress in Egypt are also hindering economic expansion in the southern and eastern Mediterranean, the EBRD said, lowering projected growth there to 3.4% in 2024 and 3.9% in 2025. Egypt’s Suez Canal revenue has fallen, while a drop in tourism to Lebanon and Jordan “may prove lasting”, the bank said. Meanwhile, geopolitical shifts are impacting investment flows, with China’s share of foreign direct investment into EBRD regions spiking to 39% in 2023 from less than 10% in 2022 – with Egypt, Morocco and Serbia benefiting. BRIGHT SPOTS, DISAPPEARING PEACE DIVIDEND Javorcik said Poland and Croatia stood out, with growth expected to accelerate in both to 2.9% in 2024 as inflation moderates and Croatia’s tourism revenues jumps 40% from pre-COVID levels. But high borrowing costs are making growth tough; the median yield on 5-year government bonds in the EBRD region increased by three percentage points between early February 2022 and early April 2024. Fallout from the war in Ukraine is also straining budgets through rising defence spending. “We see the peace dividend essentially disappearing as countries are planning and spending more on defense,” Javorcik said. More