Aurelia Butler

NEW YORK (Reuters) – Big technology-related company earnings are expected to again lead S&P 500 profit growth in the upcoming U.S. reporting period, which could refuel optimism for stocks after a weak start to April. Interest rate outlook worries hang over the first-quarter earnings season, with the expected timeline for Federal Reserve rate cuts being pushed back as the economy remains robust.Analysts expect S&P 500 companies in aggregate to report earnings increased 5% in the first quarter from a year earlier, according to LSEG data, after much stronger-than-expected earnings growth of 10.1% in the fourth quarter 2023 led by gains in megacap tech.Earnings from some big U.S. banks unofficially start the reporting period on Friday. From there, the season shifts into high gear, with results from Netflix (NASDAQ:NFLX), Procter & Gamble (NYSE:PG), UnitedHealth (NYSE:UNH) and Travelers (NYSE:TRV) Cos all due next week.Earnings for the communication services sector, which includes such names as Alphabet (NASDAQ:GOOGL), are forecast to have risen 26.7% from a year ago. The technology sector , which includes Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), is expected to have climbed 20.9% in the first quarter, according to LSEG data. Communication services led earnings gains in the fourth quarter of 2023, with 53.3% year-over-year growth, while technology earnings grew 24.2%.Investors remain optimistic about artificial intelligence. The Nasdaq in late February reached a record high close for the first time in over two years, as AI fever has driven rallies in Nvidia and other tech heavyweights.”We see a healthy capex cycle ahead from both AI and other mega projects… benefiting not just semis, but also power and commodities,” BofA Securities strategists wrote in a research note Thursday.The S&P 500 has hit a string of record highs since late January. It is up roughly 9% year to date, but down about 1% so far for April.The U.S. Labor Department this week reported the third straight month of strong consumer price readings. Some investors now feel the Fed might delay cutting rates until September.Growth stocks tend to be more sensitive to higher interest rates.”I would rather have a strong economy than one that requires stimulus from the Federal Reserve,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.But, during earnings season, he said, “we’re gong to start hearing more and more about consumer debt and carrying costs of debts. Spending growth is outpacing wage growth, and that’s not sustainable.”Of the S&P 500 sectors, energy, materials and healthcare are expected to have had the biggest declines in earnings year-over-year in the first quarter.But analysts expect the first quarter to be the smallest increase this year for earnings, with profit growth for all of 2024 seen at 9.8%, based on LSEG data. “Operating leverage should drive margins further as demand recovers,” BofA Securities strategists noted. More

LONDON (Reuters) – Global sales of fully electric and plug-in hybrid vehicles (PHEVs) rose 12% in March versus the same month in 2023, with growth in China and the U.S. market partly offset by a 9% drop in Europe, market research firm Rho Motion said on Friday. “Overall, sales growth has slowed but it’s still somewhat positive,” Charles Lester, data manager at Rho Motion, told Reuters. Sales demand for electric cars has cooled in recent months after rising dramatically for several years, as consumers wait for more affordable models to hit the market.Global electric vehicle sales rose to 1.23 million units in March. Sales rose 27% in China and 15% in the United States and Canada. Rho Motion has predicted that global electric car sales will rise between 25% and 30% this year. Lester said that global growth will likely now be closer to the lower end of that forecast. More

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TOKYO (Reuters) -The yen’s fresh slide to a 34-year low complicates the Bank of Japan’s deliberations on the timing of a next interest rate hike, as a resulting rise in import costs pushes up inflation but also hurts already weak consumption and the broader economy.If that weakness persists and discourages small firms from hiking pay, the central bank may prefer to wait at least until autumn before hiking, say five government officials and sources familiar with its thinking.The BOJ is seen raising this year’s price forecast at the next meeting on April 26 and project inflation to stay near its 2% target through 2026, said two of the sources, underscoring its readiness to jack up rates from zero later this year.But the central bank is also likely to cut this year’s economic growth forecast in the fresh quarterly projections, due in part to sluggish consumption and factory output, they said.”While wages might rise as projected, rising import prices from a weak yen could weigh on already soft consumption,” said one of the sources.The inclination to go slow on interest rate hikes contrasts with the expectations of some currency traders and BOJ watchers who think the weak yen is a reason the central bank might lift rates soon.That expectation is based partly on the BOJ’s tweaks last year to its bond yield control policy as efforts to cap long-term rates caused unwelcome yen declines that drew heat from politicians.Former BOJ official Nobuyasu Atago said the central bank’s new “data-dependent” approach would mean it will wait until the April-June gross domestic product data, due on Aug. 15, to confirm whether growth would indeed rebound, before raising interest rates.”Unless the yen’s fall become very rapid, the chance of the BOJ hiking rates by summer is very low,” said Atago, chief economist at Rakuten Securities Economic Research Institute.MIXED BLESSINGThe weak yen is a mixed blessing for the economy. While giving a boost to exports, the yen’s fall would hit households and smaller retailers by inflating the cost of fuel, food and raw material imports.The fallout from the weak yen comes at a delicate time for the BOJ. Having ended eight years of negative interest rates last month, central bank policymakers are carefully gauging the right timing to hike rates again.BOJ Governor Kazuo Ueda has said the threshold for another hike would be for big firms’ bumper wage hikes to spread to smaller companies, and services prices to rise more reflecting the increase in labour costs.The signs have been mixed so far. Consumption has lacked momentum as rising living costs hit households, which may discourage firms from pushing up prices further.The BOJ said in a recent report that smaller firms may hike wages by as much as last year or even more. But actual data on smaller firms’ pay won’t be available until later this year, analysts say.”There are some positive signs on small firms’ wage outlook but actual wage increases aren’t broad-based yet,” said one of the sources. “It might take until autumn to determine whether a positive wage-inflation cycle is firmly in place.”Waiting until autumn would eliminate the chance of a rate hike in June or July, and heighten the possibility of action in the BOJ’s September, October or December meetings.While the market’s favourite projection on the rate hike timing is in October-December, some analysts are betting on the chance of action in July after Ueda’s recent comments signaling scope of reducing monetary stimulus.While yen moves have contributed to the economic conditions that have triggered past BOJ policy shifts, the central bank’s policy itself does not explicitly target the currency.In that context, Ueda has said the BOJ was ready to respond if yen moves have a huge impact on the economy and inflation.For now, however, concerns over Japan’s fragile economy are likely to prevail and prod the BOJ to move cautiously. Two of the BOJ’s nine board members dissented to the March decision to end negative rates. Even a hawkish policymaker like Naoki Tamura has said he prefers a “slow but steady” approach from here.Political factors also raise the hurdle for an early rate hike. On the day the BOJ ended negative rates, Prime Minister Fumio Kishida told reporters it was “appropriate that accommodative monetary environment will continue” in a sign of his preference of sustained ultra-low interest rates.”It was okay to end negative rates. But an additional rate hike is out of the question,” a ruling party executive told Reuters.”Consumption is weak and it’s unclear whether inflation will keep rising,” said a finance ministry official. “There’s no reason for the BOJ to rush into hiking rates again.” More

(Reuters) – A look at the day ahead in Asian markets.Monetary policy decisions in South Korea and Singapore, and Chinese trade and Indian inflation data top Asia’s calendar on Friday, as investors look to shake off the U.S. inflation-fueled volatility from the previous day and end the week on a high.Currency markets remain on high alert for yen-supporting intervention from Japan, with the dollar holding above 153.00 yen at a 34-year high. Even if Tokyo doesn’t act, traders will be wary of staying ‘long’ dollar/yen at these historic levels going into the weekend.The yen’s deep-rooted weakness – it is also at a 31-year low against the Chinese yuan – and the competitive advantage it seemingly offers Japan in world trade is bound to be causing unease across Asia. It opens the possibility of an eventual ‘beggar thy neighbor’ wave of currency devaluations across the continent. This may never be official policy, but weaker exchange rates may be tacitly welcomed or encouraged in certain capitals.Of course, weak exchange rates can complicate central banks’ fight against inflation. In China higher inflation would be welcome, but a weak and falling currency instead raises the potential for renewed capital flight out of Chinese assets.And China’s currency is weak against the dollar. On Thursday it slipped to a five-month low despite the central bank’s efforts to steer it higher, and the offshore yuan had its steepest fall in three weeks. On the equity front, meanwhile, Asian stocks can clock their best week in five if markets take heart from Wall Street’s remarkable rebound on Thursday, in particular the Nasdaq’s 1.7% jump.A rise of 1% on the day will seal the MSCI Asia ex-Japan index’s best week this year and lift it to a new 14-month high.The resilience of Asian stocks is all the more notable given the weakness in China. The blue chip CSI 300 index has fallen six days in a row, and another decline on Friday will mark the index’s worst run since the pandemic onset in March 2020. A battered property sector, rising debt levels, and deflation remain heavy drags on economic activity, and the latest snapshot of consumer and producer prices will have done little to improve the outlook. Beijing releases trade figures for March on Friday, with economists expecting exports to have contracted, cooling some of the optimism from earlier in the year.South Korea’s central bank, meanwhile, is expected to keep its key policy rate unchanged at 3.50% for a 10th straight meeting on Friday, before embarking on a shallow cutting cycle next quarter, according to a Reuters poll.And figures from India are expected to show inflation is expected to have eased to a five-month low of 4.91% in March, still well above the Reserve Bank of India’s 4% medium-term target. Here are key developments that could provide more direction to markets on Friday:- South Korea interest rate decision – India consumer price inflation (March)- China trade (March) (By Jamie McGeever) More

WASHINGTON (Reuters) -A top U.S. Treasury official on Thursday called out emerging official creditors – the biggest of which is China – for curtailing loans to countries that had already embarked on a program with the IMF or multilateral development banks.”When the IMF and MDBs support countries’ reforms and investment plans, Fund shareholders should not be withdrawing their own financing,” Treasury Undersecretary Jay Shambaugh told an event at the Peterson Institute for International Economics. He said there was a longstanding historical precedent among the Paris Club of official Western creditors to engage in refinancings or reprofilings for borrowers and not to pull out when the going got rough.”No individual creditors should be free-riding by pulling funds out of a country while it is implementing IMF- and MDB-supported reforms, and other bilateral and multilateral creditors are refinancing or rolling over funds, or injecting new resources,” he said.Shambaugh said decisive, coordinated action was needed by all official bilateral creditors to address the worsening financial challenges faced by low- and middle-income countries and to speed up debt relief when needed.Many developing countries faced “alarming tradeoffs” due to falling inflows of official bilateral and private funds at a time when debt service payments were also rising, he said.Shambaugh said measures were also needed to help developing countries with significant external market debt continue to be able to tap private funds at affordable terms and over longer time horizons, so that private outflows did not net against support from the international financial institutions (IFIs).The U.S. Treasury official’s comments reflect growing frustration among Western countries and debtor nations about Beijing’s foot-dragging on debt restructuring efforts and the slow pace of debt relief deals.The Chinese embassy in Washington did not immediately response to a request for comment.Shambaugh, who just returned from Beijing with Treasury Secretary Janet Yellen, said sovereign debt issues were a frequent and recurring subject of bilateral discussions.He said it was in everyone’s interest to avoid major solvency problems and not let six-month delays in financing assurances unravel IMF programs.He told participants that developing countries were spending more to service their public and private debt than they were receiving in fresh funds, with the outflows going largely to China and other emerging official creditors and private lenders. Almost 40 countries saw external public debt outflows in 2022, and the flows likely worsened in 2023, he said, noting that Sub-Saharan African countries had been unable to access bond markets at all last year. To counteract the trend, Shambaugh said official bilateral creditors should pledge to sustain net positive flows to countries that were pursuing responsible policies, especially when the IMF and the multilateral development banks (MDBs) had backed their reforms and investment plans.Dozens of low- and middle-income countries had negative net debt flows from Chinese public and private creditors.Shambaugh also called once again for changes to ensure that the G20 Common Framework set up to guide debt restructurings for low-income countries produced deeper and more timely restructurings.He said the United States and other creditors had sharply scaled back loan exposures to developing countries following a wave of debt treatments in the 1980s and 1990s, and were now providing far more grants to these borrowing countries. For example, Washington had disbursed nearly $70 billion in aid to Sub-Saharan African countries over the past five years, nearly seven times the net debt flows from all Chinese creditors, he said, saying it would be “helpful” if more emerging creditors made the shift. He also said private funds should not be flowing out of developing countries with strong macro frameworks, calling for creditor countries to encourage continued private sector engagement through credit enhancements and borrower protections.Countries should also create safe harbors for borrowing countries seeking proactive relief from private debt distress on a voluntary basis, he said. More