Aurelia Butler

GENEVA (Reuters) – The head of the World Trade Organization warned on Friday that it could be difficult to strike deals at a major ministerial meeting later this month amid a “tough environment”, citing elections, recessions and wars in Ukraine and Gaza.Trade ministers gather for a meeting in Abu Dhabi from Feb. 26-29 where they will try to broker global trade agreements, including on reforming the 29-year-old body’s hobbled dispute system and cutting fishing subsidies.”It’s going to be a bit tough because the conference is taking place at a difficult conjuncture. We are sailing against the wind,” WTO Director-General Ngozi Okonjo-Iweala told reporters in Geneva, describing negotiating positions as far apart. “We are facing a lot headwinds, economic and political headwinds. You will understand it’s not going to be easy.”However, she said she felt she thought some outcomes were still possible which might include the second part of a deal on cutting subsidies for fishing that are emptying the world’s oceans and a road map for agriculture talks. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Lagging productivity growth in the EU could reverse the European Central Bank’s progress in bringing down inflation, a senior ECB official has warned as she recommended keeping monetary policy tight.“[Slow productivity growth] increases the risk that firms may pass higher wages costs on to consumers, which could delay inflation returning to our 2 per cent target,” said Isabel Schnabel, one of the ECB’s most hawkish policymakers, in a speech on Friday at the European University Institute in Florence, Italy. “In this environment, monetary policy needs to remain restrictive.” The US has remained ahead of the EU in labour productivity since the mid-1980s, with the gap growing between the US and EU in the early 2000s as mass adoption of information technology took off. The difference in unit labour cost, a measure of productivity, between the EU and US has widened in the past year, as European wages have risen in a stagnant eurozone economy that has been battered by the fallout from Russia’s invasion of Ukraine two years ago. “On the back of two inflation shocks, the eurozone is an economy where people are still being paid and paid more. What is happening is that a lot of people are working but GDP is low, so as a result the output per worker is falling,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. “That is inflationary.” In her speech, Schnabel called on the EU to reduce regulations that she said make it hard for companies to grow, and emphasised the need for lower barriers to entry so that new innovative businesses could better compete with established players.Many experts agree that regulatory restrictions are holding back productivity growth in the eurozone. Recent population projections from Eurostat forecast that the EU will decline 3.5 per cent by 2070, with notable decreases in the working age and young populations. The old-age dependency ratio in the EU, or the number of people aged above 65 relative to the working age population, will increase from 37 per cent in 2022 to 60 per cent in 2070. There will therefore be fewer total EU workers and fewer workers relative to the total population, and they will need to increase their output per hour to continue meeting demand and shore up the social system, analysts said.Data released this week showed that the eurozone economy flatlined in the last quarter of 2023, while the number of corporate bankruptcies increased 0.6 per cent in the same period. Many economists view Europe’s productivity challenge as a long-term issue, not one that can be quickly solved to ease rising prices today. “If you are looking for a solution to Europe’s inflation problems at the moment, it is not going to be a pick-up in productivity. But that will come over the longer term,” said Paul Mortimer-Lee, an economist at the National Institute of Economic and Social Research based in New York. More

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WASHINGTON (Reuters) – The Federal Reserve’s top regulatory official said on Friday that bank supervisors are flagging problems at banks at a higher rate in the past year, and are conducting additional exams at firms facing large unrealized losses.Fed Vice Chair for Supervision Michael Barr also said that bank examiners are “closely focused” on how firms are managing commercial real estate risk as that sector continues to face post-pandemic pressure.Nearly one year after Silicon Valley Bank failed due in large part to hefty unrealized losses, Barr said the Fed has been focused on flagging potential problems at banks more quickly.”The past year has been busy for Federal Reserve supervisors,” he said in prepared remarks.Reuters reported in December that federal bank supervisors had been stepping up their oversight of firms after several banks failed in the spring and issuing additional disciplinary actions to firms, including downgrading confidential bank health ratings.Barr said the uptick in activity is not due to a change in policy, but rather reflects the changing economic and interest rate environment and what strains it can put on bank finances.”We want and expect supervisors to help banks focus adequate attention on the areas that matter most for the particular bank,” he said.In addition to extra exams for firms grappling with unrealized losses, Barr said examiners are requiring those firms to take steps to address weaknesses and bolster their capital. He added a small number of firms “with a risk profile that could result in funding pressures” are being continuously monitored.He also added that different supervisory teams are heightening their coordination, particularly for regional firms that are nearing the $100 billion threshold, at which point they face stricter oversight. Firms that are growing rapidly are facing more frequent assessments of their health and policies, as part of an effort to ensure they are ready to meet tougher requirements.”The goal is that the transition to heightened supervision for fast-growing banks is more of a gradual slope and not a cliff,” he said.Those comments come as New York Community Bancorp (NYSE:NYCB) saw its stock fall sharply in value after it posted an unexpected quarterly loss in January. Bank executives said at the time part of the strain was heightened requirements they faced after recently exceeding $100 billion in assets.Barr said the Fed is still weighing whether it should impose temporary higher capital and liquidity requirements on firms facing risk management issues. More

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LONDON (Reuters) -Global shares rose for a third day on Friday, thanks to a lift from Japan’s Nikkei closing at another 34-year peak and following gains on Wall Street as data revived chances of a June rate cut.This week’s data releases have added to the belief among investors that the U.S. economy at least is holding up well enough not to merit any immediate rate cuts, which has kept the dollar at its highest in three months and set gold on course for its largest weekly drop this year.However, data on Thursday showed a surprisingly large drop in U.S. consumer spending, which revived the chances of the Fed cutting rates by June and sent Wall Street higher.The upbeat mood carried into Asia, where the Nikkei closed at its highest since 1989 and then into Europe, with the STOXX 600 hitting its highest since January 2022. “Everyone is still in this massive ‘dip-buying mode’ that they’ve been in pretty much all year,” Michael Brown, a strategist with broker Pepperstone, said.”Any dips are lasting 12 hours at most, before the buyers come in and just scoop it up,” he said.U.S. futures pointed to an upbeat start to trading later in the day. Nasdaq futures were up 0.5%, while those on the S&P 500 futures gained 0.2%.The dollar recovered some poise after a swift sell-off on Thursday to trade 0.24% higher against the yen, which has been wallowing at its weakest since November at levels that have been typically seen as potential catalysts for official intervention.Bank of Japan Governor Kazuo Ueda said on Friday that monetary policy would most likely remain accommodative, even after ending negative interest rates, echoing recent reassurances from BOJ officials that have weighed on the yen.”The dollar/yen has sort of consolidated around the 150 level, so that’s providing support (to Nikkei). There’s the corporate reform still going through, so the exporters will continue to do well,” said Tony Sycamore, market analyst at IG.WEAK DATA, STRONG CONFIDENCEFigures on Thursday showed that Japan and Britain slipped into recession at the end of last year, and U.S. retail sales last month fell much more than expected. But the upshot of that could be relatively looser monetary policy.”I think the demand picture is certainly starting to fracture in some of the developed market economies,” said Sycamore. “So it does bring forward the idea of rate cuts.”Overnight, data showed U.S. retail sales fell by 0.8% in January, the sharpest drop in 10 months. Meanwhile, UK data on Friday showed a big improvement in retail sales in January, but this did little to prop up the pound.Markets moved to fully price in a rate cut from the Fed in June, reversing some of the price action after a stronger-than-expected U.S. inflation report prompted traders to give up bets for early rate relief.Treasury yields edged up after an overnight dip. The yield on benchmark 10-year notes rose 3 basis points to 4.271% ahead of producer price data later in the day.With the dollar in the ascendant, gold has been under pressure this week. The spot price is heading for a weekly fall of nearly 1%, its biggest weekly decline since late December.Gold, which has traded consistently above $2,000 an ounce for most of the past two months, rose 0.2% to $2,007 but was down nearly 1% on the week, heading for a second consecutive weekly fall and its biggest weekly fall in 2024.Oil prices fell on Friday after jumping the previous session. The International Energy Agency on Thursday flagged slowing demand growth this year.Brent crude eased 0.9% to $82.12 a barrel, while U.S. futures fell 0.7% to $77.45. More

MOSCOW (Reuters) -Russia’s central bank held its key interest rate at 16% on Friday, opting to leave borrowing costs unchanged after five successive rate hikes since last summer, still grappling with stubborn inflation pressure.The central bank had raised rates by 850 basis points since July, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy, but has lately signalled a more dovish approach. The bank said returning inflation to its 4% target this year would require “tight monetary conditions… for a long period” and warned that inflationary pressures remained high, despite their easing from autumn peaks. Analysts largely viewed the signal as neutral. Governor Elvira Nabiullina will shed further light on the direction of monetary policy in a press conference at 1200 GMT. Domestic demand was still outstripping production capacity, the bank said, with labour shortages still the key constraint on expanding the output of goods and services. “A judgement on the sustainable nature of emerging disinflationary trends would be premature,” the bank said in a statement.The balance of inflation risks is still tilted to the upside over the medium term, the bank said, pointing to elevated inflation expectations and suggesting that it has inflation concerns regarding high budget spending and sanctions impacting Russia’s terms of trade.NO MORE HIKES? Friday’s decision was in line with a Reuters poll of analysts, who expect interest rates to start coming down this year. Double-digit rates are expected to remain into 2025. The bank’s next rate-setting meeting is scheduled for March 22. The bank raised its forecast for its average key rate range to 13.5-15.5% from 12.5-14.5%, suggesting that easing borrowing costs would take longer than previously thought. The bank slightly improved its 2024 economic growth forecast to 1.0-2.0%, from 0.5-1.5%. The International Monetary Fund expects Russia’s economy to grow 2.6% this year, but anticipates tough times ahead. Russia’s economy rebounded sharply from a slump in 2022, but the growth relies heavily on state-funded arms and ammunition production and masks problems that are hampering an improvement in Russians’ living standards.”It is very optimistic to raise GDP at the same time as such tight policy,” said Yevgeny Kogan, a professor at Russia’s Higher School of Economics. “We won’t see any more rate hikes, but they plan to keep the rate at 16% for a long time.”The central bank’s tightening cycle began last summer when inflationary pressure from a tight labour market, strong consumer demand and the government’s budget deficit was compounded by the falling rouble.Russia had gradually reversed an emergency hike to 20% which it made in February 2022 after Moscow sent its army into Ukraine, prompting sweeping Western sanctions. It cut rates to as low as 7.5% in 2023. More

(Reuters) -Futures tracking the S&P 500 and the Nasdaq gained on Friday as investors looked forward to a producer inflation report for more cues on the timing of interest rate cuts, while shares of Applied Materials (NASDAQ:AMAT) surged following an upbeat revenue forecast.January’s slump in U.S. retail sales revived optimism about imminent rate cuts from the Federal Reserve this year, providing some relief after a hotter-than-expected consumer prices report earlier this week.The tech-heavy Nasdaq is set to snap a five-week winning streak, while the benchmark S&P 500 also lost some steam this week after jumping over 5% so far this year.Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.The producer prices index (PPI) for January, due at 8:30 a.m. ET (1330 GMT), is expected to show prices inched up 0.1% after an unexpected dip last month. It will further shape the outlook for the Fed’s monetary policy path. Traders’ bets of a start to the Fed’s easing cycle are tilted towards June, with 37% betting on an at least 25-basis-point rate cut as soon as May, according to the CME Group’s (NASDAQ:CME) FedWatch tool.”The inflation shock from the U.S. earlier in the week seems to have been shrugged off for now, even if it has pushed back expectations for when the Federal Reserve will start cutting interest rates,” AJ Bell investment director Russ Mould said in a note.”So-called factory gate prices are significant because when manufacturers and other producers charge more for goods and services the higher costs usually feed through to the consumer,” Mould added, referring to the producer prices report.Investors will also monitor remarks due in the day by Fed’s Richmond President Thomas Barkin and San Francisco chief Mary Daly, both voting members this year.Atlanta Fed President Raphael Bostic on Thursday noted he saw fewer rate cuts in his last forecasts compared with his colleagues in part because he has been expecting less steady progress on inflation.Later in the day, eyes will also be on a U.S. consumer sentiment survey for February from the University of Michigan.At 7:08 a.m. ET, Dow e-minis were down 30 points, or 0.08%, S&P 500 e-minis were up 9.25 points, or 0.18%, and Nasdaq 100 e-minis were up 98.25 points, or 0.55%.Among big movers, Applied Materials jumped 13.1% in premarket trade after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in artificial intelligence. Roku (NASDAQ:ROKU) slumped 16.8% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase (NASDAQ:COIN) Global jumped 13.6% on posting its first quarterly profit since 2021.DoorDash (NASDAQ:DASH) dropped 7.2% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.A total of 80.3% of S&P 500 companies that have reported quarterly earnings so far have beaten expectations compared to the annual 76% average, according to LSEG data on Thursday.Most megacap stocks also advanced, with Nvidia (NASDAQ:NVDA) gaining 1.4% after Oppenheimer hiked its price target on the AI chip designer’s stock. More