Aurelia Butler

FRANKFURT (Reuters) – The European Central Bank expects inflation in the 20-nation euro zone to remain above 3% next year, bolstering the case for a tenth consecutive interest rate increase on Thursday, a source with direct knowledge of the discussion told Reuters on Tuesday. The ECB begins a two-day meeting on Wednesday, with persistently high inflation and rising recession fears pulling policymakers in opposing directions and keeping market expectations equally divided between a pause and another 25-basis-point hike. An ECB spokesman declined to comment. The ECB’s quarterly projections, set to be to presented to its Governing Council on Wednesday, will put inflation north of 3% in 2024, the source said, confounding expectations for a small cut. The updated 2024 projection is well above the central bank’s 2% target and will be higher than the 3% forecast in June. It is also above the 2.7% seen in a Reuters poll of economists.The source said the rate decision was still a close call and formal proposals for the meeting have not yet been presented. But the closely watched 2024 figure adds to the case for a rate hike as it appears to confirm fears that it could be harder to bring down inflation than earlier thought.The ECB has lifted its deposit rate to 3.75% from minus 0.50 in a span of 14 months, the fastest pace of tightening on record, all in the hope that it would arrest runaway price growth.But both headline and underlying inflation remain above 5%, raising the risk that workers will start demanding bigger pay increases, especially because the labour market remains exceptionally tight. While the ECB’s 2025 inflation forecast will see no fundamental change, this is not a major item in the debate for policymakers because of the poor accuracy of projections in recent years.Growth on the other hand will be downgraded for this year and 2024, roughly in line with market expectations, the source said. Economists polled by Reuters see euro zone growth at 0.6% this year and 0.9% in 2024. More

TOKYO (Reuters) – Confidence at big Japanese manufacturers fell the most in eight months, while morale in the services sector also slumped on worries a slowdown in China’s economy could be a bigger drag on growth globally and at home, a Reuters poll for September showed on Wednesday.The gloom across the business sector underlines the challenge for Japanese policymakers and raises doubts that exports could fuel an economic recovery in the face of weak domestic demand.The Reuters Tankan monthly poll of 502 big manufacturers, showed a sharp fall in the sector’s sentiment index to plus 4, from plus 12 in August. That was the biggest drop since January when the index declined 14 points.The survey, which drew 248 responses during Aug. 30-Sept. 8, serves as a leading indicator for the Bank of Japan’s closely watched quarterly tankan survey due on Oct. 2, and also provides a quick health check of business conditions for the BOJ’s upcoming policy-setting meetings.In written comments, many Japanese firms complained about elevated input costs of raw materials as well as weak demand at home and abroad. The Ukraine war and heightened Sino-U.S. tensions were also seen as headwinds. “Our business conditions are not so good due to uncertainty surrounding the global economy such as geopolitical risks stemming from a prolonged war in Ukraine and rising tension between U.S.-China frictions,” a machinery maker manager wrote in the survey.”Overseas markets, particularly in China, are slumping and domestic demand is also languishing,” a chemicals maker manger wrote on condition of anonymity.Compared with three month ago, the manufacturers’ sentiment index — calculated by subtracting the percentage of pessimistic respondents from optimistic ones — was down four points and suggests decline in the quarterly tankan survey.A positive figure means optimists outnumber pessimists.The Reuters Tankan non-manufacturers index also dropped nine points to hit plus 23 in September from the previous month, the biggest decline since May 2020, the survey showed.On the quarter, the service-sector index was down one point from June, pointing to a slight decline in the BOJ’s quarterly tankan.The outlook indexes also suggested business conditions may remain challenging for the rest of the year. The business sentiment over the coming three months showed the manufacturers’ index flat in December and the service-sector index slightly down at plus 21 at year-end. More

WASHINGTON (Reuters) – U.S. bank groups on Tuesday accused the Federal Reserve and other regulators of violating federal laws with a sweeping proposal to raise capital requirements, escalating an assault on the draft rules that were also blasted by bank executives.In a public letter to the agencies, the groups representing JPMorgan Chase (NYSE:JPM), Goldman Sachs, Morgan Stanley and Citigroup (NYSE:C), among other lenders, said the proposal unveiled in July violates the Administrative Procedure Act (APA) because it lacked sufficient public data and analysis. The APA sets certain requirements for agencies when proposing new rules, including economic analysis. The groups argued that banks cannot properly respond to the proposal, which would require lenders to hold more cash to absorb losses, without that analysis. They said the agencies should freeze all work on the rules until they are properly re-proposed. The Fed drafted the rules with the Federal Deposit Insurance Corp (FDIC) and Office of the Comptroller of the Currency (OCC). The Fed and OCC declined comment, while the FDIC did not immediately respond to a request for comment. The “Basel Endgame” proposal implements international capital standards agreed by the Basel Committee on Banking Supervision in the aftermath of the 2007-2009 financial crisis. It overhauls how banks gauge their level of risk, and in turn how much reserves they must keep as a cushion against losses.The letter marks the latest in an unusually aggressive industry effort to water down the proposal and lays the groundwork for a possible legal challenge.CONGRESSIONAL HEARINGBanks often complain that regulators do not provide sufficient analysis, but the industry is taking an aggressive stance this time due to the magnitude of the proposal, according to a person familiar with the letter. The U.S. central bank has estimated it will increase industry capital requirements by $170 billion. Executives at the biggest U.S. banks also weighed in.”We don’t agree with this proposal, and so we’re commenting,” Goldman Sachs CEO David Solomon told Reuters in an interview on Tuesday. “These capital rules will have an impact on economic growth and that will affect large businesses and small businesses and their access to capital.” JPMorgan CEO Jamie Dimon launched a broadside against the proposal on Monday, saying it could prompt lenders to pull back and that regulators had acted with “lack of transparency” about the rationale for the changes.Morgan Stanley’s head of investment management, Dan Simkowitz, said the bank is “highly engaged” in the comment period, which runs through the end of November: “There are certain things which just don’t make any sense.”While the draft rules were in train prior to the collapse of three banks earlier this year, that crisis underscored the need for more robust rules and larger capital cushions to guard against unforeseen risks, Fed and FDIC officials have said. Even before the proposal was unveiled, banks pushed for concessions, Reuters reported in June, and have enlisted Republican allies in Congress to scrutinize the effort, according to several lobbyists. The House of Representatives Financial Services Committee will hold a hearing on the proposal on Thursday. The Bank Policy Institute, which represents larger banks and is one of the groups that signed the letter, launched an ad campaign this month warning the proposal could drive up borrowing costs for consumers and businesses, and urging Americans to complain to Congress. The letter was also signed by officials representing the American Bankers Association, the Financial Services Forum, the Institute of International Bankers, and the Securities Industry and Financial Markets Association. It was also signed by the Chamber of Commerce, the biggest U.S. business lobby. More

Its filing with the U.S. securities regulator did not disclose the financial details of the offering, but revealed that net revenue for the six months ended March 31 rose 19% to 644.17 million euros ($692.87 million) and profit fell 45.3% to 40.21 million euros. The German sandal maker’s IPO ambitions come hot on the heels of filings by British chipmaker Arm, data automation provider Klaviyo and grocery delivery app Instacart, as equity markets in the U.S. thaw after a murky economic outlook led to a slow start to the year.Birkenstock’s filing also follows the marketing blitz around blockbuster movie “Barbie”, in which star Margot Robbie was seen donning a pair of pink Birkenstocks, boosting the popularity of the comfort-focused footwear among fashion aficionados. SoftBank (TYO:9984) Group-owned Arm and now Birkenstock’s decision to list outside Europe comes as IPO markets in the region wade through a lackluster year, with volumes far below 2021’s record levels. In contrast, U.S. listings have fetched nearly double the amount secured in 2022, according to data from Dealogic. In July, Birkenstock majority owner L Catterton’s beauty firm Oddity Tech rose 40% on its Nasdaq debut. L Catterton is a private equity firm backed by LVMH.Birkenstock, a family-owned business that traces its roots back to 1774, said it intends to list its shares under the “BIRK” ticker on the New York Stock Exchange.Goldman Sachs, J.P. Morgan and Morgan Stanley are the lead underwriters for the IPO.Entities affiliated with L Catterton will control a majority of the combined voting power of the shares after the offering, it said. ($1 = 0.9297 euros) More