Aurelia Butler

According to the U.S. Bureau of Statistics, the overall index registered the smallest increase since March 2021 of +4% compared to 4.1% expected by the market and 4.9% in April. On a monthly basis, the inflation rate increased 0.1% compared to a consensus of +0.2% and an April figure of +0.4%.However, the core component – which excludes energy and food – fell less, accelerating at an annual rate of 5.3%, in line with expectations, and compared to 5.5% in April.These data have consolidated market bets for a halt to interest rate hikes that have been going on for 15 consecutive months. However, expectations for a further increase in July have not decreased, just like the Bank of Canada did at its last meeting by raising rates by 25 basis points after keeping them unchanged in the previous one.In their Daily Europe note, Mark Haefele, Chief Investment Officer of UBS Global Wealth Management, wrote that May’s data is not “sufficient to allow the Fed to call a final end to tightening,” and nor will it “justify the recent optimism among equity investors.”He said that the base measure remains elevated, making it more difficult for the Fed to end its rate hike cycle or contemplate cuts before growth or employment data materially weaken.Looking at the markets, Haefele points out that equity valuations suggest that investors are “overly confident in an economic soft landing,” with U.S. stocks currently trading at about 18.4 times analysts’ earnings forecasts for the next 12 months, a 14% premium over the past 15-year average.”Price-to-earnings ratios above 18 times are typically associated with periods of healthy economic growth and rising corporate profits. Instead, we expect a period of subtrend economic growth and falling earnings, as the lagged impact of prior rate hikes feed through,” Haefele explained.Therefore, for UBS, it is unlikely that inflation data will change the Fed’s course. According to them, bankers are likely to pause in June, while signaling the likelihood of further tightening.Against this backdrop, the Swiss bank maintains a less favorable stance on global and U.S. equities, and suggests investors to “seek quality income in high grade (government) and investment grade debt.”(Translated from Italian) More

KINGSTON, Jamaica (Reuters) – World Bank President Ajay Banga told Reuters that he will “push” the lender’s balance sheet hard to help fight climate change and other crises, but this may only yield tens of billions of dollars in additional annual lending, not the hundreds of billions hoped for by some.Banga said in an interview late on Tuesday that he will roll out steps in the coming weeks and months to evolve the World Bank beyond its traditional anti-poverty mission to fight climate change, pandemics and other global challenges and scale up its financial capacity.On balance sheet leverage, he said he would “push it as hard as you can,” but not to the point of threatening the bank’s top-tier, “AAA” credit rating — the source of its ability to borrow and lend at very low rates. “My logic is that if you add up all these kinds of ideas together, annually, you’re looking … in the tens of billions, not in the hundreds of billions” of dollars, Banga told Reuters on his first foreign trip in the job to Jamaica and Peru. “I just think we have to be a little careful and a little sensible, of just how much we do on this, but we should do as much as we possibly can,” Banga said.His comments inject a dose of reality into optimism from some in the development community that balance sheet alchemy at multilateral development banks can achieve a substantial part of the massive increase in lending to finance the clean energy transition — a need that he and other experts estimate in the trillions of dollars annually.The World Bank Group made total lending commitments of $104 billion last year.OPTIONS WEIGHEDFinance ministers and non-profit groups alike are looking to Banga, the Indian-born former CEO of MasterCard, to devise ways to channel vast amounts of private capital into developing countries to help them cut carbon emissions and fund job-creating investments to make their economies more resilient.U.S. Treasury Secretary Janet Yellen told Banga as he took office on June 2 that she wanted him to “get the most” from the World Bank’s balance sheet. He said the bank is now talking to shareholders about using so-called “hybrid capital” or subordinated debt, which would allow more leverage because ratings agencies treat a portion of it like equity — a technique used in the banking sector for decades.Some economists have suggested that International Monetary Fund Special Drawing Rights monetary reserves could channeled by rich countries to the bank as capital to back new bond issues worth hundreds of billions of dollars. But Banga said he viewed the idea as largely unviable, because long-term project loans against liquid central bank assets could create a dangerous asset-liability maturity mismatch.”I’m not signing on,” he added. Using “callable capital” — funds pledged but not paid-in by rich countries that can be called on to back World Bank losses — is another option, advocated in a G20 report on multilateral development bank capital adequacy.But Banga said this step would take more time to develop because not all ratings agencies would allow callable capital to be used to increase lending, and some countries may have to change laws governing their World Bank shareholdings.He said he hoped to be able to provide details on what the bank could do in this regard by the time of its annual meeting in October. More

NEW YORK (Reuters) – A bipartisan group of U.S. lawmakers planned to introduce a bill on Wednesday to eliminate a tariff exemption widely used by e-commerce sellers to send orders from China to U.S. shoppers, one of the sponsors said.The exception, known as the de minimis rule, exempts imports valued at $800 or less from tariffs if the items are shipped to individual consumers. The bill would ban such shipments from China immediately upon enactment, sponsor Republican Senator Bill Cassidy said.Ecommerce sellers such as China-founded, Singapore-based Shein and Temu, a rival owned by PDD Holdings Inc that operates the Chinese ecommerce site Pinduoduo (NASDAQ:PDD), are big beneficiaries of the exemption. A federal brief in April said the companies “exploit” de minimis to avoid duties and import illegal items such as those made in China’s Xingiang region with forced Uyghur labor.A Shein spokesperson said Tuesday the company has no manufacturers in Xinjiang. Temu did not immediately respond to a request for comment.De minimis shipments have drawn attention at least since 2019, when the U.S. Consumer Product Safety Commission reported it struggled to catch unsafe imports because of the heavy volume of low-value packages. Such shipments rose to 685.5 million in 2022 compared with 410.5 million in 2018, U.S. customs data showed.The bill’s other sponsors are Republican Senator J.D. Vance and Democratic Senator Tammy Baldwin. It was unclear how much traction the proposal would gain. A separate but similar bill by Democratic Representative Earl Blumenauer failed to pass Congress last year.Under the bill, countries other than China and Russia could keep the exemption by adopting the $800 threshold for their own tariff-free imports. The bill would only allow private shippers like FedEx (NYSE:FDX), UPS and DHL to transport de minimis packages and exclude postal services. More

1. Final countdown to Fed decisionThe Federal Reserve is set to deliver a fresh monetary policy announcement following the end of its two-day meeting on Wednesday, with investors keen to find out if the central bank will push pause on its long-running rate-hiking cycle or increase borrowing costs further.Most estimates point to the former, particularly after data on Tuesday showed that headline inflation growth in the world’s largest economy cooled by more than expected in May. At 4.0% on an annual basis, the consumer price index stood at its lowest level since early 2021 and has now eased for eleven months straight.But the figure is still well above the Fed’s stated 2% target and the labor market is displaying signs of strength, suggesting that while Fed officials may choose to halt rate increases, they may flag that the move is only temporary.2. Futures mixed with Fed announcement aheadU.S. stock futures were mixed on Wednesday as investors awaited the latest policy decision from the Federal Reserve.At 04:51 ET (08:51 GMT), the Dow futures contract slipped by 35 points or 0.10%, S&P 500 futures added 9 points or 0.19%, and Nasdaq 100 futures rose by 41 points or 0.27%.The main indices all posted solid gains on Tuesday following the weaker-than-anticipated U.S. inflation data. The Dow Jones Industrial Average increased by 0.43%, the S&P 500 jumped by 0.69%, and the tech-heavy Nasdaq Composite climbed 0.83%.According to Investing.com’s Fed Rate Monitor Tool, there is a more than 91% chance that the Fed will keep its benchmark interest rate unchanged at a range of 5.00% to 5.25%. Meanwhile, the probability that the bank chooses to hike borrowing costs by a quarter basis point stands at under 10%.3. Federal court temporarily blocks Microsoft-Activision mergerA federal court in California has ruled in favor of a request from U.S. antitrust regulators to place a temporary block on the completion of Microsoft’s (NASDAQ:MSFT) massive $69 billion merger with Activision Blizzard (NASDAQ:ATVI).The FTC had previously asked the court to order a preliminary injunction on a final tie-up until after the agency has carried out its own administrative review — due to start later this year — over the legality of the deal.A judge in a U.S. district court in California subsequently placed the merger on hold pending a two-day evidentiary hearing next week. At that hearing, a federal court will choose whether the preliminary injunction is warranted.The FTC has already signaled that it believes the deal, the largest ever in the video games industry, will lessen competition. Microsoft has disagreed, saying it will be a boon for both gamers and companies alike.Microsoft and Activision must submit their legal arguments against the preliminary injunction by Friday. The FTC will then have until June 20 to respond.4. Nvidia closes with over $1T valuationShares in Nvidia (NASDAQ:NVDA) edged up in premarket dealmaking after a milestone session that saw the chipmaking giant’s valuation end the trading day at above $1T for the first time.California-based Nvidia first cracked the vaunted Trillion Dollar Club late last month, when the stock price surpassed the threshold level of $404.87. However, they had yet to close above that mark until yesterday.The company has been a massive beneficiary of a boom in interest in artificial intelligence, with the graphics cards maker saying that it expects the trend to power robust demand. The optimism has helped spur other firms with links to automated technology.Nvidia is one of a number of major tech industry players, including Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Microsoft, to reach a trillion-dollar valuation.5. Shell outlines plan to boost dividendShell (LON:SHEL) has said it will aim to lift its dividend and cut spending as chief executive Wael Sawan looks to restore wavering investor confidence in the business through “performance, discipline and simplification.”Europe’s largest energy company said it will raise overall shareholder distributions to 30% to 40% of cash flow from operations, up from its prior level of 20% to 30%. As a part of this plan, Shell will bump up its dividend by 15% from the second quarter, while the rate of share buybacks will go up to at least $5B for the second half of 2023.Meanwhile, capital expenditures will be slashed to $22B to $25B per year for 2024 and 2025, down from a range of $23B to $27B planned for this year.Shell will present these proposals at an investor conference in New York later today. According to Reuters, Sawan has been keen to support the company’s stock price at a time when shareholders have been skeptical of its plans to shift away from oil and gas in favor of its renewables and low-carbon businesses. More