Aurelia Butler

BERLIN (Reuters) -German consumer prices in April posted their smallest increase since the start of the war in Ukraine, as energy prices eased further and food prices began to fall. Consumer prices, harmonised to compare with other European Union countries, rose by 7.6% on the year in April, preliminary data from the federal statistics office showed on Friday. This was the lowest year-on-year reading since March 2022.Analysts had expected harmonised annual inflation to remain unchanged from March at 7.8%.Month-on-month, harmonised consumer prices rose 0.6%, the data showed. The rise in energy prices – up 6.8% in April – was again milder than the overall inflation index, as was the case in March, showing a downward trend in energy prices. A base effect explained part of that easing: the index was at a high in April 2022 after energy prices soared following the Russian invasion of Ukraine, so the year-on-year comparison was smaller.In addition, German government relief measures were also contributing to the current easing of energy prices, the statistics office said. Food prices in April continued to show above-average growth, posting a 17.2% year-on-year increase. However, they fell month-on-month for the first time since October 2021, Commerzbank (ETR:CBKG) senior economist Ralph Solveen said. “After the inflation rate for energy already peaked in September, this now also appears to be the case for food,” Solveen said. For Solveen, April’s figures support the expectation that the inflation rate will continue to decline in the coming months. Inflation is forecast to fall to 5.9% in 2023 and 2.7% in 2024, according to the spring economic projections of the German government published on Wednesday.Despite the downward path expected for headline inflation, there are still challenges ahead. “What looks like a broader disinflationary process is still only disinflation on the back of base effects,” ING’s global head of macro Carsten Brzeski said, adding that core inflation, which excludes food and energy due to their price volatility, remains high. Germany’s labour market is so tight that workers have gained bargaining power in wage negotiations and wage growth could perpetuate inflation. The seasonally-adjusted jobless rate remained stable at 5.6% in April, labour market data showed on Friday. “Recent wage settlements and still decent pipeline pressure in services are likely to keep core inflation high,” Brzeski said. More

But the current environment is tricky to trade, as evidenced by a push into perceived risky assets such as tech stocks and the largest inflows into Chinese equities in well over a year, BofA’s note, which cited data from EPFR, said on Friday.There were $52.3 billion of inflows to cash funds in the week, a resumption of inflows after one-off outflows a week earlier, and also $200 million of inflows to gold. There have been $634 billion of inflows into cash in the year to date compared to $11 billion for the whole of 2022.Meanwhile, in the week to Wedensday there were $6.1 billion of inflows to Chinese equity funds, the most since January 2022, and $1.2 billion of inflows to tech funds, the most since November 2022. “Under the surface it’s starting to get scary, but we all know what the Big Tech horsemen can do to P&L before we blow up,” BofA said. Stronger-than-expected earnings from big tech and growth companies this week including Alphabet (NASDAQ:GOOGL) Inc, Microsoft Corp (NASDAQ:MSFT) and Meta Platforms Inc (NASDAQ:META) have supported markets despite jitters in the U.S. banking sector. [.N] Meanwhile, Chinese stocks have been rising this week, ahead of an expected record-high travel rush over the Labour Day holiday, as fears around geopolitical tensions eased a touch and markets rebounded from last week’s dips after data showed an uneven economic recovery. [.SS] BofA also flagged the ever louder shouts of recession from U.S. yield curves, noting that the for the first time since 1981 every U.S. yield curve has been inverted for over six monthsIt also said the current 170 basis point gap between the U.S. 3-month and 10-year yield had been exceeded on just 125 days in the past 100 years. More

Brussels is discussing restrictions on certain EU exports to countries that it suspects are re-exporting sanctioned products to Russia, in an effort to prevent critical components from ending up on the Ukrainian battlefield. The European Commission has privately examined a legal mechanism that would permit it to restrict sales of a narrow range of products to certain third countries, people briefed on the discussions told the Financial Times, as it seeks to close loopholes that have permitted banned products to leak into Russia and contribute to its military effort. The move would mark a significant escalation of the EU’s efforts to clamp down on sanctions circumvention, and follows months of diplomatic efforts by Brussels and its allies aimed at convincing countries such as Turkey and the UAE as well as central Asian states to take tougher action. Some member states are uncomfortable with the potential ramifications of the proposal, including how it could affect relations with third countries, the people added. It is set for further discussion next week.Under the mooted mechanism, the EU would first draw up a legal framework enabling products and countries of concern to be identified, but without naming them. After due warning, it could then add the names of targeted products and destinations to export controls. The idea was floated during discussions between the commission and top EU diplomats last week, according to people familiar with the process, as Brussels prepares its 11th sanctions package. However, it raises big questions, including over the geopolitical implications of restricting trade with countries that are not directly involved in the Ukraine conflict — even if the curbs would be highly targeted and temporary. It is also unclear how to ensure that the restrictions would be compatible with world trade rules, and what type of legal procedures would be needed to put them into force, said one diplomat. Member states would retain final sign-off on any specific measures. “It will lead to quite some discussion in the EU — over whether we are comfortable doing that,” said the diplomat. “How do you avoid the unintended side-effects of pushing certain countries in a different direction to where you want them to go? You have to be very careful on how you use carrots and sticks.”

The proposed mechanism reflects a growing sense among western powers that enforcement of existing sanctions, rather than new measures, is the right approach to degrade Russia’s economy further. Inside the G7, the US is calling for a full ban on exports to Russia after growing frustrated by the number of loopholes that Moscow has exploited to import western technology via third countries. While the EU and Japan have resisted that proposal, they are set to agree at a G7 summit next month to “close loopholes that allow [third-country] jurisdictions to access and re-export restricted G7 goods, services or technology to Russia”, according to a draft statement seen by the FT.“The overall mechanism seems to be broadly supported by capitals,” said a second EU diplomat. “But there is some hesitation from some quarters regarding what the implications on relations with partners would be.”The European Commission declined to comment. Additional reporting by Laura Dubois in Brussels More

LONDON (Reuters) – A Europe on the brink of stagnation and a mixed outlook from Amazon dented global shares on Friday as investors hoped that anticipated interest rate hikes next week on both sides of the Atlantic will herald a peaking of borrowing costs.S&P 500 stock index futures were down 0.3% after Amazon.com Inc (NASDAQ:AMZN) signalled its cloud growth would slow further as its business customers braced for turbulence and clamped down on spending.Oil was firmer but still heading for another monthly decline after disappointing U.S. economic data and uncertainty over interest rates.The yen fell to a nine-year low against the euro after the Bank of Japan left its ultra-easy monetary policy unchanged. The dollar gained on expectations of a U.S. interest rate hike next week.The MSCI All Country stock index was slightly weaker, but remains up more than 7% so far this year. In Europe, the STOXX index of European eased 0.2% and was headed for its first weekly decline in six as bank shares and economic data weighed.The euro zone grew only marginally in the first three months of 2023, and at a rate lower than market expectations, sending the euro lower. “The euro zone economy carries on along the rim of stagnation,” ING bank said.After U.S. data before the opening bell on Wall Street, investors will turn to next week’s European Central Bank and U.S. Federal Reserve rate-setting meetings.High inflation and a weak economy will keep the ECB in a tight spot, while the Fed faces market worries about regional U.S. banks and haggling over the country’s debt ceiling, analysts said.Markets expect both central banks to raise rates modestly.Patrick Spencer, vice chair of equities at RW Baird, said the Fed is likely to hike by 25 basis points. “Futures are saying interest rates will be lower than Fed Funds by year end, indicating a decline. I think certainly they will pause,” Spencer said. Graphic: Big Tech share of S&P500 market cap – https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdlweepm/One.PNG BANK OF JAPAN REVIEWThe Bank of Japan kept its loose monetary settings unchanged but revamped its guidance on the future path of policy, and announced a “broad-perspective” review with a planned timeframe of around one to one-and-a-half years.In its first meeting under new governor Kazuo Ueda, the central bank modified its forward guidance by removing a pledge to keep interest rates at “current or lower levels”. Japan’s Nikkei jumped 1.4% while the yen initially weakened before turning 1% higher against the dollar, and Japanese government bonds rallied. “There’s still a major consensus call that shorting the dollar to buy the yen will be the big move of the year, but we’re looking for the catalyst, which would be a signal from the BoJ it is ready to tighten policy,” said Simon Harvey, head of FX analysis at Monex Europe.Harvey said that signal could come in June.Markets are pricing in an 85% chance of the Fed raising rates by 25 basis points, the CME FedWatch tool showed. Traders expect the hike to be the last in the U.S. central bank’s fastest tightening cycle since the 1980s. The yield on 10-year Treasury notes eased to 3.47%, after clocking its biggest intraday gain since March on Thursday as investors weighed a looming debt ceiling showdown in Washington. The yield on the 30-year Treasury bond eased to 3.70%.The dollar index, which measures the currency against six rivals, was 0.58% higher, with the euro down 0.4% at $1.098 [.FRX/]U.S. crude was up 0.5% at $75.12 per barrel and Brent was trading at $78.90, up 0.7% on the day. [O/R] More

The company also warned of an uncertain outlook for the year and said it would eliminate around 10% of its workforce in 2023, which could result in additional costs of around $95 million. As of last year December, Lazard had around 3,400 employees.Major Wall Street investment banks including Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) have felt the brunt of a barren environment for mergers and acquisitions (M&A) as rising interest rates, high inflation and fears of a recession soured the appetite for dealmaking.M&A volumes nearly halved in the first quarter from a year earlier, according to data from Dealogic.As a result, Lazard’s operating revenue from its financial advisory business fell 29% to $274 million in the first quarter, when the company also recorded a $21 million charge from its cost-saving measures.”Slower M&A activity resulted in significantly lower revenues in the quarter and the outlook for the year remains uncertain,” said Lazard CEO Kenneth Jacobs.A banking crisis last month has also dampened investor sentiment, prompting an outflow of client assets that has hit fees earned from asset management.Revenue from the segment, which is highly focused on equities and fixed income assets, dipped 15% to $265 million in the quarter ended March 31.On an adjusted basis, Lazard reported a loss of $23 million, or 26 cents per share, compared with a profit of $115 million, or $1.05 per share, a year earlier. Analysts had expected a profit of 26 cents per share, as per Refinitiv IBES data. More