Aurelia Butler

BRUSSELS (Reuters) -The European Commission proposed on Wednesday that, under a reform of the EU’s fiscal rules, governments should ensure public debt falls by an individually negotiated amount over four years and stays on a downward path for a decade afterwards. The proposal, which sets no numerical target for how much the debt should fall, immediately drew criticism from the EU’s biggest country Germany, which wants a 1% of GDP minimum annual debt reduction target for all of the EU’s 27 countries.The Commission, wary of different debt sizes in the bloc that range from more than 170% of GDP in Greece or 145% in Italy to 19% in Estonia or 22% in Bulgaria, wants to move away from one-size-fits-all rules, like the current one which calls for annual debt cuts of 1/20th of the excess above 60% of GDP.But German Finance Minister Christian Lindner said the EU proposal did not satisfy Germany because there were no minimum numerical targets for debt cuts that would be binding for all.The proposal was a basis for further negotiations, he said.France on the other hand was quick to back the EU executive.”Our position on this is different from that expressed by Christian Lindner,” a French official said. “The idea that there should be a single rule for all seems to us rather to go against the philosophy of the reform. The spirit of this proposal must not be distorted,” the official said.The proposed individual debt reduction would be the outcome of a four-year plan of reforms, investment and fiscal measures that would be agreed by the Commission and each government and target annual net expenditure as the key operational indicator.REFORMS CAN WIN MORE TIME Governments could get more time to reduce their debt and deficit, for instance seven years, if they implement reforms that increase fiscal sustainability, boost growth or invest in areas that are EU priorities like the transition to a green and digital economy, social rights or in security and defence.Under the Commission proposal, countries with public debt above the EU’s ceiling of 60% of GDP would be allowed to raise their annual net expenditure, which excludes one-offs, cyclical unemployment spending and debt servicing costs, by less than the medium-term output growth, to make sure debt falls.The government deficit, like in existing rules, will have to stay below 3% of GDP. If it is above that ceiling, it will have to be cut by 0.5% of GDP every year until it is below the limit.”And no heel-dragging, no backloading: member states will not be allowed to push back fiscal adjustments to a later date. This also applies to carrying out required reforms and investments,” Commission Vice President Valdis Dombrovskis said.To make sure governments do not postpone cutting the deficit and debt to the end of the agreed period, especially if it is extended to seven years, they would be required to implement 4/7th of the agreed adjustment by the end of the four years.The deficit reduction, just like the debt reduction, would have to be achieved over the four-year period and measures used to achieve it would have to ensure that the deficit stays below 3% for 10 years afterwards without any additional steps.The Commission’s proposal is the fourth revision of the EU fiscal rules, called the Stability and Growth Pact, since the creation of the euro currency. The rules are designed to underpin the value of the euro by limiting government borrowing.The new rules are to replace the existing ones, which have been suspended since 2020 because of the COVID-19 pandemic and the challenge of fighting climate change and the war in Ukraine, but which are to be reinstated from the start of 2024.The Commission proposal will now have to be discussed by EU governments and negotiated with the European Parliament with a view to an agreement later in 2023. More

LONDON (Reuters) -Britain will block Microsoft (NASDAQ:MSFT)’s $69 billion acquisition of “Call of Duty” maker Activision Blizzard (NASDAQ:ATVI) over its concerns it would hinder competition in cloud gaming, dealing an unexpected blow to the biggest-ever deal in gaming.The country’s antitrust regulator said on Wednesday that Microsoft’s commitment to offer access to Activision’s multi-billion dollar “Call of Duty” franchise to leading cloud gaming platforms would not effectively remedy its concerns.Microsoft’s president Brad Smith said in a statement the company remained fully committed to the acquisition and would appeal the decision, while Activision said it would “work aggressively” with Microsoft to reverse it.Activision’s CEO Bobby Kotick told staff it was not “the news we wanted – but it is far from the final word on this deal”.”We will reassess our growth plans for the UK,” the company said in a separate statement. “Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”Shares in Activision, which also makes “Candy Crush”, “Overwatch” and “World of Warcraft”, fell 10% in premarket U.S. trading to $78, moving further from Microsoft’s offer price of $95 per share. The video-game publisher was set to erase nearly $7 billion in market valuation, if the losses hold.Microsoft announced its Activision bid in January 2022 to boost its firepower in a video gaming market led by Tencent and Sony (NYSE:SONY).The deal is the biggest involving technology companies the CMA has blocked, the latest sign the UK watchdog is ready to take on Big Tech after blocking in 2021 Facebook-owner Meta’s acquisition of Giphy.Europe will decide on the Activision deal by May 22. The U.S. Federal Trade Commission is also seeking to block it.CLOUD CONCERNSThe surprise ruling comes after the Competition and Markets Authority (CMA) last month dropped its concerns about the impact of the deal on the console market led by Sony’s market-leading PlayStation.That left cloud streaming services as the remaining hurdle, which Microsoft sought to overcome by signing licensing deals with the owners of streaming platforms including Valve Corp, Nvidia (NASDAQ:NVDA) and Boosteroid.It had already offered Sony – a vocal opponent of the deal – a 10-year “Call of Duty” licence, in line with an agreement to bring the multi-billion dollar franchise to Nintendo’s Switch (NYSE:SWCH).The CMA said the cloud gaming market was forecast to be worth 11 billion pounds ($13.7 billion) globally by 2026.”Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games,” said CMA panel chair Martin Coleman. “This means that it is vital that we protect competition in this emerging and exciting market.”COMPETITIVE ADVANTAGESMicrosoft offers Xbox Game Pass, a subscription service for users of its Xbox console, and PC Game Pass for PC users.The CMA said Microsoft had an estimated 60%-70% of global cloud gaming services as well as competitive advantages including owning Xbox, PC operating system Windows and cloud provider Azure.The U.S. software giant offered licensing deals to allay the concerns, but the CMA said they would only include some Activision games, carried a significant risk of disagreement and would need overseeing by the regulator.It has offered similar remedies to the European Commission, which sources have told Reuters it is likely to accept.($1 = 0.8019 pounds) More

The country’s IPCA-15 inflation index eased to 4.16% from 5.36% in the previous month, government statistics agency IBGE said on Wednesday, coming in below market consensus of 4.20% in a Reuters poll of economists.The latest data comes a day after central bank Governor Roberto Campos Neto ruled out an imminent interest rate cut, saying in a Senate hearing that the current rate was appropriate to address inflation concerns.He said policymakers needed to ensure that inflation expectations were within the official targets, rebuffing calls from President Luiz Inacio Lula da Silva for lending costs to be lowered from their current six-year high of 13.75%.Brazil has an inflation target of 3.25% for this year, but private economists expect the official index to reach 6.04% by the end of the year, according to a central bank survey.In the month to mid-April, IBGE said, consumer prices in Brazil rose 0.57% after a 0.69% rise in the previous month. The index had been expected to rise 0.61%, according to the median forecast in a Reuters poll. More

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month, the Commerce Department said on Wednesday. Data for February was revised down to show these so-called core capital goods orders falling 0.7% instead of dipping 0.1% as previously reported. Economists polled by Reuters had forecast core capital goods orders slipping 0.1%.A tightening in credit following recent financial market turmoil could make funding less accessible to households and businesses, putting pressure on investment in equipment and by extension the manufacturing industry.Manufacturing, which accounts for 11.3% of the U.S. economy, is reeling from the Federal Reserve’s fastest interest rate hiking campaign since the 1980s. Spending is also shifting away from goods to services, while sluggish global demand is crimping exports. The inventory cycle is also turning, with restocking by businesses slowing to match cooling demand.Shipments of core capital goods decreased 0.4% in March after falling 0.4% in February. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement. Business spending on equipment fell by the most in 2-1/2 years in the fourth quarter.Most economists expect a small decline when the government publishes its advance estimate of GDP for the first quarter on Thursday. According to a Reuters survey of economists, GDP likely increased at a 2.0% annualized rate in the January-March quarter. The economy grew at a 2.6% pace in the fourth quarter. More

TOKYO (Reuters) – Investors have dialled down wagers on a policy shift at the Bank of Japan this week, which has opened a window of calm that ironically affords governor Kazuo Ueda a chance to move quickly. For months investors have been doubting policymakers’ assurances that the BOJ isn’t planning to change its ultra-easy settings yet, with speculation hitting fever pitch in January after a sudden adjustment to BOJ yield targets late last year.Ueda has given no clues a fresh move is imminent and accordingly pockets of dislocation in the bond market, where short-selling has focused, are easing, and traders are pushing back expectations for policy tweaks to June or July.The gap between market-set 10-year interest rate swaps and 10-year government bond yields, which the BOJ caps, is at its narrowest in eight months and almost 40 basis points tighter than when it was at its widest in 25 years in January. Dealers say BOJ efforts to make short selling more expensive have also worked and that investors are simply avoiding the market, rather than crowding into bets on yields rising. Implied dollar/yen volatility in the currency options market is well below January highs too, suggesting forex traders aren’t expecting wild moves either.The calm could be opportune for the BOJ.”I’m thinking that the market is very under positioned (for a shift),” said James Malcolm, head of FX strategy at UBS in London, where the house view is for the BOJ to move in June or July, but he sees a risk policymakers take their chance to act.”By process of elimination they have to adjust yield curve control before June-July (market) consensus,” he said, which could be by widening or moving the 10-year yield target band that currently keeps yields within 50 bps of zero percent.Others believe yield targets could be abandoned altogether.Sources familiar with BOJ thinking say such changes may be delayed, and instead Ueda could adjust guidance on the outlook and drop references to COVID-19 shaping policy.Nearly 90% of economists polled by Reuters said they expect no policy change. About 40% expect a change in June. RETREATInflation at 40-year highs and the biggest wage rises seen in decades are behind investors’ conviction that years of loose monetary policy must end soon for Japan.And they have bet in defiance of BOJ rhetoric, a trade nicknamed the “widowmaker” for its propensity to fail. Wagers have centred around short selling the 10-year bonds that the central bank has kept artificially pricey by capping yields.With the BOJ spending a staggering $1 trillion defending that cap in the year through to March, along with other measures to make shorting costlier, a lot of investors have given up.Foreigners’ record weekly purchase of JGBs in the week after the March meeting was largely attributed to closing shorts.The gap between futures’ implied yields and cash yields, which can blow out when futures are heavily shorted, has also narrowed. “It seems many funds were forced to cover their short positions,” said Tomohiro Mikajiri, head of yen and non-yen fixed income trading in Japan for Barclays (LON:BARC). “Hedge funds which attacked the BOJ’s policy have retreated from the game.”A rally in global bond markets has also helped make Japan’s low yields look slightly less out-of-step with the rest of the world. Ten-year cash yields were last at 0.455%, below the 0.5% cap, and 10-year interest rate swaps were at 0.64%. [JP/]Ueda’s most recent remarks have stressed the need to keep policy settings loose for now, without ruling out the possibility of future changes. On Sunday the Sankei newspaper reported the BOJ is considering a review of the impact of its policy settings, which could foreshadow changes.Nomura strategist Naka Matsuzawa said the path ahead would be a balance between getting a policy change done, and improving communication. Others remain wary of surprise.”I don’t think Ueda’s words will necessarily match his actions,” said Brent Donnelly, currency trader and president of analytics firm Spectra Markets, who also noted the market is under-positioned for a move this time around.”Remember they changed policy in December 2022 right on the heels of similar dovish comments from (former governor Haruhiko) Kuroda. If their strategy is to trick the market, like they did in December, they could move at this meeting.” More

“A gradual recovery is underway, despite a persistently difficult environment,” Germany Economy Minister Robert Habeck said.Current economic indicators such as industrial production, orders received and business climate point to an economic revival in the course of the year, the report said. “For next year, we expect the recovery to continue and gain in breadth,” Habeck said. For 2024, the government slightly lowered its growth forecast to 1.6% from the 1.8% foreseen in January.Inflation forecasts were also adjusted down, with the rate for both 2023 and 2024 now seen 0.1 percentage point lower, at 5.9% and 2.7%, respectively. Inflation stood at 6.9% last year. Despite government support measures and rising incomes, private consumption will be weak due to inflation-related losses in purchasing power, the report said. It will only pick up again later in the year as inflation continues to decline. With the new projections, the government is slightly more optimistic than the five economic institutes that prepare the Joint Economic Forecasts, which foresee 2023 economic growth of 0.3%. More