Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.The world is bracing for U.S. inflation figures on Wednesday, but before that Asia gets to digest a mixed performance on Wall Street, another creep up in U.S. bond yields, and a major inflation report of its own. Indian consumer price inflation for March tops a regional economic calendar on Wednesday which also includes Indian industrial production, South Korean unemployment, and corporate goods inflation and machinery orders from Japan.These releases come against a backdrop of global stock markets still maintaining a glass-half-full outlook despite the growth picture fraying at the edges and bond yields continuing a steady creep higher. Asian stock markets, in particular, are holding firm – the MSCI Asia ex-Japan index rose 0.6% on Tuesday, its third consecutive increase and its best performance this month.The U.S. CPI inflation report for March will go a long way to determining what the Fed decides at its May 2-3 policy meeting. Markets expect headline inflation to continue slowing, but are still shifting towards pricing in another quarter point rate hike. GRAPHIC: U.S. CPI inflation https://fingfx.thomsonreuters.com/gfx/mkt/jnvwylagovw/USCPI.pngGRAPHIC: Indian CPI inflation and policy rate https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqnmrepw/IndiaCPI.jpg India’s consumer inflation, meanwhile, likely eased in March to 5.80%, thanks to softer food price rises, dipping below the Reserve Bank of India’s upper tolerance limit of 6.00% for the first time this year.The data comes less than a week after the RBI surprised markets by holding its key interest rate steady at 6.50% when most expected a 25 basis point rise.South Korean unemployment in February fell back to match last August’s record low of 2.6%, so a further decline in the March reading would break new historic ground.Finance ministers and central bank officials from around the world are in Washington for this week’s International Monetary Fund and World Bank spring meetings. The IMF on Tuesday trimmed its global growth outlook for this year and next as higher interest rates bite, and warned that the risk of “perilous” financial turmoil could slash output to near recessionary levels. The global lender kept its Chinese growth forecasts at 5.2% and 4.5%, respectively, but lowered its 2023 Indian GDP growth forecast by a fifth of a percentage point to 5.9% and next year’s outlook by half a point to 6.3%.U.S. Treasury Secretary Janet Yellen was more optimistic about global economic growth and warned against overdoing the ‘negativism’. She also said she still hopes to visit China, underscoring President Joe Biden’s focus on opening up and maintaining channels of communication with Beijing.Here are three key developments that could provide more direction to markets on Wednesday:- IMF/World Bank spring meetings in Washington- India CPI inflation (March)- U.S. CPI inflation (March) (By Jamie McGeever; Editing by Deepa Babington) More

NEW YORK (Reuters) -Investment firm Pura Vida is wading into a boardroom battle at global aesthetics device company Cutera (NASDAQ:CUTR) Inc by warning warring directors on Tuesday it may push ahead with steps to boost the company’s share price if they fail to settle their disagreements.Also on Tuesday, 10 company executives, including the chief financial officer and chief information officer, threw their support behind their chief executive and a senior board member.The New York-based hedge fund, which owns a 7% stake in Cutera, said it wants the board to “move the company forward with an orderly CEO succession process” with the help of a prominent executive search firm. During the search, Pura Vida wants the current CEO to remain at the helm.If the board fails to act, Pura Vida’s managing member Efrem Kamen said on Tuesday his firm has “identified a world-class CEO and high-quality independent directors” who could help the company.Pura Vida is also calling on the company to extend the deadline for nominating directors which was in early January.Cutera’s share price has tumbled 58% in the last 52 weeks. It jumped 14% on Tuesday though after it regained compliance with Nasdaq’s continued listing standards and details about the standoff on the board became public.A representative for the company did not respond to a request for comment.Activist investor J. Daniel Plants, who has served on the board for eight years, and CEO David Mowry, who also sits on the board, on Monday said the board has become “factionalized” and that a group of directors have bungled the company’s succession planning after Mowry had said that he wanted to leave.Plants’ Voce Capital and Mowry together own 7% in Cutera.Mowry and Plants said in a press release that they are pushing for the removal of five of the board’s eight directors and are calling for a special meeting.The senior executives wrote that Mowry has “earned our trust and respect” since joining the company in 2019 and that he and Plants are a cohesive and effective team. Cutera on Friday said the board established a special committee of independent directors to review the request for a special meeting and related matters. More

The ECB has raised rates by a combined 350 basis points since July and more increases are likely as price growth is still too high and underlying price pressures, which filter out volatile food and fuel prices, are still rising.”We now face the risk of entrenched inflation, which lies in the underlying or ‘core’ component,” Villeroy said in New York on Tuesday. “Inflation has become more widespread, and potentially more persistent.”But Villeroy said monetary policy was most effective in tackling underlying or core inflation and he expected price growth back at around the ECB’s 2% target by the end of 2024 or the end of 2025.Although the ECB raised rates by 50 basis points at each of its past three meetings, markets are expecting just a 25 basis point increase on May 4 as smaller steps may be more appropriate as the bank is approaching its peak or terminal rate.”We at the ECB are now moving from a ‘sprint’ to a ‘long-distance race’,” Villeroy said, adding the inflation outlook, underlying inflation readings and the effectiveness of policy transmission will be the key factors in the next decisions. Markets see the ECB’s 3% deposit rate peaking around 3.65% by the end of the third quarter, suggesting two 25-basis point moves are fully priced in and investors are split over a third hike. More

A debate is emerging among top Federal Reserve officials about whether to plough forward with another interest rate increase amid diverging opinions over the magnitude of a potential credit crunch stemming from the recent banking turmoil. Austan Goolsbee, president of the Chicago Fed, called for “prudence and patience” in setting monetary policy, in prepared remarks ahead of a speech at the Economic Club of Chicago, saying it was unclear how much regional banks might pull back on lending following the implosion of Silicon Valley Bank and Signature Bank last month.“Given how uncertainty abounds about where these financial headwinds are going, I think we need to be cautious,” said Goolsbee, who assumed his position in January and is a voting member on the policy-setting Federal Open Market Committee this year. Goolsbee, who did not explicitly say whether he would support or dissent from another quarter-point rate rise next month, added that “we should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation”.In a discussion that followed his speech, Goolsbee noted that the jobs market, while “unbelievably strong” was “cooling a bit”, suggesting that the Fed’s efforts to damp demand were starting to have an effect.His remarks came on the heels of comments from John Williams, president of the New York Fed, who said that another quarter-point interest rate increase was a “reasonable starting point” in terms of the next policy meeting. The final decision, he said, would depend on incoming data, however. That echoed a point made by Susan Collins, president of the Boston Fed, in a recent speech, where she said she currently “anticipate[d] some modest additional policy tightening, and then holding through the end of this year”.Policymakers will need to decide at their meeting in early May on whether to ratify projections published last month, which indicate that most officials support one more quarter-point rate rise this year, with the federal funds rate expected to peak at 5 to 5.25 per cent. There are no cuts forecast until 2024.According to Fed funds futures markets, traders are betting that the Fed delivers another rate rise this cycle before reversing course.Speaking later on Tuesday, Patrick Harker, president of the Philadelphia Fed and another voting member of the FOMC, said the Fed will “continue to look closely at available data to determine what, if any, additional actions we may need to take”.He said the “disinflation is proceeding slowly — which is disappointing, to say the least”.Driving the debate is the severity of the economic impact of the recent banking turmoil. Jay Powell, the Fed chair, said last month that the string of bank failures could potentially be the equivalent of a “rate hike or perhaps more than that”, but cautioned that it was not easy to make that assessment in real time.

Williams on Tuesday told Yahoo Finance that the banking system had “really stabilised” and that while still early, there were not yet strong signs that credit conditions were dramatically tightening.James Bullard, president of the St Louis Fed, also adopted a more optimistic tone about the economic outlook, saying last week that he was “less enamoured with the story that credit conditions will tighten appreciably enough to send the US economy into a recession”. He has also said that the most likely scenario was that the Fed would have to grapple with a strong economy and stubbornly high inflation.Those remarks stand in sharp contrast to warnings from Goolsbee, who on Tuesday said “history has taught us that moments of financial stress, even if they don’t escalate into crises, can mean tighter credit conditions”.“These can have a material impact on the real economy in a way that the Fed absolutely needs to take into account when setting policy,” he added, noting that it could well mean that monetary policy “has to do less” if the recent banking problems lead to financial tightening. More

The IMF has warned of a “hard landing” for the global economy if persistently troublesome inflation keeps interest rates higher for longer and amplifies financial risks.Although the fund left its overall economic forecasts largely unchanged from January in its latest World Economic Outlook, published on Tuesday, it stressed that signs of resilience alongside lower global energy and food prices masked a darker reality.Pierre-Olivier Gourinchas, the IMF’s chief economist, said: “Below the surface . . . turbulence is building, and the situation is quite fragile.”“Inflation is much stickier than anticipated even a few months ago,” he said. “More worrisome is that the sharp [monetary] policy tightening of the past 12 months is starting to have serious side effects for the financial sector.”In its twice-yearly full forecasts published on Tuesday, the IMF said the turmoil in the UK government bond market last autumn and the US banking turbulence last month showed the “significant vulnerabilities [that] exist both among banks and non-bank financial institutions”.“Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing having risen sharply,” the IMF said. Gourinchas told the Financial Times that, while the banking system was far more resilient than during the 2008 financial crisis, policymakers had to “think about what could go wrong”. “We can all remember the long time between the failure of an individual institution, whether it was Bear Stearns or Countrywide,” he said, referring to institutions that failed more than a decade ago. “Every time, this was treated like an isolated incident, until it wasn’t.”The IMF’s new forecasts showed a 25 per cent chance that the annual global growth rate could fall below 2 per cent in 2023, a risk twice as large as normal. The global economy has only grown that slowly in five calendar years since 1970.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

If a significant financial shock hit — something the IMF attached 15 per cent risk to — the fund said global growth was likely to fall below the rate of population growth and result in a global recession. In the IMF’s unchanged central forecast, the global economy is expected to grow 2.8 per cent in 2023, rising to 3 per cent in 2024 and sticking at about that level until around 2028. IMF managing director Kristalina Georgieva last week said this was the weakest medium-term outlook for the global economy since 1990. Gourinchas told the FT the fund was projecting “supercharged” growth in China with other countries reverting to a more normal rate. The IMF also assumes that global productivity will deteriorate while economies will suffer from coronavirus pandemic “scarring”, and fragmentation amid geopolitical tensions. The US economic forecast has been raised versus the January forecast, and the fund is now expecting growth of 1.6 per cent in 2023 and 1.1 per cent in 2024. Three months ago, the IMF was projecting a 1.4 per cent increase this year followed by a 1 per cent expansion the following year.The eurozone is expected to grow more slowly at 0.8 per cent this year as member states deal with last year’s energy price increases before recovering to a 1.4 per cent rate in 2024. China’s forecast growth rate of 5.2 per cent in 2023 from the IMF is in line with the Beijing government’s target, although the fund expects it to slow to 4.5 per cent in 2024.

The IMF called on central banks to keep working to bring inflation down and for governments to help by removing some of the fiscal support offered in recent years to deal with Covid-19 and the energy crisis. So long as financial markets remained relatively stable, central banks should do everything they can to beat inflation, the fund said. Gourinchas warned that price pressures could continue to prove more persistent, which would result in a “harder landing scenario”.“There is a concern out there that we may not have enough tightening in the system at this point and more will be needed,” he said. “That would certainly increase the odds that output would come down further compared to our projections.” However, a credit crunch, which some economists are predicting in the wake of last month’s US banking turmoil, could act as a disinflationary force, he said. “As long as it is orderly, some of this lending contraction may actually be beneficial in terms of bringing down inflation and may substitute for further interest rate hikes.”Janet Yellen, the US Treasury secretary, was more upbeat about the outlook, seeking to ease fears of a “hard landing”. She said she had not seen “evidence at this stage suggesting a contraction in credit” after the banking sector turmoil, and noted the US economy was still “performing exceptionally well”, with “continued solid job creation, inflation gradually moving down [and] robust consumer spending”. “I wouldn’t overdo the negativism about the global economy,” Yellen said told reporters. “I think the outlook is reasonably bright.”Additional reporting by James Politi More

Over the past three years the global economy has been subjected to an unprecedented series of shocks. After the pandemic struck, Russia’s invasion of Ukraine brought added disruption. Both contributed to a cost of living crisis, with central banks raising interest rates rapidly to contain runaway inflation. Arguably, the international economic system has displayed remarkable resilience. The most downbeat forecasts for a widescale financial crisis and a chain of debt defaults by low income countries has been avoided so far. But the global economy is badly scarred. The IMF projects the weakest global medium-term growth prospects for over 30 years. Policymakers gathering at the World Bank/IMF spring meetings this week have their work cut out to stabilise the global economy and shift it on to a higher growth path.The IMF forecasts global growth to be 2.8 per cent this year, down slightly on expectations in January. It also places a 25 per cent chance that growth could fall below 2 per cent. Indeed, price pressures are proving more persistent than anticipated and economic conditions have become more fragile. A top official at the IMF warned of “acute” risks to the global financial system, and many advanced economies are expected to be sluggish this year, as high interest rates squeeze credit. Getting the global economy back on track will mean grappling with several pressing risks.Although some calm has returned to the banking system following the collapse of three US banks and Credit Suisse’s emergency takeover by UBS in March, financial markets remain on shaky ground. Central banks can see the end of this rate hiking cycle, but the rapid reversal of a decade of cheap money is exposing vulnerabilities. There are concerns over the impact of high interest rates on commercial real estate and the non-bank sector. Central bankers face a balancing act: they must limit further instability and ensure high inflation does not become entrenched.At the same time higher borrowing costs are hitting developing countries that have amassed enormous debts dealing with the pandemic and high food and energy prices, exacerbated by a strong dollar. Around 60 per cent of low-income countries are at high risk of or already in debt distress. The poorest countries also face the largest bills for servicing foreign debts in 25 years. High debt burdens complicate the task for developing countries which need over $2tn a year by 2030 to cut emissions and deal with damage from climate change. Boosting efforts to tackle global warming is paramount to prevent people in poor countries falling deeper into poverty, and to drive growth and job creation. Geopolitical risks are also undermining global prospects. The IMF finds that the long-term cost of trade fragmentation, as a result of tensions between the US and China, could be around 7 per cent of global GDP. Barriers to trade, investment and technology transfer would limit growth, particularly in poorer countries.Policymakers will need to mitigate these risks. Regulators will have to remain vigilant to the knock-on impacts of high interest rates; the recent banking crisis also ought to be a wake-up call to improve bank and non-bank regulation. There is hope that progress on a framework to restructure developing world debt in an orderly manner across creditors, including China, is possible at the meetings. Efforts to mobilise more financing for climate change from international financial institutions, both through more efficient use of their balance sheets and via private sector partnerships are vital too. The complex and connected challenges facing countries require an ambitious and co-operative global response. This week’s meetings are a crucial moment to set that in motion. More