Aurelia Butler

Investing.com — ADP publishes its monthly payroll survey and the U.S. reports trade numbers for February. Johnson & Johnson ponies up to settle long-running allegations that its baby powder causes cancer, and the rally in oil prices pauses for breath despite a big drop in U.S. inventories. Here’s what’s moving markets on Wednesday, 5th April.1. ADP, trade data due as recession signs spreadAll aboard the recession bandwagon. The weakest job vacancy numbers in nearly two years, coupled with further evidence of manufacturing already in recession, form the backdrop to two sets of data which don’t usually garner too much attention.Today, however, the ADP payrolls report at  08:15 ET (12:15 GMT), and U.S. trade data due 15 minutes later will be seized upon for any further evidence of a slowdown sharp enough to stop the Federal Reserve raising interest rates any further.The benchmark two-year Treasury note yield, which is closely correlated to Fed expectations, has fallen another 27 basis points so far this week after plummeting in response to last month’s bank collapses. Any downside surprises from the numbers are only likely to push it down further.2. Johnson & Johnson tries again to end cancer suitsJohnson & Johnson (NYSE:JNJ) offered to pay $9 billion to settle long-running allegations that its talc products caused ovarian cancer, in its most convincing effort yet to draw a line under a lengthy litigation battle.The company’s LTL Management unit, into which J&J has spun off its baby powder-related liabilities, refiled for bankruptcy protection, hoping to gain approval for a plan that would spread payments to victims over 25 years. A previous effort to do this had been rejected.J&J has already paid $2.1B in damages to settle some allegations against it. It will take another $6.9B impairment charge against its first-quarter earnings to cover the bulk of the rest of the expected liability.J&J stock was up 3.1% in prermarket on hopes for a quick end to the saga.3. Stocks set to extend declines as economy coolsU.S. stocks are set to open lower again, having turned down on Tuesday in response to a Job Openings survey that suggested the labor market is now cooling down quickly. Comments late on Tuesday from Cleveland Fed President Loretta Mester that interest rates will have to stay above 5% for an extended time – regardless of the signals from this week’s economic data – aren’t helping the mood. By 05:30 ET, Dow Jones futures were down 65 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures were down in line. The three main cash indices had fallen for a second straight day on Tuesday in response to the data.Aside from Johnson & Johnson, stocks likely to be in focus later include food groups ConAgra Foods (NYSE:CAG) and Simply Good (NASDAQ:SMPL), both of which report earnings early, along with pot stock Tilray (NASDAQ:TLRY).4. Eurozone growth hits 10-month high; von der Leyen, Macron head to ChinaThe Eurozone economy expanded at its fastest pace since May in March, according to final estimates from S&P Global. Southern Europe in particular grew strongly, while France and Germany – both hobbled by extensive strike action in March – limped along.There was also some good news from the hard data, with German factory orders rising at the fastest pace in nearly two years in February and French industrial production also rising more than forecast.The bad news is that analysts don’t expect it to last, given the tightening of credit conditions across the region that started well before last month’s banking issues. The euro, which hit a two-month high on Tuesday, was unimpressed.Europe’s attention is now turning to a trip to Beijing by EU Commission President Ursula von der Leyen and French President Emmanuel Macron. The two will meet President Xi Jinping for talks on Thursday.5. Oil pauses for breath; U.S. inventories drop againCrude oil paused for breath after its rally at the start of the week, with even the announcement of another big drop in U.S. inventories unable to push prices higher in the near term. The U.S. government publishes its weekly data at 10:30 ET.By 05:45 ET, U.S. crude futures were down 0.2% at $80.59 a barrel, while Brent was down 0.2% at $84.78 a barrel – both benchmark blends still close to their recent highs.The edge came off the rally on Tuesday after Iraqi and Kurdish officials announced a deal to end the blockage of shipments through a pipeline to the Turkish port of Ceyhan. So far, there has been no confirmation of flows resuming, however. More

TORONTO (Reuters) – The Canadian dollar is set to rally over the coming year, after a period in which it consolidates its recent gains, as an expected slowdown in economic activity stops short of a hard landing for the economy, a Reuters poll showed on Wednesday.Since early March the Canadian currency has rallied about 3% against its U.S. counterpart as worries the global banking crisis would lead to a credit crunch eased and the U.S. dollar lost ground against a basket of major currencies.A surge this week in the price of oil, one of Canada’s major exports, has added further momentum for the currency. It touched on Tuesday its strongest intraday level in almost seven weeks, near 1.34 per U.S. dollar, or 74.63 U.S. cents.The median forecast of nearly 50 currency analysts was for the loonie to weaken to 1.35 per U.S. dollar in three months’ time, compared to 1.34 expected in last month’s forecast. But it was then expected to rally to 1.30 in a year, which is a gain of 3.5%.”It’s basically a reflection that you get the moderation in (economic) growth … more of a soft landing than a hard landing, and so the CAD can do okay in that environment,” said Mazen Issa, senior FX strategist at TD Securities.”But if the U.S. (outlook) becomes particularly precarious, if lending conditions tighten significantly … then we could have a little more problems globally.”The Bank of Canada is ready to step in with support if the banking system comes under severe strain, but now it is not even close to being worried about the health of the financial system, Deputy Governor Toni Gravelle said last Wednesday.Next Wednesday, the central bank is due to make an interest rate decision and update its economic forecasts. Money markets and economists expect the benchmark interest rate to be left unchanged at a 15-year high of 4.50% after the BoC paused its hiking campaign last month.Other central banks, such as the U.S. Federal Reserve, may also soon pause.”I think it’s an environment where the (U.S.) dollar loses a bit of its edge,” Issa said. “It will give up some ground on the rate differential side.”The gap between Canada’s two-year yield and its U.S. equivalent was trading on Tuesday at 27 basis points in favour of the U.S. bond, its narrowest gap since early January.(For other stories from the April Reuters foreign exchange poll:) More

The writer is director of research and advisory at Asia House think-tankGlobal youth unemployment is soaring. China’s rate is at a record high. Even more problematic is the lesser-known Neet rate, measuring the share of youngsters not in employment, education or training. A rising Neet rate should be ringing alarm bells everywhere. It has quietly risen above 20 per cent globally, a level not seen in almost two decades. And even when employment is offered, it is often the wrong kind, poorly paid, and mostly informal, according to the International Labour Organization. As I walk my son to school through the construction boom of southern Athens, I think about affordability. I wonder about my young neighbour, who, with a newly minted PhD, has just accepted a part-time position as a junior restaurant manager. “It’s better than no job,” she says. This job downgrading is a form of economic scarring in which the quality of employment deteriorates even as economies recover. Scarring is pervasive in lower income economies. Advanced economies, including parts of the US, have not been immune either. The stakes are highest for the poorest, most fragile economies, such as Niger, Yemen and Somalia, where soaring Neet rates lead to catastrophic economic and social outcomes. This is now exacerbated by exorbitant food and energy prices. In an era of multiple shocks, higher Neet rates further embed acute vulnerability. This is true for undiversified, resource-dependent and gender-imbalanced economies. Globally 32 per cent of young women are Neets compared with roughly 15 per cent of young men. Southern Asia’s Neet gap is an eye-watering 53 per cent of young women to 6 per cent of young men. The economic consequence of this imbalance is stark. Rising Neet rates will trigger the productivity shortfalls that bring the so-called middle-income trap. When countries’ productivity falls short, the whole economy never reaches higher income status. Compare Ireland and South Korea’s economic dynamism with Mexico and Argentina’s chronic turmoil. Digitalisation, and the “platinum economy” jobs that come with it, could reverse rising Neet rates globally. A high-tech job is more than a job. For every new high-tech job, five additional non-high tech jobs are generated in a city, according to the economist Enrico Moretti. Yet, in multiple emerging economies, digital access remains staggeringly low, especially in rural areas, including in economic giants such as India. Digital innovation is also fickle for workers in that it can depress wages, rapidly shift work tasks or eliminate jobs altogether. Policymakers are taking some notice. South Korea has put forward its Human New Deal that seeks to address the labour market impacts from its energy transition and greater digitalisation. It aims to do this largely through training and insurance for non-standard forms of employment. Ultimately, success in lowering the Neet rate will be context-specific. For some economies, such as Mexico’s and India’s, an improved investment climate for foreign firms — and the knowledge spillover they bring — would align with prioritising education. While Greece could be devoting much more to its think-tank sector, so that PhD graduates can innovate. Better education and labour market outcomes to spur innovation and productivity matter. Without further understanding and tackling the Neet rate, growth and wellbeing will stagnate. Elevated financial volatility, rising borrowing costs and geopolitical turmoil could mean successive and multiple shocks ahead. In this context, the Neet rate is an essential bellwether for a broad array of vulnerabilities for the young — and an essential barometer of wellbeing for the next generation.   More

ABIDJAN (Reuters) – West African countries of the eight-nation economic and monetary union are struggling to raise funds on the regional capital market, as investors demand higher interest rates amid tightening liquidity, financial market sources said.Ivory Coast failed to issue local currency debt in March, while Senegal, Mali, Niger and Burkina Faso have cancelled or postponed bond issuance in recent weeks.The failure to raise much-needed funds from the regional market may force states to look for alternative, cheaper financing sources such as the International Monetary Fund (IMF) to avoid budget shortfalls, the sources told Reuters.”There is currently a serious liquidity crisis for states on the regional financial market. The interest rates offered do not reflect the reality of the market,” said Isidore Tanoe, director of Abidjan-based financial services firm Majoris Financial Group.Tanoe said interest rates should be between 6.5% and 6.80%, instead of the 5.80% to 5.95% offered by governments currently.Ivory Coast, the biggest economy in the West African Economic and Monetary Union, failed to raise 85 billion CFA francs ($142 million) through bonds issued at an interest rate of around 5.5%. It returned to the market to raise the funds at an interest rate above 6%. Ivory Coast plans to raise 3.1 trillion CFA to finance its 2023 budget, with 2.5 trillion CFA expected to come from the regional market, according to the finance ministry.The country could also seek bilateral aid and funding from a consortium of banks, an official at the finance ministry told Reuters. He requested anonymity because he is not authorised to speak to the media.”When market conditions are not favourable at a given time, we withdraw to come back with a better offer,” he said, adding that the next bond issuance will take into account the realities of the market and interest rates will be adjusted.LIQUIDITY Mali, Benin, Burkina Faso and Senegal have all had to postpone debt auctions. Senegal returned to the market to raise over 201 billion CFA at an interest rate above 6%, the finance ministry said in a statement on March 31.Commercial banks, which make up more than 80% of the investor base for government securities, have seen their liquidity positions deteriorate, said London-based economist Emmanuel Kwapong at Standard Chartered (OTC:SCBFF) Bank. West Africa’s regional central bank, the BCEAO, raised its main lending rate to 3.00% from March 16 to bring inflation within its target range of 1-3%. Inflation was around 6% in January, it said. “With the BCEAO tightening monetary conditions to contain elevated inflationary pressures and preserve FX reserves, the cost of funds for banks has increased,” Kwapong said.Kwapong said financing needs were greater given the deterioration in the region’s fiscal position following global external shocks, forcing more countries to turn to the regional debt market.”As a result, sovereign demand for financing on the regional debt market rose significantly, putting pressure on it,” he said. Countries will have to seek bilateral assistance to avoid budget deficits and continue to finance projects, said Soualiou Fadiga, executive director of the regional stockbrokers association. “There will be a scarcity of financing and the solution for the states is bilateral resources such as from the IMF,” Fadiga added. Ivory Coast, Senegal and Benin have international sovereign bonds, for which yields have soared as developed country central banks have hiked interest rates, making new foreign currency bonds unaffordable for many small emerging markets.Ivory Coast reached an agreement with the IMF earlier this month for a $2.6 billion loan, while Senegal will start negotiating for new programme at the IMF spring meetings next month. ($1 = 598.5000 CFA francs) More

Trade talks between the EU and four of South America’s largest economies have hit a fresh hurdle after Brasilia condemned Brussels’ attempts to add environmental commitments to the export deal. The EU said last month that the four Mercosur countries — Brazil, Argentina, Uruguay and Paraguay — must commit to binding measures on deforestation reduction before the deal can be ratified.However, a senior Brazilian diplomat told the Financial Times that his country was “not at all” happy with the nature of the request, which the EU made through a so-called side letter to appease concerns of certain member states. “It is the same old tricks and rhetoric to try to gain leverage but it is not going to work,” the official said. The deal took 20 years to negotiate and was finally concluded in 2019. However, its ratification has been beset by delays after EU countries, led by France, insisted on a firm commitment from Brasília to protect the Amazon before they will sign. EU trade commissioner Valdis Dombrovskis last month hailed a “window of opportunity” to sign the deal after Luiz Inácio Lula da Silva beat Jair Bolsonaro in the presidential election in October. Lula repeatedly vowed to preserve the Amazon after Bolsonaro presided over record levels of deforestation.“On the environment, throughout his previous tenure and from day one of his government, [Lula] has shown clear commitment to tackle problems he inherited from the previous administration,” the Brazilian official said. “They are not talking with Bolsonaro anymore. It is necessary they recognise this and tone things down.”The request came in the form of a side letter from the European Commission, the bloc’s executive arm, sent to Mercosur members in early March.A copy of the EU’s letter, seen by the FT, requests both sides to commit to measures contained in the Paris Climate Agreement, which require signatories to halve deforestation by 2025, as well as reverse forest loss and the misuse of land by 2030. The letter also includes an obligation to respond to “any further decisions” made by the UN with regard to the Paris agreement, and to properly resource environmental regulators.“They are trying to turn the voluntary Paris agreements into binding commitments, which is well beyond the scope of a side letter,” the Brazilian official said. “A side letter is meant to clarify things that have been already agreed upon. It is not meant to make new commitments.” While Brazil believes any new commitments on the environment would require renegotiating the deal, the EU is reluctant to do so — fearing it would give leverage to member states and protectionists that have long opposed the deal. Parliaments in the Netherlands and Austria have come out against the deal, arguing more imports from South America would make EU consumers responsible for deforestation. EU farming groups oppose increased imports of beef from the region, while Mercosur governments are wary of opening up their markets to the EU’s manufactured goods.An EU diplomat acknowledged there was opposition in several member states but was “optimistic” of reaching a deal. “Let’s not give up,” they said. The European Commission said it was awaiting feedback from Mercosur to its proposal. More

The consumer price index rose 7.6% in March, below the 8.0% forecast in a Reuters poll, and marked the slowest pace of price increase in six months. But core inflation, which strips out volatile food and fuel items, accelerated to 8.0% in March from February’s 7.8%, indicating price pressures remain. The Philippine central bank, which projected inflation to be between 7.4% to 8.2% in March, raised its benchmark interest rate by 25 basis points to 6.25% last month, to bring inflation back to its 2%-4% target this year. The central bank said its future policy moves would be would be data-dependent. More

The final au Jibun Bank Japan Services purchasing managers’ index (PMI) rose to a seasonally adjusted 55.0 last month, from February’s 54.0, marking the quickest rate of expansion since October 2013.It was also higher than the flash reading of 54.2 and well above the 50-mark that separates expansion from contraction for a seventh straight month.”The Japanese services economy signalled a sharp improvement in demand conditions at the end of the first quarter of 2023 as the dissipating impact of the COVID-19 pandemic and stronger customer confidence combined to boost output and orders,” said Usamah Bhatti, economist at S&P Global (NYSE:SPGI) Market Intelligence.The subindexes of new orders and overseas demand grew for a seventh month, rising at the fastest pace since February 2019 and December 2022, respectively.The survey was an encouraging sign for Japan’s post-COVID economic recovery, and provides some offset to the manufacturing PMI released on Monday which showed factory activity still in contraction last month even as the downturn eased somewhat.Business confidence for the coming year logged a 31-month streak of improvement, the quickest rate since June 2022, with the survey citing positive sentiment on hopes for an extended improvement in post-pandemic conditions.The number of visitors to Japan ticked down 1% to 1.47 million in February but showed continued “robust recovery,” according to the national tourism agency. In May, the country will also end its existing COVID-19 border controls for international visitors to launch a voluntary testing programme at airports.However, higher costs in fuel, commodity and labour as well as a weaker yen caused firms’ average input prices to increase consecutively since December 2020, though the rate was the softest since last January.”Inflationary pressures remain a key downside risk in Japan, notably as official statistics point to the sharpest rise in inflation in over 40 years, a marked change from the deflationary period over the recent past,” Bhatti said.The subindex for employment expanded for a second month and at the fastest pace in ten months, as workloads and business expansion plans increased.The composite PMI, which combines the manufacturing and services figures, grew at the fastest pace since June 2022. The index rose to 52.9 in March from the previous month’s 51.1, staying above the break-even 50 mark for three consecutive months. More