Aurelia Butler

WASHINGTON (Reuters) -For the fourth time in a week, U.S. Treasury Secretary Janet Yellen took a microphone on Thursday aiming to reassure Americans that the U.S. banking system is safe, each time with a subtle shift in message.But bankers and Wall Street never heard what they fervently wanted: That the government would guarantee all $19.2 trillion in U.S. bank deposits until the banking crisis that erupted two weeks ago calms down.Yellen is the face of the U.S. government on the issue, and her public comments have sent markets on a roller coaster ride.Becoming more explicit each time she has spoken, Yellen has repeatedly said the U.S. will safeguard deposits but has stopped short of a blanket guarantee, which would insure account balances of any size, including those above the current limit of $250,000.Her comments on Thursday more clearly indicated than previously that further guarantees for uninsured deposits would come in the form of rescues for depositors of individual failing banks where problems threaten to spark runs on other banks. She told U.S. lawmakers that bank regulators and the Treasury were prepared to make comprehensive deposit guarantees at other banks as they did at failed Silicon Valley Bank and Signature Bank (NASDAQ:SBNY).”These are tools we could use again, for an institution of any size, if we judge that its failure would pose a contagion risk,” she told a U.S. House of Representatives Appropriations subcommittee hearing. The comments helped lift broad stock indexes. But regional bank shares including those of struggling First Republic Bank (NYSE:FRC) continued to slide.Yellen on Wednesday told a Senate subcommittee that she was not considering a move to circumvent Congress and grant “blanket insurance” on all U.S. bank deposits.CONGRESS’ CLOUTThat’s a step that the government and regulators took unilaterally in the 2008 global financial crisis, but the Biden administration would now have to get approval from Congress under 2010 reforms. Hardline Republicans oppose any increase in the current $250,000 Federal Deposit Insurance Corp limit, making it unlikely that Yellen could hastily arrange such a backstop even if the crisis worsens.Banks and markets have found Yellen’s comments unsettling at times. On March 16, she told a told a Senate hearing that banks had to pose a systemic risk to win a deposit guarantee, a comment interpreted as leaving small community banks to fend for themselves.But at a bank conference on Tuesday, she said that similar actions to the SVB guarantee “could be warranted if smaller institutions suffer deposit runs,” reassuring those institutions. Yellen’s reluctance to endorse a universal backstop has drawn criticism from investors including hedge fund manager Bill Ackman. They argue that a universal guarantee is needed to prevent depositors at small and mid-size banks from fleeing for perceived safety at large banks viewed as “too big to fail.” More

TOKYO (Reuters) -Japan’s core consumer inflation slowed in February but an index stripping away energy costs hit a four-decade high, data showed on Friday, suggesting cost-push pressures may persist longer than policymakers thought.With inflation still exceeding the Bank of Japan’s 2% target, the data will keep alive market expectations of a near-term tweak to its bond yield control policy, analysts say.The core consumer price index (CPI), which excludes volatile fresh food but includes oil products, rose 3.1% in February from a year earlier, government data showed, matching a median market forecast and slowing sharply from a 41-year high of 4.2% seen in January.The slowdown was mostly due to the effect of government subsidies to curb utility bills. Prices of non-energy items like food and daily necessities continued to rise, a sign the pass-through of rising raw material costs have yet to run its course.Highlighting the lingering cost-push pressure, a separate index that strips away both fresh food and fuel costs rose 3.5% in February from a year earlier, accelerating from a 3.2% gain in January.The index, dubbed “core-core” CPI and closely watched by the BOJ as an indicator of price moves reflecting demand, marked the fastest year-on-year increase since January 1982.The figures highlight the challenge incoming BOJ Governor Kazuo Ueda faces in gauging whether the cost-push inflation will shift to a more sustained, demand-driven price rise – or cool consumption and choke off a fragile economic recovery.The recent market rout caused by the failure of two U.S. banks, and the takeover of Credit Suisse, also complicates the BOJ’s policy path by adding to risks for Japan’s economy.”The numbers are fluctuating due to supply shocks and its repercussion, as well as the effect of government steps to combat rising living costs,” said Yasunari Ueno, chief market economist at Mizuho Securities.”The new BOJ leadership will scrutinise Japan’s price trend, as well as U.S. and European developments, in deciding its policy move,” he said.The BOJ has repeatedly said inflation will slow back below the bank’s 2% target later this year as the effect of past rises in fuel and raw material costs dissipate.But some BOJ policymakers have flagged the chance inflation could exceed initial expectations, as price hikes and wage gains show sign of broadening.Markets are rife with speculation the BOJ will phase out or end its bond yield control policy under incoming head Ueda, who succeeds incumbent Haruhiko Kuroda when his term ends in April.The BOJ has pledged to keep ultra-loose policy until bigger wage hikes accompany rising inflation to ensure Japan can meet the bank’s 2% price target in a sustainable manner.In closely watched annual labour talks with union earlier this month, top Japanese companies agreed to their largest pay increases in a quarter century in a sign the country may be finally shaking off the public’s sticky deflationary mindset. More

The loan will ensure the Central American country’s government has sufficient cash to handle future natural disasters, and includes a three-year drawdown period, the statement said.The new credit marks the World Bank’s second loan to Costa Rica tied to tackling the impact of natural disasters such as hurricanes, with the first one approved in 2008 for $65 million.Elected last year, Costa Rican President Rodrigo Chaves is a former World Bank economist. More

NEW ORLEANS (Reuters) – Some of the most prominent rainmakers in the world of corporate mergers struck a note of optimism about dealmaking on Thursday, even as they acknowledged a volatile economic backdrop had significantly impacted M&A activity. The banking crisis that has emerged in the wake of Silicon Valley Bank’s failure has shaken boardroom confidence already dented by fears over an economic slowdown, investment bankers and deal lawyers told the Tulane Corporate Law Institute conference in New Orleans. “There is a brick wall in front of M&A activity,” said Anu Aiyengar, global head of M&A at JPMorgan Chase & Co. (NYSE:JPM)”When you look at what’s happening in China, geopolitical tensions, interests rates, bank runs, liquidity crisis, increased chances of recession – throw everything together and it seems quite formidable.”With financing having dried up for private equity-backed leveraged buyouts, buyers will have no option but to put up a lot of equity to get deals done in the near term, the conference participants said. “We are in for choppiness,” said Scott Barshay, chair of the corporate department at law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP. “There is a giant struggle right now. And it’s a giant struggle because there’s a lot of dry powder for the equity part of private equity deals. What there’s not is a lot of leverage for the leverage part of the leveraged buyout.”M&A volumes declined considerably last year amid fears of faster interest rate hikes, possible recession, weaker credit markets and a tumbling stock market. The total value of deals last year fell 37% from a record high in 2021 to $3.61 trillion, according to Refinitiv data. That is the biggest year-over-year percentage drop since 2001 when the U.S. economy fell into recession.Global dealmaking this year through mid-March has tumbled nearly 50% in terms of dollar volumes from a year ago and is off nearly 30% in terms of the number of deals being done, according to Refinitiv.Dealmakers, however, said they expect the impact from the banking crisis on broader M&A activity to be contained, as most of the worst affected regional banks are not major advisers or lenders on deals. The technology sector remains the best hunting ground for corporate acquirers or private equity financiers, deal advisors said.”There is really no part of the world that allows you to have an organic growth trajectory that lets you meet the market possible for trading at a premium valuation, which means you have to look at inorganic growth opportunities,” said Aiyengar. Dealmakers also predicted an increase in unsolicited approaches from cash-flush buyers who are taking advantage of a drop in valuations of potential targets, who are now more willing to entertain bids than they were a few months ago.Increased regulatory uncertainty due to greater scrutiny on deals from antitrust regulators also is likely to impede the speed of deals getting across the finish line, with dealmakers criticizing the adversarial stance taken by the Federal Trade Commission and the Department of Justice. “In this very narrow context of who’s going to be running the DOJ antitrust division and the FTC in the future, our business will be a lot better if it’s somebody else,” said Barshay. More

NEW YORK (Reuters) – A U.S. judge on Thursday denied Archegos Capital Management LP founder Bill Hwang’s effort to dismiss an indictment accusing him of fraud in the collapse of his once-$36 billion firm.U.S. District Judge Alvin Hellerstein in Manhattan rejected arguments that the 11-count indictment should be tossed because prosecutors deceived Hwang into cooperating with their probe and because Hwang’s trading activity had been lawful.Hwang said federal prosecutors, long before his arrest last April, had viewed him as the mastermind of a vast market manipulation scheme, and induced him during several interviews and meetings over six months to divulge his defense strategy. But the judge said prosecutorial misconduct could justify a dismissal only if it substantially influenced the grand jury’s decision to indict, or there was “grave doubt” that there was no such influence.”There is no support in the record for such a finding,” Hellerstein wrote.He had said during a Tuesday hearing that prosecutors were free to change their minds in the course of a probe.Hellerstein also rejected a dismissal request by Hwang’s co-defendant, former Archegos chief financial officer Patrick Halligan.Lawyers for both defendants did not immediately respond to requests for comment.Archegos collapsed in March 2021, causing billions of dollars in losses for banks such as Credit Suisse Group AG and Nomura Holdings (NYSE:NMR) Inc.Hwang was accused of having borrowed aggressively and using total return swaps, a type of financial contract, to boost the effective size of Archegos’ market positions in stocks such as ViacomCBS (NASDAQ:PARA) and Discovery (NASDAQ:WBD) to more than $160 billion.Authorities said Hwang concealed the size and riskiness of his bets by spreading his borrowing among several banks.When the prices of some stocks fell, Hwang was unable to meet margin calls, leading banks to dump stocks backing his swaps, and causing losses for Archegos and others.The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-cr-00240. More

UK consumer confidence improved in March on the back of better economic forecasts, but people’s outlook on their own finances worsened, according to data published on Friday. Research group GfK said its index of consumer confidence, a closely watched measure of how people view their personal finances and wider economic prospects, had risen this month by two points to -36. The reading was the highest since March 2022 and in line with analyst forecasts, but it remained well below zero, indicating an overall decline in confidence. Respondents to the survey, which ran between March 1 and 14, were more optimistic about the year ahead, with the sub-index measuring their general outlook on the future economic situation increasing by 3 points to -40.But Joe Staton, client strategy director at GfK, said the overall improvement masked “continuing concerns among consumers about their personal financial situation”.Respondents’ forecast for their personal finances in the next year fell three points to -21, pointing to the fact that “wages are not keeping up with rising prices and the cost of living crisis remains a stark reality for most”, said Staton. Overall, consumer confidence in March was five points lower than in the same month in 2022, as soaring energy bills, higher interest rates and food prices squeezed household budgets over the past year.The GfK data followed confirmation on Wednesday from the Office for National Statistics that consumer price inflation rose to 10.4 per cent in February, up from 10.1 per cent in January.The unexpected uptick in inflation has reinforced fears that price rises are increasingly being driven by domestic pressures in the services sector, which tend to be more persistent than the external shock of high energy prices.“Just having enough money to live right and pay the bills remains the number one concern for consumers across the UK,” said Staton. Nevertheless, GfK noted that consumers in March reported a slight uptick in their willingness to make expensive purchases, as well as in the likelihood that they would put money into savings accounts. Ashley Webb, UK economist at Capital Economics, a research company, said that “even though real household incomes have been eroded due to high inflation, households appear to have supported their real spending by using their pandemic savings”. She added that resilience in the labour market had also lifted consumer morale.

The survey comes a day after the Bank of England raised interest rates by 0.25 percentage points to 4.25 per cent, marking the central bank’s 11th consecutive increase since December 2021 in response to high inflation.Webb said that while further rises in the base rate were “likely to weigh on consumer confidence, we don’t expect interest rates to rise much further from here. “Instead, we expect the easing in inflation and the resultant boost in real household incomes will support consumer confidence this year.” More