Aurelia Butler

Earlier this month, British Airways’ check-in staff at Heathrow suspended a strike after the airline agreed to improve its pay offer.Staff represented by the GMB and Unite unions voted to approve their respective pay offers from British Airways, they said on Friday.”No one wanted a summer strike at Heathrow, but our members had to fight for what was right,” Nadine Houghton, national officer for the GMB union said.GMB said workers would now receive a consolidated pay rise of 8%, a one-off bonus and the reinstatement of shift pay.In addition, more than 500 members of Unite, who initially voted in favour of industrial action over a pay dispute with British Airways, also accepted a new pay offer.Unite said the offer was worth a 13% pay rise for staff, which will be paid in several stages.Any strike at Heathrow could have further pressured an aviation industry struggling with staff shortages, which have resulted in long queues and cancelled flights amid increased demand from travellers after the COVID-19 pandemic.Representatives for British Airways did not immediately respond to a request for comment. More

According to Refinitiv Lipper data, U.S. equity funds recorded $8.45 billion worth of net selling, which was the biggest weekly outflow since June 15. (GRAPHIC: Fund flows: US equities bonds and money market funds – https://fingfx.thomsonreuters.com/gfx/mkt/zgvomxljjvd/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg) The Fed is expected to raise policy rates by another 75 basis points at the end of the July 26-27 meeting, as it seeks to balance the risks of a stubbornly high inflation and the likelihood of a recession.U.S. growth funds booked outflows of $3.46 billion after small purchases in the week before, while investors exited value funds worth $1.62 billion in a fourth subsequent week of net selling. (GRAPHIC: Fund flows: US growth and value funds – https://fingfx.thomsonreuters.com/gfx/mkt/byprjwnxbpe/Fund%20flows%20US%20growth%20and%20value%20funds.jpg) Selling in bond funds stood at a net $4 billion, much higher than the outflows of $371 million in the previous week.Investors disposed of U.S. municipal bond funds of $897 million, marking their first weekly net selling in three weeks, while U.S. taxable bond funds recorded outflows of $3.43 billion.U.S. short/intermediate investment-grade funds, short/intermediate government & treasury funds and high yield funds suffered outflows of $3,008 million, $1,998 million and $1,060 million, respectively. (GRAPHIC: Fund flows: US bond funds – https://fingfx.thomsonreuters.com/gfx/mkt/lbpgneywyvq/Fund%20flows%20US%20bond%20funds.jpg) Meanwhile, money market funds lured a third weekly inflow of $4.28 billion, although purchases reduced by about 57% from the previous week. (GRAPHIC: Fund flows: US equity sector funds – https://fingfx.thomsonreuters.com/gfx/mkt/akpezwynxvr/Fund%20flows%20US%20equity%20sector%20funds.jpg) More

BRUSSELS (Reuters) – The European Commission gave Hungary a final month to address its concerns about the rule of law before asking European Union governments to suspend some of the funds Hungary is to get under the bloc’s 2021-2027 budget.The new deadline is part of an EU process, called the “conditionality mechanism”, meant to protect the EU’s financial interests against breaches of rule of law by an EU government. It is separate from other procedures over the rule of law that the EU has launched against Hungary.The Commission believes EU money is at risk in Hungary because of what it says is corruption, which can take the form of tenders for EU funded projects in which only one bidder, usually linked to the ruling party, takes part. The EU executive also has concerns about the independence of the judiciary, media and non-governmental organisations.Hungarian Prime Minister Viktor Orban has in the past dismissed EU and U.S. concerns over corruption in Hungary, but top Hungarian officials have said over the past weeks Budapest was willing to work with the Commission to address the concerns.Hungary offered this week to cut the number of public tenders in which only one bidder participates to 15% of the total. It has also offered to allow courts to order prosecutors to pursue cases even if prosecutors had decided not to and to make law-making in Hungary more transparent and inclusive.Because of its concerns over EU budget money, the Commission launched the “conditionality mechanism” against Hungary in April. In the end, it could lead to the suspension of the 21 billion euros ($21.3 billion) for Hungary in the EU budget.The Commission said on Friday it had mandated Budget Commissioner Johannes Hahn to inform Budapest of the measures that the EU executive intends to propose to EU governments if Hungary’s remedial measures are not adequate.”Hungary has now one month within which it can submit its observations and any additional information, in particular on the proportionality of the measures envisaged by the Commission,” the EU executive arm said.It added Hungary still had the opportunity to submit adequate remedial measures.The funds affected are known as cohesion funds – which EU countries that are poorer than the EU average get to develop their infrastructure such as roads and bridges, water treatment plants or transportation. A senior EU official, who asked not to be named, said the Commission’s proposal to EU governments would most likely not concern all of the cohesion funds for Hungary, because it had to be proportional to the scale of the problem.”But it will be a serious proposal, not a symbolic one,” the official said.The suspension of the cohesion funds, however, coming on top of 5.8 billion euros of recovery fund grants that are still frozen, would be a major blow to the Hungarian economy which is suffering from a weakening currency, rising costs of borrowing, a widening budget deficit and rampant inflation.($1 = 0.9848 euros) More

FRANKFURT (Reuters) – Europe’s banks, facing a potential economic storm and a rise in borrowing costs for the first time in more than a decade, are set to show their weak spots when they update investors on how their business has fared this year.They have already had to cope with soaring inflation and rising interest rates, a pincer movement that squeezes borrowers, plus the Ukraine conflict which has rattled Europe’s economy, including by constraining its energy supplies. UBS, Deutsche Bank (ETR:DBKGn), Credit Suisse, BNP Paribas (OTC:BNPQY) and UniCredit could set the tone for investors when they report second-quarter results next week.On one hand, higher interest rates are good for banks as they can charge more for loans. But they suffer if customers, struggling with rising prices and borrowing costs, cannot repay. Graphic: European banks valuation- https://graphics.reuters.com/EUROPE-BANKS/ECONOMY/gkvlgyqzjpb/chart.pngThe difficult economic conditions have put investors in a cautious mood, which means European banks, like their U.S. rivals, will earn less money on deal making and selling investment products.Within Europe, Germany’s banks are at the centre of the storm because the country is particularly dependent on Russian energy and its economy will be hit hard by any supply shortages.Giles Edwards, an analyst with the ratings agency S&P, said any fears about European banks this year will hinge on how borrowers’ keep up loan repayments.     Although he did not expect a big immediate rise in bad loans, he said he was watching for “early warning indicators, signs that there’s pressure, a sort of slow squeeze essentially starting to sort of pop a few buttons here and there”.Analysts are also watching developments at Uniper , the German power company that received a state bailout on Friday. [nL8N2Z32QK]German banks may still have to set aside more for resulting loan losses, said Michael Rohr, an analyst with credit rating agency Moody’s (NYSE:MCO).Over the past two months, analysts have cut profit forecasts for Germany’s biggest bank Deutsche Bank, which has emerged from a series of crises, and raised predictions for the amount of bad loan provisions it needs. For Deutsche, the biggest risk is “a severe recession”, Rohr said.Other warning signs are flashing.Euro zone banks tightened access to credit in the second quarter and will continue to be cautious, a survey by the European Central Bank showed.And Germany’s cooperative banks said they expect a “considerable decline” in profit this year as they brace for credit losses.    Highlighting these worries, euro zone bank stocks have fallen more than 22% year-to-date, underperforming the wider pan-European STOXX 600 index of shares which is down roughly 13%.Graphic: G10 interest rates- https://graphics.reuters.com/EUROZONE-MARKETS/ECB/lbpgnemjqvq/chart.png’SLOW SQUEEZE’The ECB, which raised interest rates by a surprise 50 basis points on Thursday to tame runaway prices, has earlier also warned of potential perils, such as an overheated property market.During the pandemic, governments spent billions to prop up much of the economy, but the ECB has said that this time around they may not be able to. In Spain, one senior Spanish economic official, who asked not to be named, said banks are generally vulnerable, pointing to a large number of loans under special surveillance for default and the potential lifting of payment moratoriums.”I don’t know what the real impact … is going to be and … that worries me,” said the official. Santander (BME:SAN) and BBVA (BME:BBVA) report second-quarter results at the end of the month.In Italy, gripped by a political crisis, pressure is mounting on the country’s government bonds, which also erodes the capital cushions of the banks as the Italian government bonds they hold lose value.    Italy’s reliance on Russian gas and the importance of its manufacturing sector, made up mostly of small businesses, increase the chances of a recession.     Almost 300 billion euros (or more than 40%) of Italian corporate loans are guaranteed by the state after banks used emergency measures during the pandemic to refinance existing debts. While Britain’s banks are expected to chalk up solid results, Tom Merry, a banking strategy consultant at Accenture (NYSE:ACN), said he expected an increase in bad loan provisions.NatWest is expected to swing from releasing 38 million pounds ($45.43 million) worth of cash put aside against potential defaults in its first quarter results, to new impairment charges of 136 million pounds, based on a poll of analysts.    In higher margin investment banking, Europe’s banks are likely to see a slump in year-on-year banking fees similar to that reported by U.S. rivals earlier this month, analysts said.JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) reported investment banking fees fell by more than half compared to a year ago. U.S. merger volumes fell by 29% in the first half of this year, based on Refinitiv data, while they rose 1% in Europe.     Barclays (LON:BARC), with its significant U.S. business, may see a performance similar to Wall Street rivals, while banks like HSBC and Standard Chartered (OTC:SCBFF), with their Asia focus, could fare better.($1 = 0.8365 pounds) More