Aurelia Butler

LONDON (Reuters) – Wall Street was tipped for a weaker open on Friday, bucking share price gains in Europe and Asia after warnings on the economic outlook from Tesla (NASDAQ:TSLA) Chief Executive Elon Musk who outlined plans to lay off 10% of his staff.Markets are on edge ahead of crucial monthly jobs data in the United States and signs that a combination of high oil prices and higher interest rates are starting to tighten conditions in the global economy and the United States. But while world stocks are clinging to a slender gain, Wall Street futures turned lower on the day after Musk said he had a “super bad feeling” about the economy. In an email to executives seen by Reuters, he said he wanted to cut about 10% of jobs at the electric carmaker.Musk’s message came shortly after Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase (NYSE:JPM), described the challenges facing the U.S. economy as akin to a “hurricane”. Shares in the electric carmaker were down 4.2% in pre-market trade, while futures in the tech-heavy Nasdaq turned negative after the Reuters report, to slide 1.1%. S&P 500 futures were down 0.7%.A pan-European equity index was little changed while MSCI’s global equity benchmark rose by 0.1%, still headed for a second week of gains.”(Markets) will clearly read this message negatively at first blush; Tesla is trying to be ahead of a slower delivery ramp this year and preserve margins ahead of economic slowdown,” said Dan Ives, managing director for equity research at Wedbush Securities, said on Twitter (NYSE:TWTR). GRAPHIC: Tesla (https://fingfx.thomsonreuters.com/gfx/mkt/znpneogexvl/Pasted%20image%201654253286602.png) Musk’s comments came just before the 1230 GMT release of the U.S. Labor Department’s employment report, which investors will scan for hints of a slowdown in the jobs market. A Reuters poll of analysts expects 325,000 nonfarm payrolls were added in May, with average earnings slowing to 5.2% on a yearly basis, from 5.5% in April and any figures worse than that could fan hopes the Fed will slow or even pause interest rate hikes in the second half of the year.Many investors are inclined to wait and see. “There is a risk of recession yes, and people need to prepare but then, you need to see numbers heading in that direction and so far there are none,” said Francois Savary, chief investment officer of Swiss wealth manager Prime Partners.”If we have a significant deterioration of U.S. labour markets over the summer, then I would say there is a risk of recession next year but for the time being we don’t see this.”Private sector payrolls undershot expectations, data from payrolls processor ADP showed on Thursday, however other data show job openings still near record highs and falling jobless claims. Balancing the growth and inflation outlook is the task central banks are juggling, with inflation at multi-decade or record highs.There was little relief from oil prices, with Brent crude declining less than 1% in response to an offer from OPEC+ producers to raise output by more than previously agreed, as the volume is considered insufficient to offset the global energy supply shortfall.Brent futures were lower by 0.6% at $116.87 per barrel, while U.S. West Texas Intermediate crude fell 0.7% to $116.01.In Europe, a rise in inflation to another record high in May is being viewed as a challenge to the European Central Bank’s view that gradual rate rises can tame prices.The ECB is expected to start raising interest rates in July for the first time in eleven years.”The eurozone inflation number was one confirmation that even the ECB is now forced, even though they are facing a probable recession, to hike rates, perhaps faster or more aggressively than previously expected,” said Jeroen Blokland, Head of Research at investment research platform True Insights. European government bonds were marginally higher with thinner trading volumes than usual given public holidays in Britain and parts of Asia.Germany’s 10-year government bond yield was up 3 basis points at 1.259% after briefly hitting a new eight-year high of 1.281% earlier in the session.The U.S. dollar was flat to mostly firmer against a basket of currencies while the yuan rose to a one-month high against the greenback in offshore trade amid recent positive signals for a domestic economy battered by COVID restrictions. GRAPHIC: US GDP (https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyegykpw/Pasted%20image%201654254070477.png) More

Investors purchased a net $6.16 billion worth of global bond funds in their first weekly net buying since March 30, marking the biggest weekly inflow since Jan. 5, according to Refinitiv Lipper data. Graphic: Fund flows: Global equities, bonds and money market – https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnddaepq/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg Last week, minutes from U.S. central bank’s most recent monetary policy meeting hinted potential for a pause in policy rate hikes later in the year.Investors hope that U.S. jobs data due on Friday might sway the Federal Reserve to slow its current aggressive pace of interest rate hikes over the coming months.Investors acquired U.S. bond funds of $7.09 billion, while European and Asian funds received inflows of $1.15 billion and $0.08 billion, respectively.Global high yield bond funds drew $7.62 billion, the largest amount since at least July 2020, while government bond funds lured $4.54 billion.However, investors disposed global short and medium-term bond funds worth $3.89 billion, recording outflows for the 21st subsequent week. Graphic: Global bond fund flows in the week ended June 1 – https://fingfx.thomsonreuters.com/gfx/mkt/klpykoowxpg/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20June%201.jpg Meanwhile, global equity funds had purchases worth a net $9.38 billion, the biggest since Feb. 9, amid robust demand for ETFs, which garnered inflows of $14.42 billion.Among sector funds, healthcare, metals and mining as well as tech funds gained inflows of $1.19 billion, $445 million and $86 million, respectively, but financials lost $1.03 billion in outflows.Money market funds, meanwhile, saw net selling of $40.99 billion, the biggest since April 13. Graphic: Fund flows: Global equity sector funds – https://fingfx.thomsonreuters.com/gfx/mkt/lgvdweeyypo/Fund%20flows-%20Global%20equity%20sector%20funds.jpg Data for commodity funds showed investors exited gold and precious metal funds worth $521 billion after purchases of $1.33 billion in the previous week. Energy funds also had small outflows.An analysis of 24,309 emerging market funds showed investors purchased equity funds worth $167 million after seven weeks of net selling, but sold bond funds of $194 million. Graphic: Fund flows: EM equities and bonds – https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwwdrvq/Fund%20flows-%20EM%20equities%20and%20bonds.jpg More

Exports rose 4.4% from the previous month, the Federal Statistical Office said, almost three times the 1.5% increase predicted by economists in a Reuters poll.In March, exports had fallen by 3%.The boost for Germany’s export-driven economy came despite a collapse in trade with Russia over recent months due to severe sanctions imposed by the West in a bid to punish Moscow for its invasion of Ukraine.Exports from Germany to Russia dropped 10% in April after plummeting 60% in March, the statistics office said.Imports also increased more than expected in April, by 3.1%, following a 3.2% rise in March, the statistics office reported. ING chief economist Carsten Brzeski called the April trade data a “pleasant surprise”.”German exports have defied renewed supply chain disruptions and the economic impact of the war in Ukraine. At least for now,” he said.However, the Chambers of Industry and Commerce (DIHK) warned that the upswing could be short-lived.”The export engine is grinding tremendously,” said DIHK foreign trade chief Volker Treier, adding that the April growth was solely due to price increases in exports, which had actually fallen in real terms.Supply-chain bottlenecks were yet to come – but with some delay – as a result of China’s weeks-long COVID lockdowns, Treier said.The DIHK expects German exports to stagnate in 2022 on the whole. More

The EU’s executive Commission froze access to the funds for Hungary and Poland over their nationalist governments’ track record of undercutting liberal democratic rules by restricting the rights of migrants, gays and women, as well as increasing state control over media and the courts.Hungarian minister Tibor Navracsics told MTI late on Thursday that Budapest would do everything it could to be able to sign an agreement on Hungary’s recovery plan “in the second half of the year or toward the end of the year.”Navracsics however added that the process leading to the signature of the agreement was “complicated”, striking a less optimistic note than on Tuesday, when Hungary had indicated that negotiations were in their final phase.Asked for comment, the Brussels-based Commission, however, reiterated its long-standing position that Budapest must step up efforts to fight corruption to unlock the money. “The Commission takes its role in safeguarding the respect of … the rule of law … very seriously,” a spokeswoman said. Poland scored a political win this week as the Commission granted it access to nearly 36 billion euros ($39 billion) that had been blocked over Warsaw’s judicial overhaul that the top EU court struck down for not protecting courts from political meddling. Warsaw has only offered some concessions, rather than fixing the problem in full, but the political calculus changed in its favour as Poland won praise for welcoming some 3 million refugees from neighbouring Ukraine since Russia’s invasion.Conversely, tensions between Brussels and Hungarian Prime Minister Viktor Orban have grown in recent months, including over Budapest stalling more sanctions against Russia.Hungary initially requested 7.2 billion euros in grants under the EU’s pandemic recovery stimulus, but after Russia’s February invasion Orban signalled he also planned to tap the cheap loans offered under the programme.The absence of an agreement on accessing the funds for Budapest and recently announced windfall taxes on banks and energy firms have pressured Hungarian financial markets, sending the forint to all-time-lows versus the Polish zloty this week. The EU has long criticised Hungary’s public procurement laws as failing on anti-corruption safeguards. Rights groups accuse Orban of channelling EU funds to his close associates, enriching them and ensuring their loyalty.Only two of the EU’s 27 countries have not yet had their recovery spending approved by the Commission.($1 = 0.9309 euros) More

ROME (Reuters) -Germany’s Rheinmetall has sent Italy’s Leonardo an offer for a minority stake in its OTO Melara cannon maker unit valuing the whole business at almost 430 million euros ($462 million), according to a document and two sources close to the matter.Leonardo put OTO Melara up for sale last year and the Russian invasion of Ukraine in February has since highlighted the need for more advanced ground combat systems and greater European spending and cooperation on defence.The non-binding offer was presented at the end of May and Rheinmetall is seeking to buy up to 49% of the company, the sources told Reuters on Thursday, seeking anonymity because of the sensitivity of the matter.Rheinmetall has set a value of 190 million to 210 million euros as an indicative price for the 49% stake in OTO Melara, a document seen by Reuters showed.The document said Rheinmetall would in future be open to acquiring a further 2% or more in OTO Melara, which would give it majority ownership, in line with the company’s industrial plan and its stakeholders’ strategy. Shares in Leonardo rose 3% on Friday following the report.Rheinmetall’s move comes after Franco-German consortium KMW+Nexter Defence Systems (KNDS) and Italian shipbuilder Fincantieri last year sent Leonardo a preliminary offer to buy the whole of OTO Melara and its sister company Wass.Leonardo, which plans the sale as part of a broader strategy to focus on helicopters, aircraft and electronics for defence, was not available for comment. Rheinmetall did not respond to a Reuters email seeking comment. GOVERNMENT ROLEThe Italian government has been informed, the sources said, but Rheinmetall still needs to secure Italy’s backing, one of the sources said.Rome has the power to block or set strict conditions on takeovers in strategic sectors, such as defence, energy and banking.Before giving its backing to any changes in OTO Melara’s ownership, Rome wants Italy to be included in the Franco-German Main Ground Combat System (MGCS) tank project, more popularly known as the “tank of the future”, one of the sources said.Including Italy could create the opportunity for Leonardo to provide sensors and defence electronics systems for the new tanks.Italian Prime Minister Mario Draghi has pointed out that the European Union spends about three times as much on defence as Russia, stressing the need for better coordination.Brokerage Equita warned a final decision on a sale could still take time, given the government’s powers to intervene.($1=0.9305 euros) More

South Korean inflation surged by the most in nearly 14 years, adding to economic uncertainty in Asia’s fourth-biggest economy caused by Russia’s invasion of Ukraine and supply chain disruptions due to lockdowns in China.The consumer price index rose 5.4 per cent in May compared with the same period a year earlier, surpassing a 5.1 per cent forecast by economists surveyed by Reuters. The rise marked the fastest increase since August 2008, according to South Korea’s statistics office, after rising 4.8 per cent in April. President Yoon Suk-yeol on Friday warned of a looming “economic crisis”, saying: “Our lawn currently lies in the path of the typhoon.” He made the comments after industrial output, consumption and investment all declined in April for the first time in nearly two years. The latest data were released as inflation has soared across much of the world’s advanced economies to multi-decade highs. Prices have also risen in many parts of Asia after initially lagging behind Europe and North America.Inflationary pressures are strengthening the case for the Bank of Korea to raise interest rates next month as it struggles to deal with the fallout of pandemic-era stimulus policies and higher commodity prices. The central bank last week raised interest rates by a quarter point to 1.75 per cent in its fifth increase since last summer.The BoK said inflation would probably remain above 5 per cent in June and July and governor Rhee Chang-yong has said the bank would prioritise fighting inflation rather than boosting economic growth. It is “more important than anything to stably manage inflation expectations”, the central bank said.The BoK blamed the price increases on higher international oil and food prices and expected inflationary pressure to grow owing to higher demand-side pressure as Covid-19 restrictions are eased further.The bank downgraded the country’s growth forecast for this year to 2.7 per cent, from the 3 per cent prediction it made in February. The government on Monday approved a record supplementary budget of Won62tn ($49.9bn) to shore up small businesses hit by the pandemic. It also announced price-stabilising measures worth Won3.1tn, including cutting taxes and removing import duties on some food products by the end of this year.The finance ministry said the inflation situation was “grave” and pledged to take further action. But economists expect price pressure to continue to weigh on the economy. Krystal Tan, an economist at ANZ Research, said South Korea’s key policy rate would reach 2.5 per cent by the first quarter of next year. “Considering various forces such as a robust labour market, high commodity prices and expansionary fiscal policies, we believe inflation will remain elevated for longer and overwhelm the impact of the recent reduction in import tariffs,” she said in a report on Friday. More

Turkey’s official inflation rate hit a 23-year high last month as President Recep Tayyip Erdoğan’s unorthodox strategy for managing the country’s $790bn economy continued to backfire.The consumer price index rose 73.5 per cent year on year in May, according to data from the country’s statistical agency, the highest level since October 1998 when Turkey was reeling from a period marred by unstable coalition governments and economic turmoil.Food prices, which have become a growing source of discontent among the Turkish public, rose 91.6 per cent year on year.Erdoğan, a staunch opponent of high interest rates, had ordered the central bank to repeatedly slash borrowing costs in the final months of last year despite rising inflation.The president claimed he was embarking on a new economic model that would harness a cheap lira and a boom in exports to bring down inflation by eliminating the country’s longstanding trade deficit.Even before the war in Ukraine, critics had described the plan as a high-risk economic “experiment” that risked causing a collapse in the value of the Turkish lira and ushering in runaway inflation.Russian president Vladimir Putin’s invasion of Ukraine has increased the challenges, as a rise in global energy prices pushed up the cost of Turkey’s already large energy import bill and further stoked inflation.While Turkey has enjoyed strong growth thanks to ultra-loose monetary policy, the soaring cost of living has contributed to an erosion of popular support for Erdoğan ahead of elections scheduled for June next year.Erdoğan last month said those who drew a link between interest rates and inflation were either “illiterate or traitors”. More

It has been a tumultuous year for private investors as global markets react to rising inflation and interest rates, making the search for future growth an even harder task. As the world continues on a path of rapid transformation, investors are having to rebalance their portfolios and anticipate key trends — and the FT’s next reader event is designed with this in mind. Organised by FT Money’s sister publication, Investors’ Chronicle, this two day digital event on June 15-16 will bring together experts from across the financial industry, from advisers to fund managers, to share exclusive insights and unearth key trends for investors in the months to come. In the post-pandemic world, which industries are bound to grow and which will struggle to bounce back? How should the changing investment landscape be reflected in your asset allocation strategy — and what can investors expect as the world continues on a path towards net zero?FT Money readers can register and watch all of the sessions free, using the link below, plus they will have the chance to put their questions directly to the experts on the day via interactive Q&A sessions. Programme highlights include Deborah Meaden, star of BBC’s Dragons’ Den, in conversation with Investors’ Chronicle editor Rosie Carr about climate change, the rise of the green economy and where she sees the future of entrepreneurship.Anne Glover, the venture capitalist and an adviser to Montanaro Global Innovations Fund, talks to funds editor Dave Baxter about the prospects for UK and global small-cap companies.Dan Jones, deputy editor of Investors’ Chronicle, leads a panel on how to protect your investments from rising inflation featuring UBS chief economist Paul Donovan. Mary Buffett, author of many bestselling books about Warren Buffett’s investment methods, will be speaking about the challenges of investing in a post-pandemic world. Claer Barrett, the FT’s consumer editor, leads a panel exploring how best to pass on wealth to the next generation, tackling common inheritance tax issues and how families can plan for these. She also quizzes investment advisers including Justin King, founder of MFP Wealth Management, about the challenges of actively managing your portfolio through retirement. Stephen Clapham, founder of research group Behind the Balance Sheet, leads a session educating UK stockpickers about which financial metrics can provide early warning signs that a company is in trouble. Mitchell Labiak, the Investors’ Chronicle’s new property writer, will be leading a panel of experts discussing the future for commercial property and buy-to-let investing. Other topics covered in the two-day event include investing for income, investment trusts, healthcare and using ETFs within your portfolio.To view the full two-day programme and register for your free virtual ticket please visit FT.com/investmentevent where full terms and conditions can also be found. More