Economy

LONDON (Reuters) -Global shares rose to one-month highs on Friday while the dollar held steady, giving commodities a boost, after softer U.S. jobs data gave investors confidence that interest rates will start to decline this year.In currencies, the pound headed for a modest weekly loss after the Bank of England (BoE) on Thursday paved the way for the start of rate cuts as soon as next month, while data showed the UK economy exited a mild recession in the first quarter of this year.The MSCI All-World index was up 0.3%, as equities in Asia and Europe took their lead from a rally on Wall Street overnight, after data showed the number of people filing for jobless benefits for the first time rose more than expected, suggesting the U.S. economy is beginning to slow.Rather than putting the brakes on the stock market, the numbers are giving investors confidence in the ability of the Federal Reserve to cut interest rates this year, as central banks in Europe have started to lower borrowing costs.The STOXX 600 rose 0.8% towards record highs on Friday, heading for one of its strongest weekly performances this year. U.S. stock futures were up 0.3-0.4%.”What could have been a crack in the overall market bullishness appearing has turned into an opportunity to get long again and that’s what we’re seeing now in May,” David Morrison, market strategist at Trade Nation, said. Thursday’s weekly jobless data followed last week’s report that showed U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years.INFLATION AHEADMarkets will be closely watching the April U.S. producer price index and the consumer price index out next week for signs that inflation has resumed its downward trend towards the Federal Reserve’s 2% target rate.Hotter-than-expected inflation reports last month quashed any lingering expectations of near-term U.S. rate cuts. Markets are now fully pricing in a cut only in November though there is still a chance of the Fed moving in September. In contrast, markets now imply a 50-50 chance of a BoE cut in June and are almost fully priced for August. They also imply an 88% chance the European Central Bank will ease in June.BOE Governor Andrew Bailey said there could be more reductions than investors expect, the latest sign of the growing divergence between the Europe and U.S. rate outlooks.Sterling was steady at $1.2524, having touched a more than two-week low of $1.2446 on Thursday.Traders currently anticipate roughly 45 basis points of cuts this year from the Fed. In comparison, traders are pricing in 58 bps of easing from the BoE this year, while anticipating 70 bps of cuts from the ECB. The dollar index, which measures the U.S. currency versus six others, was up 0.1% at 105.28, as the euro held steady at $1.0779, set for its fourth straight week of gains on the dollar.The yen remains in focus after last week’s suspected rounds of interventions from Japanese authorities totalling nearly $60 billion aimed at pulling the yen off its 34-year lows of 106.245 per dollar touched on April 29.On Friday, the yen was last at 155.74 per dollar, with Japan’s Finance Minister Shunichi Suzuki repeating Tokyo’s recent warnings that it was ready to take action against disorderly currency moves.Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management, said the Ministry of Finance wants to avoid spikes in volatility which could negatively impact domestic financial markets. “So like we suspect a few days ago, they will intervene if intraday moves become too large. But I don’t think they’ll push against a steady depreciation, like we’ve seen since.” With the dollar taking a breather, commodities pushed higher. Brent crude futures were up 0.6% at $84.35 a barrel, while copper futures rose 1.6% to $10,066 a tonne and gold rose 1.1% to $2,371 an ounce. More

“I still have that belief” that interest rates can be lowered this year, Bostic said in an interview with Reuters published earlier Friday, despite inflation remaining well above the central bank’s target during the first quarter of this year.”There is an expectation for most of the employers I talk to that they will get back to pre-pandemic wage growth,” Bostic said in the interview. And with the possible exception of tech companies, “we’re hearing from pretty much everyone … their pricing power is pretty much at its limit.”That should result in inflation falling back as the year progresses, allowing the central back to start cutting interest rates.”I don’t think we’re going to know that for at least a couple of months,” he added. “I’m hopeful that we do continue to see this slowing down because my outlook really says that you’re going to have to see some slowing down in order to get inflation back to our 2% target … We still are seeing robust job growth.”The Federal Open Market Committee last week voted to hold the benchmark interest rate steady again in the 5.25%-5.50% range, a decision that Bostic supported.The Atlanta Fed head said last month that he would be open to lifting interest rates if inflation remains at elevated levels, comments that resulted in a sharp rise in bond yields and a selloff on Wall Street.”If inflation stalls out or even starts moving in the opposite direction, away from our target, I don’t think we’ll have any other option but to respond to that,” Bostic said in April. More

NEW YORK (Reuters) – A cryptocurrency nonprofit has launched a new political action committee (PAC) to raise money from its 440,000 members for crypto-friendly politicians, and is endorsing a bipartisan slate of candidates running in the House of Representatives and the Senate.Stand With Crypto’s PAC joins a deep-pocketed effort from the cryptocurrency industry to put political candidates in office who are committed to supporting crypto and blockchain.Crypto super PACs Fairshake, Defend American Jobs and Protect Progress have so far raised more than $110 million this election cycle, according to Federal Election Commission records.The involvement in this year’s elections comes as the industry faces some scrutiny after FTX founder Sam Bankman-Fried was found guilty last year of stealing from customers. Prosecutors allege he used those funds to donate more than $100 million to U.S. political campaigns.PACs like Stand With Crypto are typically set up to gather funds for candidates or political causes; they differ from super PACs, which can receive donations of unlimited size but cannot coordinate with campaigns directly.Endorsements include Jim Banks, a Republican running for Senate in Indiana; Jim Justice, a Republican running for Senate in West Virginia; Shomari Figures, a Democrat running to represent Alabama’s Second District; Eddy Morales, a Democrat running to represent Oregon’s Third District; and Troy Downing, a Republican running to represent Montana’s Second District.”The goal is to endorse candidates and support candidates that are protecting the rights of our advocates of Stand With Crypto throughout November,” Nick Carr, chief strategist at Stand With Crypto, told Reuters.The cryptocurrency industry says it is already playing a role this election cycle. Crypto super PAC Defend American Jobs claimed victory after four endorsed candidates won in their Indiana primaries on Tuesday, including Banks and Mark Messmer, a Republican running to represent the state’s Eighth District. More

Economists at Swiss Bank UBS were among those who shifted their view on when the BOE may cut interest rates, saying they were now expecting the first rate cut to take place in June rather than August.
The BOE’s interest rate decision was followed Friday by the latest U.K. gross domestic product data, which showed that the U.K. economy grew by more than expected in the first quarter of 2024.
GDP increased by 0.6% compared to the 0.4% estimate, marking the first quarter since the end of 2021 in with GDP growth exceeded 0.5%.

Bank of England Governor Andrew Bailey attends the central bank’s Monetary Policy Report press conference at the Bank of England, in London, on May 9, 2024. The Bank of England on Thursday kept its main interest rate at a 16-year high, but hinted at a cut over the summer as UK inflation cools further and the country looks set to exit recession. (Photo by Yui Mok / POOL / AFP) (Photo by YUI MOK/POOL/AFP via Getty Images)
Yui Mok | Afp | Getty Images

LONDON — A slew of commentary from the Bank of England and a better-than-expected economic growth number have left traders and investors scrambling to refine their bets on when the U.K. central bank will start to cut its benchmark rate.
Investors had been eagerly awaiting any indicators in the hope that they would provide hints about when cuts may begin. The BOE’s benchmark rate helps price all sorts of loans and mortgages in the country and has risen rapidly over recent years to help tame high inflation.

Markets on Friday were pricing in an around 48% chance of a rate cut in June according to LSEG data, slightly higher than Thursday’s 45% probability.
Economists at Swiss Bank UBS were among those who shifted their view on when the BOE may cut interest rates, saying they were now expecting the first rate cut to take place in June rather than August.
“The broader message and the tone of the MPC were more dovish than we had anticipated,” they said in a note published following the BOE’s latest interest rate decision.
The central bank on Thursday said it would leave interest rates unchanged for now, and stressed that a June rate cut was in no way guaranteed. Two members of the Monetary Policy Committee voted to cut rates, one more than at the central bank’s previous meeting.

“June is not a fait accompli, but each meeting is a new decision,” BOE Governor Andrew Bailey said in a post-meeting press conference.

UBS cited changes to the BOE’s forward guidance, inflation expectations and comments from Bailey regarding the impact of increased national living wages on overall wage growth as reasons for their changed expectations.
The Swiss bank now expects rates to be cut in June, August and November, it said, by 25 basis points each.

The BOE’s interest rate decision was followed Friday by the latest U.K. gross domestic product data, which showed that the U.K. economy grew by more than expected in the first quarter of 2024.
GDP increased by 0.6% compared to the 0.4% estimate, marking the first quarter since the end of 2021 in with GDP growth exceeded 0.5%.
The economy thereby exited the technical recession it had entered after two consecutive quarters of contraction in the second half of last year.
“This is undeniably a strong number and suggests the U.K. economy is shaking off its woes from 2023,” Nomura analysts said in a note published Friday. This could suggest that inflationary pressures are persistent and the economy is more resilient to higher interest rates, they noted.
The BOE on Thursday warned that indicators of persistent inflation “remain elevated,” but also said it was anticipating inflation to close in on the 2% target in the near-term.
“This [GDP] release further strengthens our view that the Bank of England will need to keep policy restrictive for longer than markets are pricing to bear down on inflation,” analysts said, adding that they expected the central bank to wait until August before cutting rates. More

LONDON (Reuters) -Britain’s economy grew by the most in nearly three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to Prime Minister Rishi Sunak ahead of an election.Gross domestic product expanded by 0.6% in the three months to March, the Office for National Statistics said, the strongest growth since the fourth quarter of 2021 when it rose by 1.5%.The data was welcomed by Sunak who said the economy had “turned a corner”, while the opposition Labour Party, which has a large lead in opinion polls, accused Sunak and finance minister Jeremy Hunt of being out of touch.”There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic,” Hunt said.Labour contested those claims. “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good,” said Rachel Reeves, who hopes to succeed Hunt as finance minister after an election expected later this year.First-quarter economic growth was faster than the 0.3% in the euro zone and the 0.4% quarterly growth in the United States.However, Britain has still had one of the slowest recoveries from the effects of the coronavirus pandemic among major advanced economies, exacerbated by a surge in European natural gas prices after Russia invaded Ukraine in 2022.At the end of the first quarter of 2024, the country’s economy was just 1.7% bigger than its level in late 2019, before the pandemic, with only Germany in the G7 faring worse.”Despite the better near-term outlook, the improvement in GDP growth looks likely to be constrained by the ongoing weakness in productivity growth as well as reduced scope to increase employment levels,” Yael Selfin, chief economist at KPMG UK, said.SURPRISE FOR BOEThe first-quarter growth exceeded all forecasts in a Reuters poll of 39 economists which had pointed to a 0.4% expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023. Friday’s data also showed that GDP in March was 0.7% higher than a year earlier, above expectations of a 0.3% rise. The Bank of England, which held interest rates at a 16-year high on Thursday, had forecast quarterly growth of 0.4% for the first quarter and a smaller 0.2% rise for the second quarter, and a weak expansion of just 0.5% for 2024 as a whole.Officials on the BoE’s Monetary Policy Committee signalled the central bank could shift to cutting rates as early as June, but some economists suggested on Friday that stronger GDP growth could delay the Bank’s efforts and stoke inflation.”This is likely to be a surprise to the MPC and may result in upward revisions to inflation at the next Monetary Policy Report,” economists at Japanese bank Nomura said.Sterling strengthened against the U.S. dollar after Friday’s ONS figures were released. LIVING STANDARDSOn a monthly basis, the economy grew by 0.4% in March, much faster than the 0.1% growth forecast by economists in the Reuters poll, reflecting strength in retail, public transport, haulage and health – partly due to fewer public-sector strikes.Car manufacturing also performed well, offset by continued weakness in construction, the ONS said.GDP per head rose for the first time in two years in the first quarter, up 0.4%, but was still 0.7% lower than a year earlier, highlighting the ongoing squeeze on living standards and Britain’s struggle to boost productivity.”In per capita terms, it could be said that UK households have seen little meaningful improvement in living standards in the last two years,” Gora Suri, economist at PwC, said. More

WASHINGTON (Reuters) – U.S. Senator Elizabeth Warren this week called on the Treasury Department to more swiftly address racial discrimination in the U.S. tax and banking systems by advancing reforms proposed by an advisory board set up in December 2022.In a letter dated May 9, Warren told Treasury Secretary Janet Yellen she was concerned that many recommendations made by the Treasury Advisory Committee on Racial Equity (TACRE) had not been implemented, including reforms to the IRS audit process.Yellen named 24 experts to the committee to analyze U.S. economic factors that resulted in unfavorable conditions for Black, Latino and Native Americans. They have made over 40 recommendations to date, but experts say change has been slow.Warren said the recommendations would improve economic conditions for Black and Brown communities that face barriers to building equity and assuring financial security for their families, and urged Yellen to implement them swiftly.”I am concerned that the recommendations made by members of the TACRE remain in limbo at Treasury,” Warren wrote in the letter, a copy of which was obtained by Reuters.One committee member, Dorothy Brown, a tax lawyer and law professor, told Marketplace in January she worried that Treasury was not embracing the recommendations and saw the committee as a “check-the-box” exercise.Warren asked Treasury to brief her staff by May 23 on the timeline for implementing the remaining proposals, including reforms to the Internal Revenue Service’s auditing progress, and creation of outreach tools to ensure low-income tax credits and green energy credits reached under-served communities.The Democratic senator’s letter comes as President Joe Biden works to shore up support in communities of color ahead of the November presidential election, in which he is seeking a second term. A number of Republican senators have challenged creation of the committee, and its work has been closely scrutinized.Warren welcomed what she called a “much-needed” Treasury rulemaking released in late March that would adopt one recommendation – that the IRS share tax data with Census to better track racial disparities in tax enforcement.The changes marked a positive first step, she said, but more work was needed on other proposals, including inclusion of analyses that looked at how Biden’s tax proposals would affect households with different race and income levels, and whether they would benefit from new clean energy investments. More

The company’s revenue also missed estimates, coming in at $737.1 million against the consensus of $820.33 million. The results reflect a period of strategic transformation for the utility company as it aims to become a pure-play regulated utility.In the first quarter, AQN experienced a 6% increase in net utility sales and a modest 1% rise in adjusted EBITDA. However, adjusted net earnings saw a significant decline of 20% compared to the same quarter last year. This was accompanied by an 18% decrease in adjusted EPS year-over-year (YoY). The company’s regulated services group revenue dropped by 7% YoY, while its renewable energy group revenue increased by 11%.Chris Huskilson, recently appointed as CEO after serving as interim CEO since August 2023, highlighted the company’s ongoing efforts to streamline operations and focus on its regulated utilities. He noted that while the regulated net utility sales and divisional operating profit showed growth, there is more work to be done to reduce costs and enhance the standalone business’s profitability.The company’s financial activities in the quarter included closing approximately $2.3 billion in financing transactions, signaling investor confidence in AQN’s long-term value creation strategy. These transactions included the issuance of senior notes and securitized utility tariff bonds, as well as the successful remarketing of senior notes.AQN’s focus on business simplification was evident in its acquisition of the remaining 50% equity interest in the Sandy Ridge II Wind Facility and the sale of various development assets. Despite these strategic moves, the winding down of the company’s development joint venture, increased interest expenses, and a normalization of tax credit recoveries contributed to the decline in adjusted net earnings per share.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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