Economy

IM Motors’ Series B round of equity financing was among the biggest investments into Chinese EV brands in the past two years, following Abu Dhabi-based CYVN’s combined $3 billion investments into NIO and Stellantis (NYSE:STLA)’ $1.6 billion purchase of a 21% stake in Leapmotor (HK:9863). IM Motors, co-founded by SAIC, Alibaba (NYSE:BABA) and Shanghai Zhangjiang Hi-Tech Park Development in 2020, said the new funding will also be used to support its overseas expansion. SAIC has said it plans to export IM Motors’ cars to overseas markets including Europe this year. State-backed investors in IM Motors’ new capital raise included Bank of China’s asset management unit, an investment arm of Agricultural Bank of China (OTC:ACGBF), and Shanghai government-backed Lingang Group, IM Motors said in a statement. IM Motors said Chinese battery giant CATL, autonomous driving startup Momenta, and SAIC-invested battery firm QingTao Energy Development contributed to the new capital raise. ($1 = 7.1987 Chinese yuan renminbi) More

They purchased a net $42.54 billion worth of U.S. money market funds during the week, logging their largest weekly net purchase since Jan. 3, data from LSEG showed.The U.S. Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index data, on Thursday showed that the annual increase in inflation was the smallest in nearly three years.Investors had been particularly anxious ahead of the PCE data after higher-than-expected readings for the most recent consumer and producer prices.Meanwhile, U.S. equity funds received $196 million in inflows during the week after about $4.89 billion worth of net selling in the past week, thanks to a sentiment boost from Nvidia (NASDAQ:NVDA)’s upbeat earnings outlooks.The tech sector received $520 million worth of inflows during the week after experiencing outflows in the previous week.Consumer discretionary and metals & mining sectors also lured $262 million and $236 million worth of inflows, respectively.By segment, U.S. growth funds received $613 million worth of inflows after an outflow of $3.57 billion in the previous week. Value funds still had $449 million worth of outflows, a second successive week of net selling.U.S. bond funds, meanwhile, stayed in demand for a 10th successive week, drawing in a net $1.88 billion worth of inflows.U.S. short/intermediate investment-grade funds received $2.59 billion, the biggest amount in three weeks. High yield and short/intermediate government & treasury funds meanwhile saw $450 million and $267 million worth of net selling, respectively. More

LONDON (Reuters) – February marked another static month for interest rates at major central banks with the much anticipated change of course in the global monetary policy expected to kick in later in the year while emerging market peers soldiered on with easing policy. All four of the central banks overseeing the 10 most heavily traded currencies that held meetings in February – Australia, New Zealand, Sweden and the UK – kept benchmark lending rates unchanged. The U.S. Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of Canada, the Swiss National Bank and Norges Bank did not meet. February marked the third straight month of no hikes from G10 central banks – the longest such streak since summer 2021. Market focus is firmly on when major central banks could start easing policy with recent strong U.S. data having pushed expectations for a move by the Fed later into the year. “When we talk about economic re-acceleration, we are talking about U.S. re-acceleration – not global, and definitely not EU. So could the ECB actually go before the Fed?” said Mary-Therese Barton, CIO for fixed income at Pictet Asset Management. Money markets show traders see a high chance both the ECB and Fed will start cutting rates in June, according to LSEG data, with a slightly higher probability for the ECB. An exceptionally heavy election calendar, culminating in the November U.S. vote, added an extra layer of uncertainty, Barton added. Meanwhile, emerging economies – which have been ahead of their developed market peers on both the tightening and the easing cycle – continued their easing push, albeit at a slower pace. “Emerging Market central banks are … outpacing their developed market counterparts in curbing inflation,” said Nicolas Forest, CIO at Candriam. “However, rising oil prices and resilient economies continue to put upward pressure on inflation, suggesting that central banks might adopt a slower pace in easing monetary policies.”Out of the Reuters sample of 18 central banks in developing economies, 13 held rate setting meetings in February, though only two – in Hungary and the Czech Republic – cut rates. Indonesia, India, Korea, Mexico, Thailand, the Philippines, Israel and Poland all kept rates unchanged. China’s central bank kept its key policy rate unchanged, but delivered a record reduction in its benchmark mortgage rate.None of the emerging market central banks in the sample raised rates last month – the first such pause in at least three years. Serial hikers Turkey and Russia – responsible for much of the hikes across developing economies in recent months as they battle high inflation and pressure on their currencies – kept rates unchanged.The latest moves brought the year-to-date rate cut tally to 425 basis points, while the cumulative hikes totalled 250 bps. More

“We don’t want to see an extension of conflict into other parts,” Yellen told Reuters in an interview late on Thursday. “Israel is a friend and we talk to them regularly. If we see something that worries us, we tell our partners what we think of that.”On Tuesday she told reporters she had written to Prime Minister Benjamin Netanyahu to express her concerns and to welcome Israel’s agreement to resume tax transfers to the Palestinian Authority.Israel’s economy came to a standstill after gunmen from the Palestinian Islamist group Hamas attacked on Oct. 7, killing 1,200 people and sparking Israeli attacks in Gaza that have killed over 30,000 Palestinians.Hundreds of thousands were called up from the reserves in one of Israel’s largest military mobilizations. Thousands of Palestinian workers were laid off and have not been allowed to return to work.The World Bank estimates the Palestinian economy shrank by 6.4% last year, reversing a forecast of 3.2% growth due to the war in Gaza and deterioration in the West Bank, a separate Palestinian enclave. The situation in Gaza is far worse, with more than 80% of the housing units destroyed or damaged and 2 million people displaced.Yellen said Israel’s travel and commerce restrictions were hitting the Palestinian economy hard and halting a number of construction projects in Israel by creating a worker shortage.”My understanding is there are construction sites that have had to shut down because they have insufficient labor, so it’s not good for Israel’s economy, or the West Bank’s economy,” she said in the interview. “I don’t think any of this is in Israel’s interest.”The U.S. is also concerned about neighbor Egypt’s economy, which has seen hits to revenues from a 55% drop in traffic through the Suez Canal and sharp declines in tourism, Yellen said.Egypt is close to reaching an agreement with the International Monetary Fund (IMF) that would expand its current $3 billion program, she said, without giving details.”We’re certainly supportive of the IMF helping Egypt, and its problems have intensified, especially with the situation with the Suez Canal and the Red Sea. It’s driven down their revenues and tourism and things like that,” Yellen said.IMF Managing Director Kristalina Georgieva told Reuters this week key issues with Egyptian authorities had been resolved and the fund should finalize an augmented financing package within weeks. More

SAO PAULO (Reuters) – The United States and its allies will keep seeking options to tap $300 billion in frozen Russian sovereign assets, U.S. Treasury Secretary Janet Yellen said after days of rancorous talks failed to seal a deal to aid Ukraine’s war effort.Yellen told Reuters in an interview on Thursday that any action would need an airtight legal rationale, which emerged as a sticking point in negotiations this week on the sidelines of a meeting of Group of 20 (G20) finance ministers hosted by Brazil.Yellen said she challenged French Finance Minister Bruno Le Maire to help develop the options sought by Group of Seven (G7) leaders in time for their June summit after Le Maire publicly rejected her view that there is a legal case for monetizing the assets.G7 officials have struggled for a year over what to do with Russian sovereign assets to help Ukraine, which Moscow invaded two years ago. The debate spilled into the public during this week’s G20 meeting, revealing deep divisions among G7 allies.Russia has threatened major retaliation if the West seizes its assets. Some European countries fear doing so could set dangerous precedents and undermine faith in Western currencies, although Yellen has called a massive shift out of those currencies “highly unlikely.”In the interview she said that while some Europeans were skeptical about asset seizure, there were options such as using the assets as collateral for loans and a new proposal to issue a syndicated loan, which she described as an “interesting option.””There are complicated legal issues here. We agree that whatever we do has to have a firm international legal rationale, as well as domestic rationale,” Yellen said.”We’re going to continue to work. (Le Maire’s) staff are working with ours. We urged him to help us come up with options, options that we can present to the leaders.”OPTIONS FOR G7 LEADERSYellen said G7 leaders had asked their staffs “to come up with as many viable options as we can, and to analyze both the benefits and costs associated with them.”The decision on “what to do – the go-no-go – is up to them,” she said, adding that it was unclear if the leaders would reach such a decision at their summit in Italy in June.Yellen said it was critical not to jeopardize the work of Belgian clearing house Euroclear, which holds most of the Russian assets. “Euroclear is an infinitely important financial utility, and we must be exceptionally careful not to do anything that endangers its functioning,” she said.The U.S. Treasury secretary said she remained convinced that “countermeasures” legal theory offered a strong case for unlocking the value of the Russian assets, a view shared by many prominent experts. Under international law, countermeasures provide a lawful means for states to respond to violations of their rights. All the G7 governments agree on the urgent need to move forward to help Ukraine, which has faced military setbacks from Russia, a Western official said.Le Maire argued for a more modest approach, centered on the European Union’s moves to use windfall profits from the frozen assets to generate revenues for Ukraine.Washington supports the windfall tax idea but wants to see whether more significant action is justified, given what it calls the egregious nature of Russia’s invasion.The issue has grown in importance since $61 billion in U.S. aid to Ukraine has been blocked by the Republican-led House of Representatives. More

SAO PAULO (Reuters) – Argentina is talking to the International Monetary Fund (IMF) about a possible new financing program with different targets for the embattled economy, U.S. Treasury Secretary Janet Yellen said after meeting Economy Minister Luis Caputo.The new government of libertarian President Javier Milei is willing to take “very promising” steps to deal with the South American’s economy’s underlying problems, Yellen told Reuters on Thursday after her first meeting with Caputo.Milei has pledged to reverse the crisis in Argentina – where inflation is at 250% and a reported 57% of people live in poverty – with tough austerity measures, a message that has gone down well with markets and investors but created tension with unions and regional governors.”They inherited an impossibly difficult situation, and I think the steps that they have announced that they are willing to take are very promising,” Yellen said on the sidelines of a Group of 20 meeting in Brazil. “It’s going to be a really tough transition as they try to get fiscal policy under control.”Caputo on Thursday denied a media report that the government was negotiating a new IMF loan program at the moment but said the global lender was open to such discussions with its largest debtor.A $44 billion loan program slid off track last year amid rising inflation and a deepening fiscal deficit. The two sides are discussing how to revamp the deal. A new deal would be a more significant step that would involve fresh funds to an economy with foreign currency reserves in the red and tight capital controls.An IMF official, asking not to be named, said the lender was focused on supporting Argentine government policies that help restore macroeconomic stability, adding it would be “premature” for the two sides to discuss details about any new program.Yellen said Caputo was “very open to the IMF’s ideas.””They are potentially talking about a new program and setting different targets. They’re working with the IMF and are going to continue to do so,” she said.Yellen said Argentina’s long history of financial crises and debt defaults was a case study when she taught at the University of California, Berkeley, and most analysts viewed its failure to control budget deficits as its fundamental flaw.”This is a country that used to be one of the richest in the world. For the last 100 years, they’ve apparently had dozens of financial crises and defaulted on their international debt nine times. They’ve suffered from high inflation, hyperinflation and every macroeconomic evil,” she said.At their meeting Caputo told Yellen his government knew there were challenging times ahead but he felt confident its reforms would usher in an inflection point.Yellen welcomed what she told Caputo were “important steps” by the Milei government to restore fiscal sustainability, adjust the exchange rate and fight inflation. More

Inflation in the 20-nation euro zone eased to 2.6% in February, flash figures showed on Friday, but both the headline and core figures were higher than expected.
Core inflation, stripping out volatile components of energy, food, alcohol and tobacco, was 3.1% — above the 2.9% expected.
The February figures will be a mixed bag for policymakers, as core inflation is holding above 3% even as the headline rate moves toward the ECB’s 2% target.

A salesman preparing a bag of sweets for a customer in the Sicilian confectionery shop Mazzone on February 02, 2024 in Catania, Italy. 
Fabrizio Villa | Getty Images News | Getty Images

Inflation in the 20-nation euro zone eased to 2.6% in February, flash figures showed on Friday, but both the headline and core figures were higher than expected.
Economists polled by Reuters had forecast a headline reading of 2.5%.

Core inflation, stripping out volatile components of energy, food, alcohol and tobacco, was 3.1% — above the 2.9% expected.
The European Union statistics agency said food, alcohol and tobacco had the highest inflation rate in February at 4%, followed by services at 3.9%.
Energy prices, which had swollen last year as a result of Russia’s invasion of Ukraine, continued to reduce, with the rate of deflation moving from -6.1% to -3.7%.
The headline print previously came in at 2.8% in January, with further easing expected after price rises cooled in Germany, France and Spain.
Investors are hunting for clues on when the European Central Bank will start to bring down interest rates, with market pricing pointing to a June cut. Yet many ECB officials still stress that they need spring wage negotiations to conclude before they have a clearer picture of domestic inflationary pressures.

The February figures will be a mixed bag for policymakers, as core inflation is holding above 3% even as the headline rate moves toward the ECB’s 2% target. Price rises have nonethless cooled significantly from their peak of 10.6% in October 2022.
The ECB must also contend with economic stagnation in the euro zone, after the bloc narrowly avoided a recession last year, posting flat gross domestic product growth in the fourth quarter.
European stock gains moderated following the inflation print, trading 0.2% higher down from 0.5% earlier in the morning. The euro was flat against the U.S. dollar and the British pound. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Eurozone inflation eased to 2.6 per cent in February, but the figure was higher than expected by economists as the cost of living for consumers continued to rise at persistently strong rates.The annual increase of consumer prices in the 20 countries that share the euro slowed from 2.8 per cent in January, according to data released by the EU statistics office on Friday. The rate was slightly higher than the 2.5 per cent rate forecast by economists in a Reuters poll.The continued slowdown in the cost of living for European consumers will be welcomed by the European Central Bank, which meets next week to discuss how soon to cut interest rates amid signs the economy remains mired in stagnation.  However, many rate-setters are likely to worry that rapid wage growth is still pushing up prices in the labour-intensive services sector, where inflation slowed only slightly to 3.9 per cent in the year to February, from 4 per cent a month earlier.“The ECB is concerned about persistence in domestically generated inflation,” said Tomasz Wieladek, an economist at investor T Rowe Price, adding that services inflation was “clearly too strong”.Core inflation, which strips out energy and food prices to give a better picture of underlying price pressures, fell more slowly than economists expected, from 3.3 per cent in the year to January to 3.1 per cent in February.Fresh food prices in the euro area rose 2.2 per cent in February, the slowest rate since 2021, while industrial goods prices increased 1.6 per cent, almost a three-year low. But energy inflation picked up slightly.Since the disruption of the coronavirus pandemic and Russia’s invasion of Ukraine triggered the biggest price surge for a generation, eurozone inflation has fallen rapidly from its peak of 10.6 per cent in October 2022. This has raised hopes that the ECB could soon start to lower borrowing costs after it raised its benchmark rate to a record 4 per cent last year.Senior ECB policymakers have played down the likelihood of imminent rate cuts. Some have signalled they are unlikely to loosen monetary policy before June to give them time to check if wage pressures are moderating enough to allow inflation to reach their 2 per cent target.Underlining the strength of Europe’s labour market, eurozone unemployment returned to a record low of 6.4 per cent in January after the December figure was revised upward slightly to 6.5 per cent, with the number of jobless people falling by 34,000.Paul Hollingsworth, an economist at French bank BNP Paribas, said the eurozone’s stickier than expected services inflation “strengthens the resolve of those pushing to wait until June before beginning the cutting cycle” but he did not think the ECB was likely to wait until September.The ECB plans to release new forecasts after its meeting next week. Goldman Sachs expects it to cut its forecast for eurozone inflation this year from 2.7 per cent to 2.3 per cent and for next year from 2.1 per cent to 2 per cent. More