Economy

(Reuters) -Rising interest rates helped Commonwealth Bank of Australia (OTC:CMWAY) deliver record profits on Wednesday, but shares of the lender dropped on headwinds facing its mortgages business and concerns that its margins have peaked. Australia’s biggest lender pointed to tailwinds ahead as loan impairment expenses increased by A$586 million ($409 million). Business credit growth also slowed, reflecting inflationary pressures, rising interest rates, supply chain disruptions and a decline in house prices.”We expect business credit growth to moderate and global economic growth to slow during 2023,” said Chief Executive Officer Matt Comyn.”However, we remain optimistic that a soft landing for the Australian economy can be achieved.”Shares in the bank as much as 5.7% in early trading in Sydney, while the broader market was down 0.2%.”With further headwinds from deposit switching likely in 2H23, accelerating headwinds in the mortgage market, and a cash rate that is closer to the peak, we think concerns are likely to grow that NIMs (net interest margins) have peaked,” Citibank said in a note after the earning announcement.”Asset quality was strong in this result, but there is likely to be a perception that it will deteriorate from here as revenue tailwinds are starting to ease.” DIVIDEND UPAfter eight rate hikes through 2022 and a further quarter-basis point raise last week, the central bank has indicated more tightening ahead to stamp out inflation. Soaring rates have cooled off the housing market and added to rising cost of living pressures. “We are conscious that many Australian households are feeling significant strain from rising interest rates, alongside the rising costs of electricity, groceries and other household items,” Comyn said. “Despite this, consumer spend remains resilient.”Higher interest rates are yet to hit many CBA mortgage customers as many cheaply priced fixed rate loans are expected to come off by the end of the year.In an investor presentation pack CBA said approximately 83% of the book is exposed to rate increases by December 2023.CBA said cash profit from continuing operations climbed to A$5.15 billion in the six months ended Dec. 31, from A$4.75 billion a year earlier, almost in line with a Visible Alpha consensus estimate.It declared an interim dividend of A$2.10 per share, higher than the A$1.75 it paid to shareholders a year earlier.The lender also said its “troublesome and impaired” assets fell by $500 million over the half to $6.3 billion.Home lending volume growth slowed for the company, with gross lending coming in at A$77 billion during the first half, down from A$94 billion a year earlier.The bank also announced it would buy back additional shares worth A$1 billion, on the back of A$2 billion share buy-back announced last February.While higher earnings on deposits drove up net interest margin to 2.10% from 1.92% a year earlier, CBA said it was partly offset by increased competition in home lending.($1 = 1.4314 Australian dollars) More

The company joins a growing list of firms in corporate America – from Wall Street banks and tech companies to online furniture retailer Wayfair (NYSE:W) Inc – that have reduced their workforce amid worries of an economic downturn.The company also said its Chief Product & Technology Officer Bob Kupbens will depart, while said Ryan Ross, president, Neiman Marcus, will lead customer insights for the group. Darcy Penick, the president of luxury department store Bergdorf Goodman, will assume group-level leadership of the NMG Product & Technology organization.Neiman Marcus Group has more than 10,000 employees as per its website. Last year, Farfetch (NYSE:FTCH) Ltd, an online retailer of luxury fashion products, had said it would make an investment of up to $200 million in Neiman, gaining a stronger foothold in the United States as part of a deal to develop the high-end department store’s online business. More

PARIS (Reuters) – Airbus will start delivering narrow-body A320neo-family jets to Air India at the end of this year as part of a 250-plane order, the aircraft manufacturer’s chief commercial officer said.The carrier’s huge aircraft acquisition will further expand as Air India additionally leases around 25 A320neo-family jets on the open market, he said in an interview.”Those will come in before we can start delivering the A320s,” Airbus CCO Christian Scherer told Reuters.That would bring the size of the total acquisition, which includes 220 Boeing (NYSE:BA) jets, to 495 planes, 470 of which were announced as direct orders on Tuesday. Reuters reported last month Air India was poised to acquire a total of 495 planes.The Airbus part of the direct order includes 34 A350-1000 aircraft and six smaller A350-900s originally destined for Russia’s sanctions-hit Aeroflot. It also includes 210 single-aisle planes spread between 140 A320neo and 70 A321neo.Asked whether the deal supported Airbus plans for higher A350 production, Scherer said: “It is poised to grow for sure”.Airbus said in October it would lift monthly A350 output to six units from five in early 2023 and then explore more.Industry sources have said Airbus throttled back to 4.5 a month in late 2022 and is now producing 5.6, on its way to six a month in 2024, where it may stay through 2025, barring any changes with its full-year results on Thursday.However, within that shallow overall increase, production of the Air India-backed A350-1000 variant – which currently stands at 1.2 jets a month – is due to increase to 1.8 a month in 2024, two in the first half of 2025 and three in the second half, the sources said.Airbus declined comment on production of individual variants but Scherer said India’s 34 A350-1000 jets would be delivered starting in about two years “at a relatively good pace”.Airbus said in October it is producing three of its A330neo jets a month. Industry sources said it plans to reach a rate of four a month in the second half of 2024, up from 2.8 a month now. It is said to be making seven A220s a month with a goal of 10 by end-year.Sources cautioned production may be further reviewed when Airbus releases full-year results on Thursday. Scherer declined any comment on detailed output numbers ahead of those earnings.(This story has been corrected to change the title of Christian Scherer in paragraph 3) More

Haddad told reporters the topic is not on the agenda.Brazil’s finance chief also stressed the need to harmonize fiscal and monetary policies while predicting that over time the central bank would see that interest rates are too high.The comments come a day after central bank governor Roberto Campos Neto said the monetary authority did not propose the government increase its inflation target in a bid to make decisions over rates more flexible, denying rumors since last week that the target might be boosted.Haddad also defended more closely aligning monetary and fiscal policies, emphasizing that failing to harmonize them would make both the government and the central bank’s top goals more difficult to achieve.Even Campos Neto has recognized that fiscal adjustment measures announced by economic policymakers last month go in the right direction, Haddad noted.”As results come in, I’m sure this will help monetary (policymakers) conclude that we might have an interest rate at the moment that compromises the country’s objectives,” said Haddad, who described Brazil’s inflation rate as “more comfortable” than current borrowing costs. More

WASHINGTON (Reuters) -The International Monetary Fund’s strategy director on Tuesday said the goal of a new sovereign debt panel of creditors and borrowers due to meet on Friday is to try to reach understandings on common standards, principles and definitions for how to restructure distressed country debts.Ceyla Pazarbasioglu, director of the IMF’s Strategy, Policy and Review Department, told reporters that the Global Sovereign Debt Roundtable does not intend to discuss country-specific debt restructuring issues, but to address some of the broader impediments that have been delaying such relief.The panel, organized by the IMF, the World Bank and India, this year’s leader of the Group of 20 major economies, is due to hold its first virtual meeting on Friday, Feb 17. This will be followed by an in-person meeting on Feb. 25 on the sidelines of a G20 finance leaders meeting in Bengaluru, India.Participants include officials from creditor countries China, India, Saudi Arabia, the United States and other wealthy Group of Seven democracies.Pazarbasioglu said the roundtable also will include the Paris Club of official creditors, the Institute of International Finance, the International Capital Markets Association and other private sector creditors that she declined to identify.She said six borrowing countries that have recently sought or been through debt restructurings would participate, but declined to name them.On Monday, three sources had told Reuters that these would include three countries that had requested debt treatments under the G20 common restructuring framework –Ethiopia, Zambia and Ghana — as well as Sri Lanka, Suriname and Ecuador.”So it’s basically to discuss issues that have been impeding reaching a timely debt restructuring process, and the lessons from the cases that we had in the recent past, and to come up with technical solutions to address these shortcomings,” Pazarbasioglu said.Zambia requested a debt restructuring under the G20 process more than a year ago, but has been held up by major creditor China’s insistence that local debt owned by foreign investors be included and that the multilateral development banks agree to reduce debt principal along with Beijing.U.S. Treasury Secretary Janet Yellen has been urging China to move faster on restructurings and to set aside these demands from country-specific debt talks and address them through the roundtable. HAIRCUTS VS CONCESSIONAL LOANSShe said the group will try to identify key impediments to restructurings and come up with standards and processes to address them. It will try to reach consensus on the notion that highly concessional loans or grants from multilateral development can achieve the same goals as a debt principal “haircut,” she said.Other concepts the group hopes to define more precisely include common parameters for analyzing debt sustainability, timing for issuing debt service suspensions and comparable treatment of creditors, Pazarbasioglu said. More

US stock markets steadied on Tuesday despite disappointing inflation data that raised the prospect of more aggressive interest rate rises than investors had previously expected.Wall Street’s benchmark S&P 500 index dropped as much as 1 per cent in early trading but ended the day flat, holding on to the gains made in strong trading on Monday.The tech-heavy Nasdaq Composite rose 0.6 per cent after falling as much as 1.1 per cent in the morning.The early falls followed the publication of data showing that US consumer prices rose 6.4 per cent year on year in January — a slight slowdown from the previous month but higher than economists had expected. Annual core inflation, which strips out volatile food and energy prices, was also slightly above expectations at 5.6 per cent, down from 5.7 per cent in December. Prices rose 0.4 per cent month on month.The high numbers renewed concerns that stubbornly high inflation would push the Federal Reserve to raise rates higher than the market expected, as chair Jay Powell warned last week.“The Fed ended the year thinking the economy is slowing, inflation is coming steadily down, the labour market is cooling . . . January data threw all of that up in the air,” said Neil Shearing, chief economist at Capital Economics. “The labour market is red hot, the economy looks like it’s in a better place and inflation is coming down more slowly. Put it all together and if you’re Jay Powell, you’re suddenly sleeping less easily.”The Fed increased its benchmark interest rate by a quarter of a percentage point in February to its highest level since September 2007 but warned “ongoing increases” would be needed to bring inflation under control. Pricing in the futures market shows investors now expect rates to peak at around 5.27 per cent in July — up from 5.18 per cent in the same month before Tuesday’s inflation numbers — with at most a single interest rate cut during the remainder of the year. Earlier this month, they had been expecting a peak of about 5 per cent in May, with two interest rate cuts by the end of 2023.The dollar followed the reverse trajectory to stocks, rallying in the immediate aftermath of the inflation data before giving up the gains. The dollar index, which tracks the US currency against a basket of peers, was down 0.1 per cent by Tuesday evening.US government bonds also sold off, with the yield on the two-year Treasury rising 0.08 percentage points to 4.62 per cent after dipping earlier in the day. Yields rise when prices fall.The 10-year Treasury yield rose 0.03 percentage points to 3.75 per cent.In Asia, Hong Kong’s Hang Seng index fell 0.2 per cent and China’s CSI 300 was steady. Europe’s region-wide Stoxx 600 closed 0.2 per cent higher. London’s FTSE added less than 0.1 per cent. UK government bonds sold off sharply after the publication of the US inflation numbers, with the yield on the interest rate-sensitive two-year gilt rising 0.17 percentage points to 3.81 per cent, its highest level since late October.The price for Brent crude, the international oil benchmark, fell 1.2 per cent to $85.58 a barrel. More

WASHINGTON — Inflation has slowed from its painful 2022 peak but remains uncomfortably rapid, data released Tuesday showed, and the forces pushing prices higher are proving stubborn in ways that could make it difficult to wrestle cost increases back to the Federal Reserve’s goal.The Consumer Price Index climbed by 6.4 percent in January compared with a year earlier, faster than economists had forecast and only a slight slowdown from 6.5 percent in December. While the annual pace of increase has cooled from a peak of 9.1 percent in summer 2022, it remains more than three times as fast as was typical before the pandemic.And prices continued to increase rapidly on a monthly basis as a broad array of goods and services, including apparel, groceries, hotel rooms and rent, became more expensive. That was true even after stripping out volatile food and fuel costs.Taken as a whole, the data underlined that while the Federal Reserve has been receiving positive news that inflation is no longer accelerating relentlessly, it could be a long and bumpy road back to the 2 percent annual price gains that used to be normal. Prices for everyday purchases are still climbing at a pace that risks chipping away at economic security for many households.“We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2 percent is going to take some time.”Stock prices sank in the hours after the report, and market expectations that the Fed will raise interest rates above 5 percent in the coming months increased slightly. Central bankers have already lifted borrowing costs from near zero a year ago to above 4.5 percent, a rapid-fire adjustment meant to slow consumer and business demand in a bid to wrestle price increases under control.Moderating price increases for goods and commodities have driven the overall inflation slowdown in recent months.Casey Steffens for The New York TimesBut the economy has so far held up in the face of the central bank’s campaign to slow it down. Growth did cool last year, with the rate-sensitive housing market pulling back and demand for big purchases like cars waning, but the job market has remained strong and wages are still climbing robustly.That could help to keep the economy chugging along into 2023. Consumption overall had shown signs of slowing meaningfully, but it may be poised for a comeback. Economists expect retail sales data scheduled for release on Wednesday to show that spending climbed 2 percent in January after falling 1.1 percent in December, based on estimates in a Bloomberg survey.Signs of continued economic momentum could combine with incoming price data to convince the Fed that it needs to do more to bring inflation fully under control, which could entail pushing rates higher than expected or leaving them elevated for longer. Central bankers have been warning that the process of wrangling cost increases might prove bumpy and difficult.Inflation F.A.Q.Card 1 of 5What is inflation? More

Prime Minister Rishi Sunak and chancellor Jeremy Hunt are exploring a pay offer to try to end the wave of public sector strikes that would backdate next year’s wage award for NHS staff and other key workers.After weeks of deadlock, Sunak and Hunt are considering giving workers a lump sum by backdating next year’s pay rise, which takes effect from April, probably to the start of January 2023, according to officials briefed on the discussions.No final decisions have been taken, but the talks reflect fears in Downing Street that the wave of strikes could run on for months, especially if, as expected, public sector workers are asked to endure another year of real-terms pay cuts.The government is contending with the worst industrial action in decades as workers in the public and private sectors demand higher pay amid the cost of living crisis. Health secretary Steve Barclay last month floated the idea of a backdated pay award for NHS staff in England but it was never formally tabled to trade unions. But one government insider said: “You could imagine that coming back into play.” Another confirmed that the strategy was being discussed.Sunak and Hunt face the risk of strikes intensifying when public sector workers are given their first glimpse of what Whitehall departments state they can afford for the pay year starting in April.Each department was due to submit papers on what they could afford to eight public sector pay review bodies, covering sectors including the NHS, armed forces, police and prison staff, by early February.Ben Zaranko, economist at the Institute for Fiscal Studies, a think-tank, said that without extra Treasury cash, departments might say they are unable to afford more than a 3 per cent pay rise from April. “That is likely to inflame things,” he added.Such is the sensitivity of the “affordability” papers that departments have been asked by Downing Street not to publish them yet. Barclay has been reprimanded by MPs for being weeks late in sending in his submission on NHS pay.With the UK fiscal watchdog forecasting inflation of 5.5 per cent in 2023-24, ministers privately admit that unions are unlikely to respond well to the idea of another real-terms pay cut.Public sector pay awards for 2022-23 were around 5 per cent. Inflation stood at 10.5 per cent in December.Although Hunt gave more money to the health and education departments in his Autumn Statement last November, he has told ministers that they will have to fund any pay rises from their existing budgets.“Any pay deals must be within existing departmental budgets and not fuel inflation further,” said one ally of Hunt. “Current union demands are unaffordable and risk stoking inflation further.”To try to sweeten the pill, Hunt and Sunak are looking at backdating the April pay award, thereby giving workers a lump sum and addressing, in part, demands by unions that they want ministers to reopen the 2022-23 wage deal.But the chancellor is adamant that pay must be kept under control and has been briefed by Treasury officials that wage awards in the public sector set a benchmark for settlements in the private sector.

A Treasury memorandum seen by the Financial Times says that public sector pay rises of less than 5 per cent for 2023-24 would have a “low risk” of protracting high private sector pay growth, 6 per cent would worsen inflation, and 7 per cent would “pose a significant risk” and could trigger higher interest rates.A government spokesman said ministers valued highly public sector workers and remained “open to discussions that will bring an end to the strikes” but added: “We cannot risk high inflation becoming embedded into our economy.”The spokesman said countries such as France, Spain and Norway had all agreed below-inflation public sector pay settlements for 2022 and 2023, and added: “Finding a fair balance is precisely the reason why we have an independent pay-setting process.” The Royal College of Nursing and the PCS civil servants’ union, whose members are engaged in strikes, declined to comment.Both unions have insisted that it is vital that the government addresses their demands for a pay rise in 2022-23. More