Economy

Refinitiv Lipper data showed investors purchased a net $197 million worth of U.S. bond funds, although a big drop from the previous week’s $4.84 billion worth of net purchases. Fund flows: US equities, bonds and money market funds https://fingfx.thomsonreuters.com/gfx/mkt/zdpxdnxxepx/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg The Fed lifted its key overnight lending rate to a range of 4.5% to 4.75% in a widely expected move on Wednesday, but Fed Chair Jerome Powell appeared to strike a more dovish tone in a press conference.Investors purchased $438 million worth of municipal bond funds, but U.S. taxable bond funds witnessed $252 million worth of outflow, the first weekly net selling in five weeks.U.S. short/intermediate investment-grade funds received $2.81 billion worth of inflows, the biggest amount in three weeks, while U.S. emerging markets debt funds had $273 million worth of net buying. Fund flows: US bond funds https://fingfx.thomsonreuters.com/gfx/mkt/jnpwyxaampw/Fund%20flows%20US%20bond%20funds.jpg Meanwhile, U.S. equity funds’ outflows cooled to an 11-week low of $483 million amid $584 million worth of net purchases in small-cap funds. However, large- and mid-cap funds had outflows of $3.67 billion and $206 million, respectively.Investors sold tech and real estate sector funds of $261 million and $248 million, respectively, but energy funds drew $436 million worth of inflows. Fund flows: US equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqdmmovw/Fund%20flows%20US%20equity%20sector%20funds.jpg Meanwhile, money market funds attracted $122 million, marking a second straight week of inflow. More

Do Val revealed on Thursday that Silveira, a close ally of Bolsonaro, tried to persuade him to join a conspiracy to overturn the far-right leader’s electoral loss, asking him to try and get Moraes to make compromising comments in a taped conversation that could lead to the judge’s arrest.Bolsonaro had made baseless attacks on the integrity of Brazil’s electronic voting system, which Moraes – also the head of the country’s top electoral authority (TSE) – defended in decisions that the former president blamed for his defeat.Moraes said during an event held in Lisbon that Do Val approached him to talk about the meeting. The justice said he then asked the senator to testify formalizing the allegations, but Do Val declined to do so.”I asked the senator if he would reaffirm that and put it on paper, because then I would immediately take his testimony,” Moraes said.”But he told me it was an intelligence matter and that unfortunately he could not confirm it. So I just thanked him and said goodbye, because in my view what is not official does not exist”.Do Val told reporters on Thursday that Bolsonaro, narrowly defeated by President Luiz Inacio Lula da Silva in an October vote, “sat in silence” while Silveira laid out the plot against Moraes at the meeting.Silveira was arrested by police on Thursday on a warrant issued by Moraes, who accused him of disobeying court rulings. Bolsonaro left Brazil for Florida 48 hours before Lula took office, without ever conceding defeat.Bolsonaro is being investigated by Moraes at the Supreme Court for his alleged role in inflaming riots by his supporters, who stormed government buildings on Jan. 8 seeking to provoke a military coup. More

ATHENS (Reuters) – Greece will have to wait until after parliamentary elections this year to win back its long-awaited investment grade rating, and it will only do so if the new government stays on the path of reform and fiscal prudence, analysts told Reuters.Having emerged from previous bailout programmes in 2018, Greece had been hoping to regain such ratings – rubber-stamping its return to fiscal normality – by early 2023, ahead of a national election that could stir political uncertainty.But the COVID-19 pandemic and the energy crisis triggered by the war in Ukraine dampened its hopes. While high inflation is helping reduce its debt relative to gross domestic product, it is also eating away at its growth output and potential.That means regaining investment grade has become something of a moving target for Prime Minister Kyriakos Mitsotakis, who is planning to call an election in the spring.”The Greek economy has shown resilience during recent crises, supported also by the EU institutions,” said Spyridoula Tzima, Vice President of ratings agency DBRS Morningstar.”However, the macroeconomic environment has deteriorated, increasing the downside risks for Greece and the other euro area economies,” said Tzima, adding that these challenges will not subside after the election. Greece lost its investment credit ratings, which imply a very low risk of default, in 2010, a year after the country’s debt crisis came to light, eventually forcing it to sign up to international bailout programmes worth about 260 billion euros to stay afloat.Four of the five major international rating agencies now rate Greece one notch below investment grade. The Moody’s (NYSE:MCO) rating is still three notches away.Greece this year is forecasting economic growth of 1.8%, down from 5.6% in 2022. It expects to achieve a small primary surplus of 0.7% of GDP after three years of primary deficits and sees its debt shrinking by 10 percentage points to 159% of GDP.If high inflation persists for longer, however, it could slow Greece’s growth further and constrain the European Central Bank in its vital support for Greece, Scope Ratings warned.”A demonstration that Greece is likely to maintain prudent primary surpluses after its enhanced surveillance programme and following 2023 elections would be important for consideration of investment grade,” said Dennis Shen, Scope Ratings Director. ELECTION LOOMSThe next election will be held under a proportional representation system, meaning it may not produce an outright winner and could lead to a second ballot, prolonging Athens’ wait for a ratings lift.Mitsotakis’ conservative government has spent more than 40 billion euros since 2020 to support households with their energy bills, while pension hikes and a minimum wage increase will also kick in this year before the elections.Rating agencies and economists have warned that an expected slowdown in Greek reforms that may affect investment, delays in decision-making and potential additional government spending could also hurt the economy – and affect their assessments.The new government will also not have a grace period. It will need to demonstrate that it is serious about fiscal consolidation and reforms, they said.”A prolonged period of political uncertainty could harm the economy substantially,” said Nikos Vettas, head of Greece’s leading IOBE think-tank. “What is crucial is not only to have a stable government without a major delay, but also one with a credible and ambitious plan for economic growth.”But most ratings agencies expect that Greece will reduce its debt and eventually meet its target for a primary surplus.”We expect the budget deficit to decline further this year, placing government debt as a share of GDP on a discernible declining trajectory. This could put upside pressure on the ratings,” Marko Mršnik, Senior Director and Analytical Manager at S&P Global (NYSE:SPGI) Ratings, told Reuters. JP Morgan also said in a euro area rating analysis that Greece could regain investment grade ratings “possibly post-election in late 2023 or early 2024”, if Mitsotakis was re-elected. His New Democracy party is leading in opinion polls over the leftist Syriza party that ruled Greece from 2015 – when the country risked being forced out of the euro zone – to 2019. Mitsotakis said last month that if he were re-elected, the return to investment grade would be a matter “of a few months”.Fitch, which upgraded Greece last week, said that “abrupt policy changes are unlikely even if there is a change of government”. More

(Reuters) – Big Tech results reinforced concerns a boom in cloud services is easing, limiting a lucrative source of profit when a slowing economy has hit the companies’ other businesses and prompting a bet on artificial intelligence as the next growth driver.Earnings from Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corp (NASDAQ:MSFT) – which together dominate the cloud market – showed growth in the business was at its lowest since they started breaking out the metric in 2015 and was on track to slow further.Alphabet (NASDAQ:GOOGL) Inc, which has the smallest cloud business among the three, said Google Cloud grew 32%, the slowest rise since the company began reporting the measure in 2019. The poor results reflect a shift to post-pandemic frugality by corporate customers whose budgets have been squeezed in the past year by high inflation and rising interest rates. “Once thought as the most defensive revenue stream in tech, we are seeing investors questioning the cyclicality for the (cloud) business,” analysts at Bernstein said.Cloud services had long been a reliable source of earnings for Microsoft and Amazon. The Windows maker posted growth of around 50% in its Azure cloud-computing business for each quarter of calendar 2020, when the pandemic forced people to work and study at home. Meanwhile, market leader Amazon Web Services (AWS) reported sales jump of about 30% during the same period. Times, though, have changed.Growth at AWS slowed to a record low of 20% in the last three months of 2022 to $21.4 billion, slightly missing analysts’ estimates of $22.03 billion, according to Refinitiv data. Microsoft’s revenue in its so-called intelligent cloud business that includes Azure rose 18% to beat expectations for October to December. But its current-quarter forecast of $21.7 billion to $22 billion was below estimates of $22.14 billion.”The deceleration in AWS was even worse than expected and means Amazon can’t rely on that business units’ operating profits as much in coming quarters,” said Andrew Lipsman, principal analyst at Insider Intelligence. Amazon finance chief Brian Olsavsky said on Thursday that the company expects slower cloud growth rates for the next few quarters. That echoed Microsoft, which said last week that growth in its Azure cloud-computing business would slow by 4-5 basis points in the March quarter. “You’ve just come off two years of rapid movement of workloads to the cloud, there’s probably a lot of inefficiency in cloud spending and now there is a shifting focus to greater efficiency,” said James Cordwell, analyst at Atlantic Equities.AI SILVER LININGA potential boom in AI after the viral success of OpenAI’s ChatGPT could boost demand for cloud services again though, analysts said. AI applications require massive computing power, a boon for companies whose services help run the technology.As an investor and partner of OpenAI, Microsoft looks well poised, analysts said, but any gains may take time to translate into profits.”Those (AI) advancements and demand for related cloud services will take time to materialize. They’re not likely to offset current headwinds in the enterprise market over the next few quarters,” Lipsman said. More

IBGE said the retreat came on the back of rising interest rates, which directly affected the cost of credit, as well as high inflation hurting household consumption.Output remained unchanged in December from November, the statistics agency said, matching the median estimate in a Reuters poll of economists.Brazil’s industrial sector stuttered in the second half of 2022, after starting the year in a positive tone due to government stimulus measures.When compared with the previous year, the agency added, production in December retreated 1.3%. Local industrial output remained 2.2% below pre-pandemic levels of February 2020 and 18.5% below the May 2011 all-time high.(By Sao Paulo Newsroom; tel: +5511 56447500) More

Equity funds got a $16 billion injection while bonds saw inflows of $7.8 billion, BofA said citing EPFR data, as investors showed “no inflation fear”. Gold, however, saw outflows of $1.3 billion while investors pulled $0.3 billion out of cash.Emerging market debt and equity enjoyed their seventh straight week of inflows, totalling $8.3 billion. BofA’s bull and bear indicator – a measure of market sentiment – is at its highest level since March 2022. It has clocked up its biggest three-month surge since August 2020, driven by strong emerging market flows and strong stock market breadth, BofA said. More

(Reuters) – Private international bondholders are ready to hold debt restructuring talks with Sri Lanka consistent with the parameters and targets set out in the International Monetary Fund’s programme, their legal adviser said on Friday.Global investment companies Amundi Asset Management, BlackRock (NYSE:BLK), HBK Capital Management, Morgan Stanley (NYSE:MS) Investment Management and T. Rowe Price Associates Inc. are among the group of around 30 bondholders being advised by White & Case LLP, a New York based law firm.The combination of the pandemic, which ruined the tourist sector, the Ukraine war, which drove up the price of imported fuel and food, and economic mismanagement pitched the Indian Ocean island of 22 million people into its worst financial crisis in more than seven decades. And having run out of foreign currency to pay for basic imports, Sri Lanka defaulted on its foreign debt in May.It secured a preliminary deal on a $2.9 billion extended fund facility with the IMF on Sept. 1, though no funds have been disbursed as yet.The government has received financing assurances from key bilateral lender India, and it is also seeking assurances from the Paris Club of creditor nations, while China’s export-import bank has offered two-year moratorium on debt repayments.The IMF is likely to begin disbursing funds once all of those assurances are in place, analysts say.Sri Lanka has to restructure debt payments on about $11 billion in bonds. And it has also sought assurances from private creditors.”The Bondholder Group … stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets during the IMF Programme period,” White & Case said in a statement. Bondholders have also called for Sri Lanka’s domestic debt to be “reorganised in a manner that both ensures debt sustainability and safeguards financial stability,” the statement said.They also requested the opportunity to express their views on the “overall design” of the IMF program, it added. “The bondholders appear to be indirectly seeking a domestic debt restructuring, which Sri Lanka is yet to agree to,” said Udeeshan Jonas chief strategist at CAL Group. “The requirement seems to be more tilted towards reprofiling the domestic debt through maturity extensions rather for coupon or principal haircuts to bring down Sri Lanka’s overall gross financing needs.” Sri Lanka secured financing assurances from India last month. The Paris Club, which includes Japan as a second major lender to Sri Lanka, is also expected to give its assurances to the IMF “soon”. The United States wants China and other creditors to provide credible and specific assurances to the IMF to help Sri Lanka unlock the bailout, a senior official said this week. Offering a two-year moratorium on debt repayments, the Export-Import Bank of China said it would support Sri Lanka’s efforts to secure an IMF programme. (The story has been corrected to fix the description of IMF deal to extended fund facility in paragraph 4) More

(Reuters) – Big Tech led U.S. markets on a sharp rebound to kick off 2023. The message from their earnings on Thursday: not so fast.Apple Inc (NASDAQ:AAPL), Google parent Alphabet (NASDAQ:GOOGL) and Amazon.com (NASDAQ:AMZN) all posted results for the end-of-year quarter that left a sour taste in investors’ mouths. The reports renewed questions about global economic demand, the effect of higher interest rates and whether the market’s January rally got ahead of itself.Nascent signs that consumer spending was beginning to rebound in China were not enough to change that.Apple, the world’s largest publicly traded company, fell short of expectations, hurt by lower iPhone sales and production disruptions in China. Amazon said operating profits could fallthis quarter due to lower demand, and Alphabet’s online advertisers cut back their spend as well. Shares of the three companies fell between 2.7% and 5% in premarket trading and they were set to lose nearly $200 billion from their collective market valuation. The drop also weighed on the wider market following a euphoric rally Thursday. [.N] “Maybe the tech stocks rallied a little bit too much into these numbers, so the market will be taking a deep breath and saying, ‘OK, well these companies aren’t bulletproof,'” said Daniel Morgan, senior portfolio manager at Synovus (NYSE:SNV) Trust Company in Atlanta, Georgia. These three firms and Microsoft (NASDAQ:MSFT), the four U.S. companies with trillion-dollar market values, have led the broad-market S&P 500 in 2023. The index is up nearly 9% year-to-date, with Amazon gaining 34%. Big Tech surged Thursday following a strong quarterly report from Facebook-owner Meta Platforms Inc (NASDAQ:META).That’s after the group was battered throughout 2022, trailing the S&P, which dropped nearly 20%. Some investors saw silver linings from Apple and other bellwethers, including Starbucks (NASDAQ:SBUX), that reported results on Thursday. They noted that lockdowns in China strangled sales for many companies in the world’s second-biggest economy, expecting a rebound in the coming year. “When things started to reopen in December (in China), we did see an increase in traffic to our stores as compared to November and an increase in demand as December rolled around,” Apple Chief Executive Tim Cook told Reuters.Cook said lockdowns in China hurt both production and demand, and the company faced headwinds from the strong U.S. dollar that pushed revenues lower.“Currency was a headwind but will be a tailwind in Q1,” said Nancy Tengler, chief executive of Laffer Tengler Investments in Scottsdale, Arizona, referring to the dollar’s weakening trajectory. “The supply chain was a problem more so than demand, and that seems to have been right-sized.” Similarly, Starbucks said comparable sales fell 29% from the previous year in China, the company’s fastest-growing market, but that beginning in January, it saw “very encouraging” recovery momentum there. Other U.S. consumer bellwethers painted a mixed picture. Consumer staples giant Clorox (NYSE:CLX) said product volumes fell in three of the company’s four business segments in the fourth quarter, while automaker Ford said the year ahead was going to be a difficult one. They, and other companies, are still grappling with higher interest rates that are slowing demand. This year’s surge in stocks has been built on a rally in bonds, as lower yields make high-valuation shares more attractive. Cost-cutting by Alphabet and Meta led some investors to think that interest rates are affecting demand.”In many respects we’re waiting for that other shoe to drop – the impact of higher rates on the economy, inflation, earnings and jobs,” said Jack Ablin, co-founder and chief investment officer at Cresset Capital, which manages $30 billion. “Profits tend to trough nine months after overnight rates peak and we haven’t even seen the peak in overnight rates yet.” Is the selloff in tech stocks over? https://www.reuters.com/graphics/TECH-STOCKS/TECH-STOCKS/egpbyaaeqvq/graphic.jpg More