Traders review interest rate bets after inflation updates

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Good evening.

Inflation updates on both sides of the Atlantic have traders reviewing their bets on where interest rates are likely to move while reminding Joe Biden of the challenges ahead in convincing Americans to re-elect him president in November.

US inflation fell to 3.4 percent in April, from 3.5 percent in March. Core consumer prices, excluding volatile food and energy costs, rose 3.6 percent, the lowest rate since April 2021. The overall decline, while in line with expectations, ended to a four-month streak in which inflation was higher than expected. , leading investors to place greater bets on an interest rate cut from the Federal Reserve this year.

Today’s data follows another warning from Fed Chairman Jay Powell yesterday that higher-than-expected inflation meant interest rates would likely stay high for longer.

Still high inflation does not help Biden’s re-election chances. As the latest FT-Michigan Ross poll highlights, about 80 percent of Americans say rising prices continue to cause pain, while general disapproval of his handling of the economy is growing. It can at least highlight a stock market in turmoil: The S&P 500 hit an all-time high following today’s data.

Eurozone inflation, meanwhile, is expected to fall faster than expected this year as the impact of trade disruptions in the Red Sea proves lighter than expected, at least according to updated EU estimates this year. Morning. Brussels now believes it will reach 2.5 percent this year, before returning to the 2 percent target set by the European Central Bank in the second half of next year.

Brussels also increased its growth estimates and now expects the single currency bloc to grow by 0.8 percent this year and the European Union as a whole by 1 percent. Recent GDP data showed a nascent recovery in the eurozone in the first quarter, boosted by rising exports, increased tourism and an increase in consumer spending as inflation eased, but is expected to remain lower as in the United States and China.

It still seems likely that Europe will act much sooner than the Fed on rate cuts. This divergence, highlighted this week by Sweden’s first interest rate cut in eight years, is not something the ECB should fear, writes Chris Giles in his central banking newsletter (for Premium subscribers), even if there are disagreements between policy makers.

Europe’s economic performance is more worrying, particularly compared to that of the United States. As our Big Read explains, many European countries still face low productivity, low levels of investment, high energy costs, an aging population, a shrinking workforce and a reduction of working hours. Germany, the EU’s largest economy, is mulling tax cuts to encourage people to work longer.

Some policymakers believe that many of the region’s problems could be solved by a change in atmosphere. “There is a risk that the gloom becomes self-fulfilling,” says ECB board member Isabel Schnabel. “Given the huge shocks we have suffered in Europe, economic performance has not been as bad as many feared, so we should stop bashing ourselves. »

See how your country stacks up in the fight against rising prices with our tracking global inflation.

Must know: the UK and European economy

Wage growth in the UK remained strong in the three months to March, at 5.7 percent, despite a slowdown in the jobs market. Ministers have been urged not to scrap a graduate visa scheme as part of their efforts to reduce migrant numbers.

Few finance ministries wield as much influence over national affairs as that of the United Kingdom. Treasury, declares the FT editorial board. Change is needed, including giving growth the same importance as controlling spending, the article says.

Former British minister Peter Mandelson claims in the FT that the green transition can revive the manufacturing sector if the government encourages potential winners.

The EU announced that it would freeze GeorgiaIf Tbilisi adopts a controversial “foreign agents” law that critics say is inspired by Vladimir Putin’s Russia, the European Union could join Tbilisi. The law was passed yesterday amid massive protests. Ukraine’s neighbor Moldova is, however, ready to defy Russia and join an EU security pact.

What you need to know: the global economy

The United States rose sharply prices on electric vehicles from China, as well as on batteries and semiconductors. Targeted “strategic sectors” also included aluminum and steel, critical minerals, solar cells, harbor cranes and medical products.

Here’s a look at the clean-tech trade row and more on why US President Joe Biden and his aspiring successor Donald Trump are racing to prove who can be tougher on Beijing. A senior executive at China’s Great Wall Motor said Western claims that the country had overcapacity for electric vehicles were a “false concept.”

The International Energy Agency has lowered its growth forecasts in oil consumption this year, after milder weather conditions and a slowdown in the global economy, consumption declined.

Polls suggest South AfricaGeneral elections on May 29 could cause the ANC to lose the absolute majority it has held since 1994. The party is relying on out-of-town loyalists and its campaigning expertise to fight for victory. cling to power.

Russia’s vote to disband a UN panel monitoring sanctions against North Korea constitutes a major blow to nuclear non-proliferation efforts. However, any new body would face opposition from Beijing, angered by Western military surveillance of maritime trade with North Korea near Chinese airspace.

A $2.2 billion plan from the International Energy Agency aims to fund better cooking methods across the country. Africa as part of the “largest ever commitment” to tackle health problems linked to the use of the dirtiest fuels. Funding comes from major oil and gas companies as well as the public sector.

Must know: Business

Anglo-Americanthe 107-year-old mining company, is considering a split as it attempts to win over shareholders following its rejection of a £34 billion takeover bid from rival BHP.

The head of Petrobras, Brazil’s state-controlled oil major, was ousted following tensions with the left-wing administration of Luiz Inácio Lula da Silva. Jean Paul Prates is the company’s fifth CEO to leave the company in three years.

British fashion house Burberry blamed slowing demand for luxury goods on lower annual revenues and profits, and warned that the first half of this year would remain difficult.

New analysis showed that Novo Nordisk Wegovy The drug not only helped users lose weight for four years, but also helped reduce the risk of heart disease, regardless of their weight. Novo is also studying the effects on alcohol consumption and liver disease.

OpenAI has revealed advancements in its flagship GPT-4 software model, including the ability to interpret voice, video, images and code in a single interface. The company is also losing its co-founder and chief scientist, six months after he and others moved to oust CEO Sam Altman.

If electric car are really taking off in the United States, there is a need to rethink the economics of roadside charging, writes columnist Brooke Masters.

The new season of our Technical toner A Chinese technology podcast discusses the rise of Shenzhen, known as China’s Silicon Valley.

The world of work

THE To work The podcast discusses the difficulty of measuring productivity in office jobs, how to get more done without being overworked, and why you should go to the movies on a Tuesday afternoon (without telling your boss) .

Some good news

Beavers were hunted to extinction in England in the 16th century. But after being reintroduced to London last October as part of efforts to rewild the city, the furry rodents are now thriving.

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