Vietnam leader interested in Biden economic framework, but needs to study details

WASHINGTON, May 11 (Reuters) – Vietnamese Prime Minister Pham Minh Chinh said on Wednesday that Hanoi was interested in helping the United States realize the aims of its proposed economic framework for the Indo-Pacific, but needed time to study the details.

Chinh, in Washington for a two-day summit between President Joe Biden and Southeast Asian leaders starting on Thursday, said he had had discussions on Biden’s Indo-Pacific Economic Framework (IPEF) with U.S. officials earlier on Wednesday.

“We would we would like to work with the U.S. to realize the four pillars of that initiative,” he told a question-and-answer session after delivering a speech at Washington’s Center for Strategic and International Studies.

He said the pillars were supply-chain stability, digital economy, the fight against climate change and a fourth related to labor, tax and combating corruption.

“These are very important to the U.S., to Vietnam and other countries alike,” he said, speaking through a translator.

However, Chinh said the “concrete elements” of the initiative had yet to be clarified.

“We are ready to engage in discussion with the U.S. to clarify what these four pillars will entail and when that is clarified, we would have something to discuss,” he added. “We need more time to study this initiative and see what it entails.”

Asian countries have been frustrated by a U.S. delay in detailing plans for economic engagement with the region since former President Donald Trump quit a regional trade pact in 2017, leaving the field open to U.S. rival China.

At a virtual summit with ASEAN last October, Biden said Washington would start talks about developing what has become known as IPEF, which aims to set regional standards for cooperation, but diplomats say this is likely to feature only peripherally this week. nL2N2X31PW

Japan’s Washington ambassador said this week IPEF is likely to be formally launched when Biden visits Japan later this month, but its details were still under discussion. nL2N2X10Z7

Analysts and diplomats say only two of the 10 ASEAN countries – Singapore and the Philippines – were expected to be among the initial group of states to sign up for negotiations under IPEF, which does not currently offer the expanded market access Asian nations crave given Biden’s concern for American jobs.

Chinh hailed the blossoming of Hanoi’s relations with the United States in recent decades and the explosion of bilateral trade to almost $112 billion annually, although he said the two sides should further advance cooperation to deal with the legacy of their hostility in the Vietnam War.

(Reporting by David Brunnstrom, Simon Lewis and Rami Ayyub
Editing by Alistair Bell)

((david.brunnstrom@thomsonreuters.com; +1-202 354 5835; Twitter: @davidbrunnstrom;))

Nasdaq falls more than 3% on inflation data

NEW YORK, May 11 (Reuters) – US stocks ended sharply lower on Wednesday, with the Nasdaq dropping more than 3% and the Dow falling for a fifth straight day after US inflation data did little to ease investor worries over the outlook for interest rates and the economy.

The benchmark S&P 500 lost 1.7% and is now down 18% from its Jan. 3 record closing high.

The Labor Department’s monthly consumer price index (CPI) report suggested inflation may have peaked in April but is likely to stay strong enough to keep the Federal Reserve’s foot on the brakes to cool demand.

The CPI increased 0.3% last month, the smallest gain since last August, while economists polled by Reuters had forecast consumer prices gaining 0.2% in April.

“It did not dispel the notion that there’s more to go in terms of reining in inflation,” said Quincy Krosby, chief equity strategist at LPL Financial in Charlotte, North Carolina.

“The market is trying to make sense of whether we’re also going to see growth pullback more than expected” as the Fed raises rates, she said.

Apple (AAPL) shares dropped 5.2% and were the biggest weight on the Nasdaq and S&P 500 indexes.

“There is much focus right now on Apple,” Krosby said. “Given its weighting, Apple is the bellwether for the market from many perspectives.”

Investor concerns about whether the Fed will continue to hike interest rates aggressively have hit growth stocks especially hard. The consumer discretionary and technology sectors fell about 3% each, leading S&P 500 sector declines.

The Dow Jones Industrial Average fell 326.63 points, or 1.02%, to 31,834.11, the S&P 500 lost 65.87 points, or 1.65%, to 3,935.18 and the Nasdaq Composite dropped 373.44 points, or 3.18%, to 11,364.24.

The Dow’s five-day decline was its longest losing streak since mid-February.

Energy shares ended higher and helped to limit some of the declines in the S&P 500 and Dow. Exxon Mobil Corp. (XOM) shares were up 2.1%.

Value outperformed growth shares in general. The S&P growth index was down 2.8% on the day versus a 0.5% decline in the S&P value index.

Investors are anxious to see more data on inflation Thursday, when US producer price index data is due.

Stocks have fallen this year following the rate concerns, as well as the Ukraine war and the latest coronavirus lockdowns in China.

Coinbase Global Inc. (COIN) slid 26.4% after its first-quarter revenue missed estimates amid turmoil in global markets that has curbed investor appetite for risk assets.

Volume on US exchanges was 15.38 billion shares, compared with the 12.75 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.16-to-1 ratio; on Nasdaq, a 3.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 67 new lows; the Nasdaq Composite recorded 10 new highs and 1,221 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Amruta Khandekar, Devik Jain in Bengaluru and Sinéad Carew in New York; Editing by Arun Koyyur and Aurora Ellis)

April inflation ‘hot’ but does not see 75 bps Fed rate increase ‘for now’

May 11 (Reuters) – US April inflation at 8.3% remained “hot” but does not yet require the Federal Reserve to switch to three-quarter point rate increases, St. Louis Fed President James Bullard said on Wednesday.

The Fed’s current plan for half point increases is “a good benchmark for now,” Bullard said on Yahoo Finance. Large increases are “not my base case … I think we have a good plan in place,” Bullard said.

The comments from one of the Fed’s most vocal advocates of faster rate hikes show how tightly US central bankers have coalesced around the plan outlined by Fed Chair Jerome Powell last week to raise rates by half a point at the next two Fed meetings, and take stock along the way of how inflation is behaving and what more might need to be done.

Bullard, however, repeated on Wednesday that he feels the Fed will need to keep moving in those half-point increments for the remainder of 2022, pushing the federal funds rate to a range of between 3.25% and 3.5% by the end of the year.

That’s higher than the level many other Fed officials have projected so far.

But Bullard said data could push the Fed in either direction still.

“I think it is more state contingent … We want to take it one meeting at a time. It is possible inflation could moderate a lot,” he said. It is possible the real economy could take twists and turns … We don’t want to be promising today what we will do in December.”

(Reporting by Howard Schneider; Editing by Chris Reese and Sandra Maler)

Colombia to perform internal public debt swap

BOGOTA, May 11 (Reuters) – Colombia will perform an internal public debt swap to improve its debt profile, the finance ministry said on Wednesday.

The government will collect TES UVR domestic public debt securities – which have yields that are tied to inflation – in exchange for other UVR securities maturing in May 2025 and April 2035, as well as others securities denominated in pesos maturing in May 2044.

The operation will take place on Thursday, the ministry said.

The size of the exchange will depend on how many offers are received.

“The exchange will be carried out in accordance with the provisions (…) with regard to not increasing the net indebtedness of the nation and contributing to improving the profile of public debt,” the finance ministry said in a statement.

In April Colombia exchanged internal public debt for 2.6 trillion pesos ($336.2 million dollars).

($1 = 4,086.71 Colombian pesos)

(Reporting by Nelson Bocanegra
Writing by Oliver Griffin; Editing by David Gregorio)

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CANADA FX DEBT-C$ rebounds but gains capped by global economic uncertainty

Adds dealer quotes and details throughout; updates prices

Canadian dollar strengthens 0.3% against the greenback

Trades in a range of 1.2922 to 1.3039

Price of U.S. oil settles nearly 6% higher

Canadian bond yields ease across curve

By Fergal Smith

TORONTO, May 11 (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rallied, but gains for the currency were limited by investor nervousness about the global economic outlook.

The loonie CAD= was trading 0.3% higher at 1.2988 to the greenback, or 76.99 U.S. cents, after trading in a range of 1.2922 to 1.3039. On Tuesday, the currency touched its weakest level in 18 months at 1.3052.

Higher oil prices gave the Canadian dollar some support but the major focus for investors is the potential for interest rate hikes to slow global economic activity, said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc, adding that “fear-based trading” is dominating the market.

Wall Street fell after U.S. consumer price index data indicated that inflation is likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand.

USD-CAD gyrated around the 1.2963 level that marked a peak for the pair in December.

“If the market can close above that number at the end of the week that would probably indicate further strength in the U.S. dollar,” Richardson said.

The price of oil, one of Canada’s major exports, rebounded after plunging nearly 10% in the previous two sessions, buoyed by supply concerns as flows of Russian gas to Europe fell. U.S. crude oil futures CLc1 settled nearly 6% higher at $105.71 a barrel. nL2N2X302U

Bank of Canada Deputy Governor Toni Gravelle is due to speak on Thursday on commodities, growth and inflation, which could offer clues on the outlook for interest rates. BOCWATCH

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year CA10YT=RR eased 2.7 basis points to 2.983%, after touching on Monday its highest in 11 years at 3.173%.

(Reporting by Fergal Smith; Editing by Will Dunham and Sandra Maler)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))

Dollar slips after CPI data as Fed expectations in check

NEW YORK, May 11 (Reuters) – The dollar was lower on Wednesday after economic data showed inflation remained high but was unlikely to lead the Federal Reserve to shift to a more aggressive path of monetary policy.

The consumer price index rose 0.3% last month, the smallest gain since August, the Labor Department said on Wednesday, versus the 1.2% month-to-month surge in the CPI in March, the largest advance since September 2005.

On an annual basis, CPI climbed 8.3%, higher than the 8.1% estimate but below 8.5% the prior month.

The data signaled inflation may have peaked but was unlikely to quickly cool and derail the Fed’s current plans to tighten monetary policy.

The dollar index, which had touched a four-session low of 103.37 ahead of the report, immediately strengthened to a session high of 104.13 following the data, just below the two-decade high of 104.19 reached on Monday.

“Hope springs eternal here but at the end of the day markets are correct in thinking these inflation pressures are ultimately transitory, that we should see a diminishment in supply chain issues and demand as well for the coming months,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

“Essentially to me, the challenge here is inflation expectations are well anchored across the spectrum … ultimately traders will look through this and we will see a bit of a reversal in the trend that we are seeing right now.”

The greenback has climbed more than 8% this year as investors have gravitated towards the safe haven on concerns about the Fed’s ability to tamp down inflation without causing a recession, along with worries about slowing growth arising from the war in Ukraine and rising COVID-19 cases in China.

Still, the dollar was choppy in the wake of the data as it retreated from its session high and last =USD fell 0.029% at 103.890, with the euro down 0.07% to USD 1.052.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool.

Atlanta Fed President Raphael Bostic said on Wednesday that rising interest rates on home mortgages, U.S. Treasury bonds and other credit instruments show the central bank remains credible in its attempts to thwart rising inflation.

Investors will get another look at inflation data on Thursday in the producer price index for April, with expectations of a monthly increase of 0.5% versus the 1.4% jump in March. On an annual basis, expectations are for a jump of 10.7% compared with the 11.2% surge the prior month.

The euro gained as European Central Bank has firmed up expectations that it will raise its benchmark interest rate in July for the first time in more than a decade to fight record-high inflation, with some policymakers even hinting at further hikes after the first.

The Japanese yen strengthened 0.48% versus the greenback at 129.79 per dollar, while sterling GBP= was last trading at USD 1.2258, down 0.52% on the day.

In cryptocurrencies, bitcoin BTC= last fell 3.88% to USD 29,797.31, after falling below USD 30,000 for the first time since July on Tuesday.

(Reporting by Chuck Mikolajczak; Editing by Alison Williams and Cynthia Osterman)

BUZZ-COMMENT-US recap: EUR/USD sheds post-CPI gains as risk appetite suffers

May 11 (Reuters) – The dollar index held steady on Wednesday after surrendering fleeting gains in the wake of above-forecast April CPI data, as the fall in annual inflation rates from the previous month focused markets on the possibility that the peak in U.S. price growth may have been passed nL2N2X315F.

Peak inflation would also mean markets had probably priced in the top of the Fed rate-hikes expected in coming months, a key development for those seeking the dollar’s hefty uptrend to either resume or retreat.

But hopes for such clarity were disappointed, with the dollar only marginally lower in post-London trading, with EUR/USD, USD/JPY and GBP/USD, stuck in recent consolidation ranges.

It might take a substantial deviation from forecasts for next Tuesday’s U.S. retail sales data to break the dollar out of consolidation ranges.

EUR/USD got early help from ECB President Christine Lagarde cementing expectations for rate hikes to start as soon as July nL5N2X32V5, but Euribor yields ended up lower on the session, allowing 2-year Bund-Treasury yield spreads to slide 8bp from Tuesday’s close and EUR/USD to shed its post-CPI report gains.

EUR/USD was about flat and posted its fourth consecutive lower daily high, though it held above May and April’s 1.0483/695 EBS trend lows.

Germany’s final April inflation reading at 7.4% came as Bundesbank President Joachim Nagel said nL2N2X30FN the bank expected the inflation rate in Germany to reach close to 7% in 2022.

Sterling fell 0.4%, also whipsawed by the post-CPI swings in Treasury yields and stocks, finding sellers at the 1.2400 high by Monday’s 1.2405 minor rebound high.

UK consumer despair amid a harrowing inflationary crunch has likely forced the BoE to take a more measured rate-hiking approach than the Fed into year-end nL5N2X157E.

Sterling clung to June 2020’s swing low support at 1.2252, with Brexit trade issues unsettled nL5N2X32GN.

USD/JPY fell 0.5% after a brief rebound with Treasury yields in the initial response to the mixed CPI data. Treasury yields retreated and stocks sank as the session wore on, weighing on Treasury-JGB yield spreads and sparking broader haven demand for the yen.

USD/JPY was below on-close pivot point support at 130.10 on EBS, a close below which would target last week’s 128.62 low.

USD/JPY flashed its first weekly uptrend-ending signal since embarking on its 14.5% rally off March’s lows. If new highs in Fed hike pricing aren’t made after Tuesday’s retail sales report, a broader correction is possible nL2N2X31OQ.

High-beta currencies were pushed about by Treasury yields swings but also stocks, which eroded earlier gains against the dollar and sent them tumbling against the haven yen.

Commodity prices were higher due to supply concerns and dollar strength.

Bitcoin and ether extended their slides amid derisking and the collapse in stablecoin TerraUSD nL2N2X30RZ.

For more click on FXBUZ

(Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

U.S. welcomes Marcos victory in Philippines -Blinken

WASHINGTON, May 11 (Reuters) – The United States welcomed Ferdinand Marcos Jr.’s presidential victory in the Philippines and looked forward to working with his administration, U.S. Secretary of State Antony Blinken said in a statement on Wednesday.

“Our special partnership is rooted in a long and deeply interwoven history, shared values and interests, and strong people-to-people ties,” Blinken said, citing the nation’s role in building a “resilient Indo-Pacific region.”

(Reporting by Brendan O’Brien; writing by Susan Heavey)

((sheavey@thomsonreuters.com; +1-202-898-8300;))

Bank of England interest rate could hit 4% or more, ex-policymakers warn

By David Milliken

LONDON, May 11 (Reuters) – The Bank of England will probably need to raise interest rates much more sharply than financial markets expect to get soaring inflation under control, former policymakers said on Wednesday.

The BoE’s Monetary Policy Committee (MPC) has raised its key interest rate four times since December to 1% – the highest level since 2009 – but still expects inflation to exceed 10% by the end of this year.

“In my view the nominal interest rate – the short-term interest rate the MPC controls – will have to go up at least 250 to 300 basis points from here,” Adam Posen, who served on the MPC from 2009 to 2012, told the British parliament’s Treasury Committee.

That would mean an interest rate of 3.5% to 4% – well above the 2.5% peak priced in by financial markets for June 2023.

Posen, who is now the president of Washington’s Peterson Institute for International Economics, said unemployment needed to go higher – effectively requiring a recession – for inflation to fall back swiftly to the BoE’s 2% target.

Last month the International Monetary Fund forecast Britain would see weaker growth and higher inflation than any other major advanced economy next year.

While countries globally are suffering from soaring energy prices and supply chain bottlenecks, exacerbated by Russia’s invasion of Ukraine, Posen said the extra inflation in Britain appeared to be mostly due to Brexit.

The BoE’s own forecasts imply interest rates might rise less than markets expect, as it predicts inflation will significantly undershoot its 2% target in three years if interest rates follow the path expected by markets. Annual consumer price inflation in Britain hit 7.0% in March, the highest reading in 30 years.

Current MPC members typically do not talk directly about how high interest rates might go.

Massachusetts Institute of Technology professor Kristin Forbes, who served on the MPC from 2014 to 2017, told lawmakers she was concerned the BoE had not been clear enough about the scale of rate hikes that might come.

“Anyone who is buying a home or might have a variable interest rate on a credit card needs to be aware that rates could go up to the 3%-type level that Adam has mentioned,” she said.

Charles Goodhart, who served on the BoE’s first MPC after it gained independence in 1997 and has taught at the London School of Economics, speculated that rates might need to go even higher.

“It will take nominal interest rates well above 4% to actually start having a significant effect on the housing market, and my bet would be that we will go over 5%,” Goodhart told the parliamentary hearing into inflation and economic policy.

(Reporting by David Milliken
Editing by Paul Simao)

((david.milliken@thomsonreuters.com; +44 20 7513 4034;))

Chile’s central bank pushes back digital currency decision

SANTIAGO, May 11 – Chile’s central bank said on Wednesday that although a digital currency could improve payment systems and mitigate risks, a deeper cost and benefit analysis is required and it would publish a new report towards the end of the year.

The bank said in September it would decide on issuing a “digital peso” in early 2022, and created a high-level group to guide its medium-term strategy on means of payment. nL1N2QT2QL

In a report, the central bank said the currency (MDBC) “would allow the benefits associated with digital transformation to be enhanced, while mitigating some of its risks,” adding that the currency could help develop a more competitive, resilient and inclusive payment system.

“However, the report concludes that a final decision on this requires a more in-depth analysis of its costs and benefits, as well as a more complete comparison with other policy alternatives that address the same challenges,” it stated.

The report stressed that the digital currency plan must prevent negative impacts on the financial system and monetary policy. The bank will hold seminars with specialists and conduct workshops with public and private parties in the financial system.

The report also stated that “it is necessary to start working now on building capacities within the bank and moving forward in the development of specific projects that allow different designs to be tested.”

(Report by Fabián Andrés Cambero; Writing by Alexander Villegas; Editing by Richard Chang)

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