Global Shorts

 Data released by Japan show that Japan’s inflation-adjusted real wages fell by 2.5% annually in March, falling for two consecutive years. The data showed the pace of decline accelerated from 1.8% last month as rising costs of living outpaced nominal wages. Japan is seeing early signs of a virtuous cycle of rising wages and inflation. However, workers’ incomes still lag behind rising costs, underscoring the challenges policymakers face in getting companies to raise wages.Some economists say they expect real wages to turn positive sometime in the 2024/25 financial year. Nominal wages, the average total cash earnings per worker, rose 0.6% to 301,193 yen ($1,940.30), a slowdown from 1.4% in February. On the other hand, consumer prices increased by 3.1% year-on-year in March, slightly slower than the 3.3% increase in February, hovering above the Bank of Japan’s 2% inflation target and price growth. Of total cash receipts, regular wages, which determine basic wages, increased by 1.7%, while overtime wages fell by 1.5%, falling for the fourth consecutive month. Special payments such as bonuses and other benefits in March are reduced by 9.4% annually.At annual labor talks this year, Japan’s major companies offered to raise workers’ monthly wages by more than 5 percent, a level not seen in about three decades. But small businesses, which employ seven in 10 workers, are lagging behind, holding back wage gains. Low-wage informal workers also make up about 40% of the workforce. The specter of sluggish wage growth is dashing policymakers’ hopes of achieving healthy economic growth led by durable inflation and stable wages, which are considered a prerequisite for normalizing monetary policy.

 The government said on Sunday that a weakening global economy and a slowdown at home were among the reasons Australia reported a smaller increase in federal budget revenue for the year to June 30 than in recent years. The Labor government is expected to report a budget surplus on May 14, although it said in March that revenue growth would be smaller than a year earlier due to lower commodity prices and a weaker labor market. On Sunday, it said the tax revenue hikes in the budget, which excludes levies from the goods and services tax, are expected to be more than A$100 billion ($66.08 billion) higher than the average hike of A$129 billion in the past three budgets.The expected results are due to a weakening global economy, a slowdown in the domestic economy, a weak labor market and falling commodity prices, the report said. “We are realistic about the challenges facing the economy and budget, including that the kind of large-scale revenue upgrade we saw in the recent budget update will not continue,” Finance Minister Jim Chalmers said in a statement. Chalmers has previously cited weak commodity prices, particularly for key export iron ore, and rising unemployment as key drivers of the change. Australia’s unemployment rate reached 4.1% in January, a two-year high. In April, he warned that events in the Middle East had heightened concerns about the global economy and would impact the government’s budget in May.

 A former central bank official who was involved in the Tokyo market push a decade ago said Japan may continue to intervene to support the yen until the risk of speculators triggering a sharp yen depreciation is removed. The yen rose sharply on Thursday, a day after traders suspected intervention measures were taken on Monday to stem a sharp decline. Japan’s Finance Ministry declined to confirm whether it had intervened, making markets nervous about the possibility of another round of intervention.At the time of Tokyo’s intervention from 2010 to 2012, Ton Takeuchi, head of the Bank of Japan’s foreign exchange department, said Japan might enter the market on Monday because the yen suffered sudden and huge losses in a short period of time that day. He said if the yen suddenly appreciated 2-3 points in a day without supervision, it could trigger a free fall in the yen, exacerbating concerns about the yen and the broader economy. By intervening when the yen’s decline accelerates in the short term, the authorities can maximize the psychological impact by alerting traders to the possibility of more action.Japan has historically been primarily concerned with preventing a sharp appreciation of the yen that would damage its export-reliant economy. Takeuchi participated in several yen sell-off intervention actions between 2010 and 2012. Under Japanese law, the government has jurisdiction over monetary policy, with the Bank of Japan acting as an agent for the Finance Ministry in deciding when to intervene.

 Inflation in Germany edged up in April as food prices rose and energy prices fell less than in previous months, preliminary data from the Federal Statistics Office showed on Monday. Compared with other EU countries, consumer prices in Germany rose 2.4% in April, following a 2.3% annual increase in March. “The year-and-a-half-long downward trend in German inflation may be temporarily over,” Commerzbank economist Ralf Solving said, adding that inflation could rise again in the coming months.Economists are closely watching German inflation data ahead of broader euro zone inflation data on Tuesday, which is expected to remain unchanged at 2.4%, unchanged from last month. The European Central Bank has made clear it will start lowering borrowing costs in June. Germany’s core inflation rate, which excludes volatile food and energy prices, fell to 3.0% in April from 3.3% in March. Commerzbank expects core inflation to stabilize around current levels, especially as service sector companies pass on sharp increases in wage costs to customers.

 British consumer confidence returned to a two-year high this month as households took a more positive view of the economy and their own finances, a long-term survey showed. Consumer confidence rose to -19 in April from -21 in March, unchanged from January’s reading and the highest level since January 2022, just before Russia’s full-scale invasion of Ukraine triggered a spike in energy costs and other expenses . Economists had forecast a slightly smaller increase of -20. A year ago, the index was -30.The inflation rate fell to a two-and-a-half-year low of 3.2% in March, the British minimum wage increased by nearly 10% in April, and employees’ national insurance contributions fell by 2 percentage points. Finance secretary Jeremy Hunt said he wanted further tax cuts if there was room in public finances ahead of an election expected by Chancellor Rishi Sunak later this year.

 UK house sales prices are near a record high after their biggest annual rise in a year, according to an industry survey that suggested momentum in the housing market at the start of 2024 continued into April. Residential property asking prices rose 1.7% in the four weeks to April 13 compared with the same period last year. Prices sought by sellers rose 1.1% quarter-on-quarter, a slowdown from the 1.5% gain in the previous four weeks. The average asking price from new sellers is £372,324 ($463,320), just £570 below the record price in May 2023.Other indicators of the UK housing market also point to a recovery in demand and prices, helped by a fall in borrowing costs in 2022, when former Prime Minister Liz Truss’s sweeping tax cut plan roiled financial markets and led to Costs soared. The number of new sellers increased by 12% compared with the same period last year, and the number of sales increased by 13%. Demand is strongest at the top end of the market, with asking price increases so far in 2024 the highest since 2014.Surveys show first- and second-time homebuyers generally rely more on mortgages and see smaller increases in demand for properties. Although the current situation is optimistic, these are not the conditions to support a significant price increase, and sellers keen to ensure sales still need to price realistically based on the local market and avoid being too ambitious.

 The European Central Bank has made it “clear” that it may cut interest rates in June, Vice President Luis de Guindos said on Thursday, but also insisted that policy decisions beyond that remained pending. The European Central Bank last week put a June rate cut on the table and strengthened that guidance over the past week, despite rising oil prices, a weaker euro and bets that the Fed will delay a rate cut.”I think we have been very clear that if things continue as they have been recently, we will be ready in June to reduce the restrictions on the stance of monetary policy,” De Guindos told a parliamentary hearing in Brussels. De Guindos Doss reiterated the ECB’s latest guidance that inflation was 2.4% in March and will hover around current levels in the coming months, but will fall back to the ECB’s 2% target next year.Markets now expect the central bank to cut its 4% deposit rate by 75 basis points this year, two full cuts after June, but De Guindos declined to say where rates might go, even though some policymakers have floated the idea in July second move.

  Data on Monday showed that China’s industrial output rose 7.0% annually in January-February, accelerating from 6.8% in December, beating expectations, marking a good start to 2024 and providing temporary relief to policymakers.         The data released by the National Bureau of Statistics (NBS) was significantly higher than the 5.0% growth forecast in a Reuters analyst poll. Retail sales, an indicator of consumption, rose 5.5% in the first two months of the year, slowing from a 7.4% gain in December. Analysts had expected retail sales to rise 5.2%. Fixed asset investment rose 4.2% annually over the two months, compared with expectations for growth of 3.2%. The full-year growth in 2023 is 3.0%.

Amid uncertainty over the timing of the Fed’s rate cut, the People’s Bank of China is expected to keep key policy rates unchanged when it rolls over maturing medium-term loans on Friday.Market observers generally believe that Beijing will continue to prioritize the stability of the yuan, despite widespread agreement that the struggling economy needs more stimulus.Cutting interest rates before the Fed or other major central banks take action would widen yield differentials and could put more pressure on the yuan. Despite the central bank’s continued efforts to support the yuan, the yuan has depreciated 1.3% against the dollar so far this year.”We maintain our view that the People’s Bank of China will not cut rates ahead of the Fed,” said DBS economist Samuel Tse.”After all, the authorities aim to stabilize the exchange rate to prevent further capital outflows. Stabilizing economic data also leaves room for delaying a decision to cut interest rates.”The Fed is widely expected to cut interest rates this year if inflation cools, with markets currently pricing in a 65% chance of a rate cut in June, according to LSEG’s Rate Probability app, although that’s down from 71% earlier this week. dropped. The chance of a rate cut in July is about 83%.Traders and analysts said a rate cut or series of rate cuts by the Federal Reserve would give China’s central bank room to maneuver to lower borrowing costs to support economic growth.A bond fund manager in Beijing said that “China’s policy interest rate adjustment may have to wait until the timing of the U.S. interest rate cut is clear.” He expects the central bank to fully roll over maturing MLF loans and even provide some new funds to the market. Financial system on Friday.However, Pan Gongsheng, the governor of the People’s Bank of China, said last week that the bank would keep the yuan basically stable and sent a dovish message to the market, saying China “has abundant monetary policy tools.””We expect China to introduce more loose monetary policies to support economic growth,” Barclays economists said in a note.”We expect policy rates to be cut by 10 basis points in both the second quarter and third quarter, and expect the bank reserve ratio (RRR) to be cut by 25-50 basis points in the second quarter and by another 25-50 basis points in the third quarter.”

  Britain’s financial regulator on Monday approved the launch of cryptocurrency-backed exchange-traded notes for professional investors, becoming the latest regulator to allow digital asset products while trying to protect retail investors.The Financial Conduct Authority (FCA) said in a statement that such products – bonds issued by financial institutions that track the performance of the underlying assets – will only be available to investment firms and credit institutions authorized to operate in financial markets.The FCA said the ban on cryptocurrency exchange-traded notes (ETNs) and derivatives for retail investors will remain in place, calling it “unsuitable” because “they can cause harm.”The London Stock Exchange said in a separate statement on Monday that it will accept applications for admission to Bitcoin and Ethereum ETNs starting in the second quarter of this year.In recent months, the U.S. Securities and Exchange Commission (SEC) has approved a Bitcoin spot exchange-traded fund, while calling the token a “speculative, volatile asset and used for illegal activities” and urging investors to exercise caution. Crypto markets have surged in recent months. .Bitcoin hit an all-time high above $70,600 on Monday, driven by an influx of cash into Bitcoin ETFs and expectations that the Federal Reserve will cut interest rates soon.The FCA said that with “deeper insights and data from longer-term trading history,” professional investors can better determine whether cryptocurrency ETNs meet their risk appetite. The exchange said it must ensure orderly trading and protect investors.However, the FCA reiterated warnings from recent years, saying cryptocurrencies are “highly risky and largely unregulated” and that investors could “lose all their money.”Jake Green, global head of financial regulation at law firm Ashurst, said the FCA’s stance on cryptocurrencies and retail investors was in a “state of flux”.He said the regulator “clearly doesn’t want to get close” to the idea that “retail investors can buy cryptocurrencies in the form of FCA-regulated financial instruments”.