2024-05-27 18:42

BUENOS AIRES, May 27 (Reuters) - Argentina's markets have a wary eye on President Javier Milei's sprawling reform bill that is grinding through Congress and facing likely amendments in the Senate that will push it back to the lower house and gum up its final approval. The country's bonds and peso, which rallied strongly in the early months after libertarian economist Milei took office in December, have ceded ground in recent weeks, weighed down by delays to the signature bill and rising political noise. The reform package, ranging from plans to privatize state bodies to measures to encourage investment, is a key plank in Milei's plans to fix the economy with inflation near 300%, myriad capital controls, and depleted foreign currency reserves. Its fate, therefore, is key for markets which have generally cheered Milei, a former TV pundit who won a shock election last year when he pledged "chainsaw" spending cuts to overturn an entrenched fiscal deficit after years of debt crises. "The rejection of the 'bases' bill and tax bill would confirm the political weakness of the government in building a legislative majority," said economist Joaquín Marque at local financial services firm UG Valores. "That would generate greater uncertainty in various macroeconomic conditions and postpone the economic recovery." While Milei's austerity measures have boosted the country's fiscal position, Argentina's economy has tanked, with economic activity and construction down sharply, hit by moves including to halt public works. Poverty and dollar prices are rising fast. Consultancy Portfolio Personal Inversiones, meanwhile, said "positive news in the Senate about both bills and a greater inflow of agriculture sales" could boost the peso in widely used parallel markets to get around capital controls. Milei, who only has a minority in Congress, has already conceded the bill is likely to take longer to move forward than his government had hoped, which has already delayed an important pact with regional governors Milei had aimed to sign in May. A government adviser close to Milei, asking not to be named, said that the date of the pact with governors was less important than striking an agreement that would be long-lasting. "We don't care about the date, it could be June 20, July 9 or Oct. 17," the person said last week, adding that the reform bill should first get congressional approval. The bill likely faced modification and being sent back to the lower house, he added. "There is no rush to sign the pact... It is preferable to wait for Congress to approve the bases law and to then advance a majority agreement between governors, legislators, union leaders and the church, among other social actors." Sign up here. https://www.reuters.com/markets/argentina-markets-keep-wary-eye-milei-reform-bill-hold-ups-2024-05-27/

2024-05-27 18:35

May 27 (Reuters) - The president of this decade's summit for Small Island Developing States on Monday blasted "empty" and "grossly inadequate" climate pledges, saying wealthy nations have failed to meet obligations to limit damages from carbon emissions. Small island states across the Pacific, Atlantic and Caribbean, with negligible emissions, are particularly vulnerable to economic crises and rising temperatures due to their exposure to natural disasters, high debt and reliance on imports and tourism. The Atlantic hurricane season, starting in June is expected to be more active than usual due to near-record warm Atlantic Ocean temperatures and cooler surface water in the Pacific. "It is not sufficient for nations to simply make empty and grossly inadequate commitments under the Paris Agreement," conference president and Antigua and Barbuda Prime Minister Gaston Browne said, citing a 2015 treaty to limit emissions and prevent temperatures rising more than 1.5 degrees Celsius above pre-industrial levels. This threshold is seen as a tipping point for more severe and irreversible climate events. Scientists have warned that without aggressive action the planet is on track to warm between 2.5C and 2.9C. Browne called for more climate financing, a global carbon tax on oil companies, an end to fossil fuel subsidies and a faster transition to renewable energy sources. He urged rich nations to honor a pledge to send $100 billion a year to poorer countries to help reduce emissions and mitigate extreme weather. A Reuters investigation found that billions in funds sent so far have been funneled back to rich nations. United Nations Secretary-General Antonio Guterres added that Small Island Developing States had "every right" to demand better financing options and bigger contributions to the "loss and damage" fund. "The idea that an entire island state will become collateral damage for profiteering by the fossil fuel industry or competition between major economies is simply obscene," he said. Loss and damage, announced at last year's COP28 summit after long-standing calls by island states, was intended to help poor countries recover from climate disasters, but funding from wealthy nations have been paltry. "The major contributors to climate change have failed to meet their obligations," Browne said. Sign up here. https://www.reuters.com/business/environment/caribbean-leader-blasts-empty-climate-promises-small-islands-summit-2024-05-27/

2024-05-27 18:26

May 27 (Reuters) - Brazil's central bank chief Roberto Campos Neto said on Monday that policymakers believe inflation expectations should stabilize and improve over time, after recently citing concerns about them deviating from the official target. "It is generally possible to be optimistic when we look at the reasons (for the unanchoring of inflation expectations)," he said at an event organized by the business group Lide in Sao Paulo. Private economists surveyed weekly by the central bank raised their inflation expectations to 3.86% this year, 3.75% for 2025, and 3.58% for 2026 - in the latter case, adjusting the projection upwards after 46 weeks of stability. The government's official inflation target is 3%. Campos Neto said various factors have been affecting inflation expectations, including uncertainties about monetary and fiscal credibility. He emphasized that time will lead people to understand that policymakers' decisions are technical, while also saying that it would be a very positive shock to see progress in the discussions that have recently emerged about potential budget deindexation. In Brazil, many mandatory public expenditures are tied to distinct growth rules, complicating their control. In a split decision earlier this month, the central bank cut rates by 25 basis points to 10.50%, following six cuts twice that size. Campos Neto stressed that despite the division, board members unanimously recognized that inflation expectations were unanchored and that this was a very important factor. "We understand that the division generated some noise. What we need to do is communicate that the division was technical, and we have been doing that," he said. "Our actions will show that (rate) decision is technical over time." He mentioned that the central bank sees a small correlation between labor-intensive services and price increases, but that the movement is "incipient" and still needs to be better understood. Sign up here. https://www.reuters.com/markets/brazil-inflation-expectations-improve-over-time-says-central-bank-chief-2024-05-27/

2024-05-27 18:03

BERLIN, May 27 (Reuters) - German Chancellor Olaf Scholz and France's President Emmanuel Macron warned in a joint opinion piece for the Financial Times that the European Union had to make dramatic efforts to improve its competitiveness or risk seeing its way of living undermined. Among the reforms needed were further efforts to decarbonize the economy, while leaving the precise means of doing so up to member states, they wrote, in what seemed to be a boost for the French nuclear power industry. The leaders also urged European Union member states to complete the single financial market by introducing common insolvency, tax and investment frameworks. "We can't take for granted the foundations on which we have built our European way of living and our role in the world," they wrote in the article, due to appear in Tuesday's edition of the newspaper. "Our Europe is mortal, and we must rise to the challenge." Sign up here. https://www.reuters.com/world/europe/germanys-scholz-frances-macron-urge-reform-mortal-europe-2024-05-27/

2024-05-27 17:05

JERUSALEM, May 27 (Reuters) - The Bank of Israel will have a hard time continuing to lower short-term interest rates as long as inflation pressures persist and Israel's war against Hamas remains uncertain and drives up government spending, governor Amir Yaron said on Monday. The central bank earlier on Monday kept its benchmark rate (ILINR=ECI) New Tab, opens new tab at 4.5% for a third straight month, as had been widely expected. Since a 25 basis point rate cut in January, the war - particularly on Israel's northern border - has intensified, while fiscal spending has swelled along with higher inflation, prompting the central bank to keep rates steady at its February, April and May meetings, Yaron said. "All these parameters are putting more of a burden on the process of interest rate normalisation because we are determined to not allow inflation to diverge," Yaron said in an interview with Reuters. In January, the central bank had forecast rates falling as much as one percentage point this year and Yaron said that still remains possible. "Things can change quite quickly around here," he said, adding the rates path will be very data dependent. Yet, "we don't see the continued convergence of inflation, at least in the short run," he noted. Israel's inflation rate edged up to 2.8% in April, still within the bank's 1-3% target, but the rate had eased to 2.5% in February. Yaron said the April data were highly influenced by the cost of air tickets and the central bank was looking to see whether that was a one-off factor or something more permanent. Core inflation that removes energy and food was also below the headline figure, while inflation expectations in the coming year or so were contained within the target, he said. The rate cut process "is going to be very cautious and very measured" since policymakers seek the inflation rate easing towards 2%, Yaron said. Fiscal policy is also a big concern for the Bank of Israel since war expenses have jumped, leading to a budget deficit of 7% of gross domestic activity in April - above a target of 6.6% that was revised sharply higher in the wake of the war that began after Hamas's attack on Israel on Oct. 7. Yaron, though, said that while spending has grown, tax revenue - due to a rebound in the economy - has been higher than expected. The deficit, he said, will continue to rise beyond 7% of GDP in the near term but likely end 2024 at current levels as long as there were no "notable security deviations in security expenses." The central bank sees a deficit of around 5% of GDP in 2025 and a debt to GDP ratio of some 68% of GDP. As such, Yaron said, budgetary adjustments will be needed to keep the deficit under control and some will have to be brought forward should defence expenses rise significantly. S&P last month cut Israel's long-term credit ratings to A-plus from AA-minus, citing elevated geopolitical risks and projecting a budget deficit of 8% of GDP in 2024. That followed a ratings cut by Moody's in February. Sign up here. https://www.reuters.com/world/middle-east/further-rate-cuts-will-be-tough-while-inflation-persists-says-bank-israels-yaron-2024-05-27/

2024-05-27 17:00

VIENNA, May 27 (Reuters) - Iran is enriching uranium to close to weapons-grade at a steady pace while discussions aimed at improving its cooperation with the U.N. nuclear watchdog are stalled, two confidential reports by the watchdog showed on Monday. The International Atomic Energy Agency faces a range of difficulties in Iran, including the fact it only implemented a small fraction of the steps IAEA chief Rafael Grossi thought it committed to in a "Joint Statement" on cooperation last year. "There has been no progress in the past year towards implementing the Joint Statement of 4 March 2023," one of the two reports to member states, both of which were seen by Reuters, said. Grossi travelled to Iran this month for talks with Iranian officials aimed at improving cooperation and IAEA monitoring in Iran. Follow-up talks have stalled, however, after the death of Iranian President Ebrahim Raisi in a helicopter crash last week. "The Director General reiterates to the new government of Iran his call for, and disposition to continue with, the high-level dialogue and ensuing technical exchanges commenced ... on 6-7 May 2024," the report added. It is 18 months since the IAEA's 35-nation Board of Governors last passed a resolution against Iran, ordering it to cooperate urgently with a years-long IAEA investigation into uranium particles found at three undeclared sites. While the number of sites has since been reduced to two, Iran has still not explained how the traces got there. "The Director General regrets that the outstanding safeguards issues have not been resolved," the report said, referring to those traces. France and Britain are pushing for a new resolution at next week's Board meeting, which the United States has so far not supported, diplomats say. Iran usually bristles at such resolutions, taking nuclear-related steps in response. The other report said Iran's stock of uranium enriched to up to 60% purity, close to the roughly 90% of weapons-grade, grew by 20.6 kg over the quarter to 142.1 kg as of May 11, and Iran later diluted 5.9 kg to a lower enrichment level. That means Iran now has roughly enough material enriched to up to 60% purity, if enriched further, for three nuclear weapons in theory, according to an IAEA yardstick. It has enough for more at lower enrichment levels. Western powers say there is no credible civil reason for Iran to enrich to that level. Iran says its aims are peaceful. Sign up here. https://www.reuters.com/world/middle-east/irans-near-bomb-grade-uranium-stock-grows-talks-stall-iaea-reports-say-2024-05-27/