Latest news with #SocieteGenerale
Yahoo
12 hours ago
- Business
- Yahoo
Pausing for breath: Five questions for the ECB
By Yoruk Bahceli and Stefano Rebaudo LONDON (Reuters) -The European Central Bank is set to pause for breath on Thursday after eight consecutive interest rate cuts, with the prospect of steeper-than-expected U.S. tariffs looming. The threat tariffs pose to the euro zone is big but there's still little certainty about them, so the question is what happens next. "All the focus goes to September," said Societe Generale senior European economist Anatoli Annenkov. Here are five key questions for markets: 1/ What will the ECB do on Thursday? Hold its main rate at 2%. Data shows little to change the outlook since policymakers met in June, and there's no clarity on what final U.S. tariffs will look like. "The ECB will prefer to wait and see if anything actually pushes them out of the equilibrium they find themselves in," said Salomon Fiedler, economist at Berenberg. 2/ How will the ECB react to the latest tariff threats? Policymakers won't want to look like they're reacting to a threat. New forecasts are not due this week but the ECB will have to reassess its scenarios, sources have told Reuters, as the 30% tariff level U.S. President Donald Trump has threatened is steeper than the 20% the ECB anticipated in its most negative scenario outlined in June. "There is considerable uncertainty about the impact of tariffs on growth and inflation in Europe," said Jefferies chief Europe economist Mohit Kumar. "I expect a wait-and-watch tone from (ECB chief Christine) Lagarde." 3/ What happens after July? It's anyone's guess what level of U.S. tariffs materialise, so traders have held onto expectations for one more rate cut. Money markets price the move roughly as a coin toss between September and December. Jefferies' Kumar reckons an average 10-15% tariff rate wouldn't require the ECB to cut more than once, but a 30% rate would reduce euro zone growth by around 0.5% next year and require an additional cut. But AXA chief economist Gilles Moec said markets were too optimistic on trade and underestimating prospects for more ECB rate cuts. "The baseline is that we actually end up with fairly chunky tariffs, probably not 30%, but still chunky tariffs and we're going to face more deflationary pressure from China," said Moec, expecting two cuts this year. 4/ Should the ECB worry about disinflation? This is not a matter of if, but how much. Policymakers are already worried and cut rates in June to ensure inflation, which they see falling to 1.4% early next year, doesn't stay below the 2% target in the medium term. While the ECB expects it to rebound, that's not a pretty sight with the memory of below-target inflation still recent in policymakers' minds. Tariffs add to the risks. The ECB already thought a 20% tariff with EU retaliation would keep inflation below 2% in 2027 rather than reaching target as the bank currently expects. The prospect of China dumping discounted products on the EU could add to disinflation. But if EU countertariffs include services, the impact becomes more uncertain, Societe Generale's Annenkov said. And Germany's massive fiscal stimulus is an upside risk to inflation. Policymakers are split. Italy's Fabio Panetta, a dove, has said the ECB should continue loosening policy if trade tensions strengthen disinflation. For hawk Isabel Schnabel, the bar for another cut is "very high". 5/ What about further euro strength? Policymakers are worried as a strong euro hurts growth and inflation. Vice President Luis de Guindos has identified $1.20 as pain point. The euro surged nearly 17% from February to early July, hitting its highest since 2021 around $1.18. It has since pulled back slightly, a relief as economists say it's the speed of the appreciation that's really worrying. Yet analysts reckon it will reach $1.20 in a year, much higher than the $1.13 the ECB assumed for the next two years in June. The euro is one reason why BNP Paribas expects a September rate cut, its head of developed markets Paul Hollingsworth said. Morgan Stanley sees a rally to $1.25 by 2027 and expects this would lower inflation by 0.3 percentage points to 1.7%, preventing it from rising to target. "We're almost paying too much attention to the tariffs themselves than on FX," said AXA's Moec.
Reuters
12 hours ago
- Business
- Reuters
Pausing for breath: Five questions for the ECB
LONDON, July 21 (Reuters) - The European Central Bank is set to pause for breath on Thursday after eight consecutive interest rate cuts, with the prospect of steeper-than-expected U.S. tariffs looming. The threat tariffs pose to the euro zone is big but there's still little certainty about them, so the question is what happens next. "All the focus goes to September," said Societe Generale senior European economist Anatoli Annenkov. Here are five key questions for markets: 1/ What will the ECB do on Thursday? Hold its main rate at 2%. Data shows little to change the outlook since policymakers met in June, and there's no clarity on what final U.S. tariffs will look like. "The ECB will prefer to wait and see if anything actually pushes them out of the equilibrium they find themselves in," said Salomon Fiedler, economist at Berenberg. 2/ How will the ECB react to the latest tariff threats? Policymakers won't want to look like they're reacting to a threat. New forecasts are not due this week but the ECB will have to reassess its scenarios, sources have told Reuters, as the 30% tariff level U.S. President Donald Trump has threatened is steeper than the 20% the ECB anticipated in its most negative scenario outlined in June. "There is considerable uncertainty about the impact of tariffs on growth and inflation in Europe," said Jefferies chief Europe economist Mohit Kumar. "I expect a wait-and-watch tone from (ECB chief Christine) Lagarde." 3/ What happens after July? It's anyone's guess what level of U.S. tariffs materialise, so traders have held onto expectations for one more rate cut. Money markets price the move roughly as a coin toss between September and December. Jefferies' Kumar reckons an average 10-15% tariff rate wouldn't require the ECB to cut more than once, but a 30% rate would reduce euro zone growth by around 0.5% next year and require an additional cut. But AXA chief economist Gilles Moec said markets were too optimistic on trade and underestimating prospects for more ECB rate cuts. "The baseline is that we actually end up with fairly chunky tariffs, probably not 30%, but still chunky tariffs and we're going to face more deflationary pressure from China," said Moec, expecting two cuts this year. 4/ Should the ECB worry about disinflation? This is not a matter of if, but how much. Policymakers are already worried and cut rates in June to ensure inflation, which they see falling to 1.4% early next year, doesn't stay below the 2% target in the medium term. While the ECB expects it to rebound, that's not a pretty sight with the memory of below-target inflation still recent in policymakers' minds. Tariffs add to the risks. The ECB already thought a 20% tariff with EU retaliation would keep inflation below 2% in 2027 rather than reaching target as the bank currently expects. The prospect of China dumping discounted products on the EU could add to disinflation. But if EU countertariffs include services, the impact becomes more uncertain, Societe Generale's Annenkov said. And Germany's massive fiscal stimulus is an upside risk to inflation. Policymakers are split. Italy's Fabio Panetta, a dove, has said the ECB should continue loosening policy if trade tensions strengthen disinflation. For hawk Isabel Schnabel, the bar for another cut is "very high". 5/ What about further euro strength? Policymakers are worried as a strong euro hurts growth and inflation. Vice President Luis de Guindos has identified $1.20 as pain point. The euro surged nearly 17% from February to early July, hitting its highest since 2021 around $1.18 . It has since pulled back slightly, a relief as economists say it's the speed of the appreciation that's really worrying. Yet analysts reckon it will reach $1.20 in a year, much higher than the $1.13 the ECB assumed for the next two years in June. The euro is one reason why BNP Paribas expects a September rate cut, its head of developed markets Paul Hollingsworth said. Morgan Stanley sees a rally to $1.25 by 2027 and expects this would lower inflation by 0.3 percentage points to 1.7%, preventing it from rising to target. "We're almost paying too much attention to the tariffs themselves than on FX," said AXA's Moec.
Zawya
5 days ago
- Business
- Zawya
Euro zone bond yields steady as markets assess US, UK inflation data
Euro zone government bond yields edged slightly lower on Wednesday, as markets assessed U.S. inflation figures released Tuesday that suggested tariffs may be pushing up prices while the latest hot UK inflation data pushed gilt yields higher. The June CPI data out of the U.S. on Tuesday showed an increase of 0.3%, suggesting tariffs are reading through to prices, and spurring investors to slightly scale back their bets on Federal Reserve rate cuts with Wall Street markets falling late on Tuesday as treasury yields rose. But the mood was decidedly muted on Wednesday, with German 10-year yields, the euro area's benchmark, down a mere 1 bps to 2.7%, hovering just off a nearly four-month high of 2.737% scaled on Monday. "It's relatively quiet - no spillover from UK CPI to Europe. A pause after a run up in yields makes sense. I'm keeping a close eye on stocks after profit warnings .. that puts a brake on yields," said Kenneth Broux, head of corporate research FX and rates at Societe Generale. The two-year yield – more sensitive to expectations for European Central Bank policy rates – was also down 1 bp to 1.86% . The German 30-year yield was down 1 bps at 3.23%, having risen to its highest level since October 2023 on Monday, touching 3.26%. Markets are looking ahead to U.S. producer price data due later to assess the extent of inflationary pressures in the U.S. UK CPI data meanwhile showed Britain's annual rate of consumer price inflation unexpectedly rose to its highest in over a year, at 3.6% in June. The print meant UK 10-year gilts were a rare outlier, rising 2 bps to 4.65%, while most of the other major government bonds yields were slightly down. Markets are focused on U.S. President Donald Trump's ongoing trade war, with his latest move being a 19% tariff on goods from Indonesia under a new agreement with the Southeast Asian country. It comes as the European Union is readying retaliatory measures should talks with Washington fail. Planned U.S. tariffs of 30% on imports from the EU could cost the German economy about a quarter of a percentage point in growth this year and next compared with current forecasts, the IMK institute said on Wednesday. Elsewhere, the German cabinet approved on Wednesday a medium-term fiscal plan that will be submitted to the European Commission, a spokesperson from the finance ministry said. Italian EU-harmonised consumer prices (HICP) rose 0.2% month-on-month in June and were up 1.8% from the year earlier, official statistics agency ISTAT said on Wednesday, slightly revising up preliminary data. The European Union statistics office on Wednesday said the euro zone's May seasonally adjusted trade balance was 16.2 billion euros, with an earlier Reuters poll expecting 13 billion euros. (Reporting by Lucy Raitano; Editing by Amanda Cooper and Bernadette Baum)
Reuters
6 days ago
- Business
- Reuters
Societe Generale agrees to sell local unit to State of Cameroon
July 15 (Reuters) - Societe Generale ( opens new tab has agreed to sell its Cameroon subsidiary to the State of Cameroon, the France-based international banking group said on Tuesday. The sale of Societe Generale Cameroun, the value of which was not disclosed, will cover more than 58% shares in the subsidiary, pushing the stake held by Cameroon to 83.7%. The deal, expected to close by the end of 2025, would have a positive impact of around six basis points on the group's CET1 ratio, which stood at 13.4% at the end of the first quarter, Societe Generale said. A CET1 ratio measures a bank's liquidity to its risk exposure. The lender said that the state would take over all of the activities, client portfolios and employees within the local subsidiary.
Khaleej Times
6 days ago
- Business
- Khaleej Times
China's economy slows as consumers tighten belts, US tariff risks mount
China's economy slowed less than expected in the second quarter in a show of resilience against U.S. tariffs, though analysts warn that weak demand at home and rising global trade risks will ramp up pressure on Beijing to roll out more stimulus. The world's No. 2 economy has so far avoided a sharp slowdown in part due to policy support and as factories took advantage of a U.S.-China trade truce to front-load shipments, but investors are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low. Policymakers face a daunting task in achieving the annual growth target of around 5% - a goal many analysts view as ambitious given entrenched deflation and weak demand at home. Data on Tuesday showed China's gross domestic product (GDP) grew 5.2% in the April-June quarter from a year earlier, slowing from 5.4% in the first quarter, but just ahead of analysts' expectations in a Reuters poll for a rise of 5.1%. "Despite a strong H1, the outlook is set to sour in H2 as export frontloading fades and the impact of U.S. tariffs becomes more visible," Wei Yao, an economist at Societe Generale, said. "Renewed weakness in house prices and the fading impact of subsidies also cast doubt over the sustainability of the consumption recovery." Indeed, the solid headline GDP numbers held little sway for most households including 30-year-old doctor Mallory Jiang, in the southern tech hub Shenzhen, who says she and her husband both had pay cuts this year. "Both our incomes as doctors have decreased, and we still don't dare buy an apartment. We are cutting back on expenses: commuting by public transport, eating at the hospital cafeteria or cooking at home. My life pressure is still actually quite high." On a quarterly basis, GDP grew 1.1% in April-June, the National Bureau of Statistics data showed, compared with a forecast 0.9% increase and a 1.2% gain in the previous quarter. Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year. Beijing has ramped up infrastructure spending and consumer subsidies, alongside monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from U.S. President Donald Trump's sweeping tariffs. Some analysts believe the government could ramp up deficit spending if growth slows sharply. China's markets wobbled slightly but the overall reaction to the data was largely muted. Households pressured Separate June activity data also released on Tuesday underlined the pressure on consumers. While industrial output rose 6.8% year-on-year last month - the fastest pace since March, retail sales growth slowed down to 4.8%, from 6.4% in May and hitting the lowest since January-February. China observers and analysts say stimulus alone may not be enough to tackle entrenched deflationary pressures, with producer prices in June falling at their fastest pace in nearly two years. Zichun Huang, China economist at Capital Economics, said the GDP data "probably still overstate the strength of growth." "And with exports set to slow and the tailwind from fiscal support on course to fade, growth is likely to slow further during the second half of this year." Analysts at ANZ expect the economy to slow in the second half, but raised their 2025 GDP growth forecast to 5.1%, from a previous estimate of 4.2%, noting that deflation remains the "key threat." Data on Monday showed China's exports regained some momentum in June as factories rushed out shipments to capitalise on the fragile tariff truce between Beijing and Washington ahead of a looming August deadline. Tariff, property headwinds The latest Reuters poll projected GDP growth to slow to 4.5% in the third quarter and 4.0% in the fourth, underscoring mounting economic headwinds as Trump's global trade war leaves Beijing with the tough task of getting households to spend more at a time of uncertainty. China's 2025 GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease even further to 4.2% in 2026, according to the poll. The country's property downturn remained a drag on overall growth despite multiple rounds of support measures, with investment in the sector falling sharply in the first six months, while new home prices in June tumbled at the fastest monthly pace in eight months. China's top leaders pledged to push forward urban village renovation and quicken a new property development model, state media reported Tuesday. Fixed-asset investment also grew at a slower-than-expected 2.8% pace in the first six months year-on-year, from 3.7% in January-May. The softer investment outturn reflected the broader economic uncertainty, with China's crude steel output in June falling 9.2% from the year before, as more steelmakers carried out equipment maintenance amid seasonally faltering demand. "Q3 growth is at risk without stronger fiscal stimulus," said Dan Wang, China director at Eurasia Group in Singapore. "Both consumers and businesses have turned more cautious, while exporters are increasingly looking overseas for growth."
