Business

(Reuters) – JPMorgan on Wednesday cut its expectation for U.S. real gross domestic product for the second half of 2022 and for 2023.

The firm’s economic and policy research department cut its second half view to 2.4% from 3% and cut its first half 2023 target to 1.5% from 2.1% and for the second half of 2023 it cut its view to 1% from 1.4%.

It said there may be enough of a growth slowdown to lead to a gradual increase in the unemployment rate later next year, helping to relieve some wage pressures that have been building.

“In short, we forecast a soft landing, but are well aware that this outcome has rarely (if ever) occurred,” according to the research led by economist Michael Feroli.

(Reporting By Sinéad Carew; Editing by Chris Reese)

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By Ann Saphir

(Reuters) -Two U.S. central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession.

It’s not clear if that view – mapped out on Tuesday by Chicago Federal Reserve Bank President Charles Evans and on Wednesday by Philadelphia Fed chief Patrick Harker – marks a consensus at the Fed for how to bring down the highest inflation in 40 years.

But it does suggest that while policymakers broadly back using half-point rate hikes to get short-term borrowing costs to a range of 1.75%-2% over the next two months, support for sticking to that pace beyond July may be limited.

Evans on Tuesday told an audience in New York City that he expects to transition to “measured” rate hikes after an initial burst of policy tightening. In the Fed lexicon, “measured” means quarter-point rate hikes.

On Wednesday Harker gave a similar assessment, telling the Mid-Size Bank Coalition of America that after July, “I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”

As he spoke, the S&P 500 and the Dow Jones Industrial Average were tumbling and ended with the sharpest one-day loss in nearly two years.

“I still am in the camp that we can have, if not a soft landing, a safe landing,” Harker said, noting the strength of the labor market, with nearly two jobs open for every American jobseeker, and an unemployment rate of 3.6%.

The U.S. economy will likely grow between 2% and 3% this year, he said, adding, “this economy can withstand a measured, methodical approach to tightening financial conditions.”

Fed policymakers say the current bout of high inflation — running at more than three times the Fed’s 2% target — is the product of outsized demand bumping up against constrained supply.

Fed Chair Jerome Powell has not been specific about his expectations for the policy path beyond July. On Tuesday he said the Fed will keep pushing on rate hikes until it sees clear and convincing evidence that inflation is cooling.

(Writing by Ann Saphir; Editing by Cynthia Osterman)

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LONDON (AP) — Britain’s inflation rate rose to the highest level in 40 years last month as Russia’s war in Ukraine fueled further increases in food and fuel prices.

Consumer price inflation accelerated to 9% in the 12 months through April, from 7% the previous month, the Office for National Statistics said Wednesday. That is the highest rate since sometime in 1982, when inflation reached 11%, according to statistical modeling by the ONS.

Millions of households across Britain were hit with a 54% jump in gas and electricity bills last month after regulators boosted the energy price cap to reflect previous increases in wholesale prices. Russia’s invasion of Ukraine has put further pressure on food and energy prices.

The figures will increase pressure on the government to mitigate a cost-of-living crisis that economists forecast will produce the biggest drop in living standards since the 1950s.

The government may cut income taxes and is drawing up plans to boost subsidies for low-income people struggling to pay fuel bills, British media reported Wednesday. It is also considering a windfall profits tax on energy companies benefiting from high oil and gas prices.

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By Greg Roumeliotis and Tom Hals

(Reuters) – Twitter Inc published its account on Tuesday of its deal negotiations with Elon Musk, showing he opted out of asking the questions about the social media company’s business he has now cited in declaring the $44 billion acquisition is “on hold.”

The account, published in Twitter’s proxy statement that outlines what shareholders need to know to vote on the deal, paints a picture of Musk in a rush to clinch a deal with his “best and final” offer.

Musk negotiated the Twitter deal over the weekend of April 23 and April 24 without carrying out any due diligence, the proxy statement shows.

Since signing the deal on April 25, Musk has questioned the accuracy of Twitter’s public filings about spam accounts representing less than 5% of its user base, claiming they must be at least 20%. This is despite Twitter stating in its filings that the numbers could be higher than it estimates.

Independent researchers have projected that 9% to 15% of the millions of Twitter profiles are bots.

Musk tweeted on Tuesday that Twitter Chief Executive Parag Agrawal has refused to show proof for his company’s estimate and that the deal cannot move forward until he does. Twitter’s proxy statement shows that in the run-up to the deal Musk made no effort to get information about the issue.

“Mr. Musk did not ask to enter into a confidentiality agreement or seek from Twitter any non-public info regarding Twitter,” Twitter said in its proxy statement.

The proxy statement makes no mention of threats Musk has tweeted about not going ahead with the deal if he does not get to the bottom of how many spam accounts are on the platform.

Twitter investors appeared convinced that a deal at the agreed price was now out of the question. Twitter shares were trading around $37.55 on Tuesday afternoon, a discount of more than 30% to the $54.20 per share deal price.

Musk suggested for the first time on Monday at a conference in Miami that the deal could be done at a lower price, without specifying what that could be. He has yet to inform Twitter that he wants to renegotiate the deal.

Legal experts have said Musk would likely lose in court if he tried to walk away from a deal. But they say that any litigation would likely be protracted and cast uncertainty over Twitter’s business. Even companies that have prevailed in court over their acquirers have ended up negotiating financial settlements.

Musk is contractually obligated to pay a $1 billion break-up fee if he does not complete the deal, but Twitter can sue for “specific performance” to force Musk to complete a deal and obtain a settlement from him as a result.

Ann Lipton, a professor at Tulane University Law School, said the fact that Musk had not asked Twitter for information before signing the deal meant he would now have to show that the company’s public filings were wrong and posed significant long-term financial issues – a high legal bar.

“Twitter has long said ‘this is our estimate of spam but we might be wrong.’ So it’s not clear that they said anything false,” Lipton said.

COMMITTED TO THE DEAL

Twitter said on Tuesday it remained committed to the deal at the agreed price and expected it to be completed in 2022.

The San Francisco-based company said in its proxy statement that Musk expressed his interest in joining its board or taking it private on March 26. This would indicate that Musk mischaracterized his stake of more than 9% in Twitter as passive when he revealed it in a regulatory filing on April 4. He subsequently clarified it was an active stake.

Representatives of Musk did not respond to requests for comment.

Musk also told Twitter that he contemplated starting a competitor, according to the proxy statement.

Twitter’s CEO, Agrawal, is entitled to a $60.2 million golden parachute if the deal closes, while the company’s chief financial officer, Ned Segal, would get $46.4 million, the proxy shows. Twitter’s top lawyer, Vijaya Gadde, would be paid $30 million.

Goldman Sachs Group Inc stands to be paid $65 million for advising Twitter once the deal is completed, having already been paid $15 million, the proxy statement shows.

Another Twitter adviser, JPMorgan Chase & Co, stands to be paid $48 million once the deal closes, having already made $5 million for its fairness opinion to the company.

(Reporting by Greg Roumeliotis in New York and Tom Hals in Wilmington, Del.; Editing by Nick Zieminski and Matthew Lewis)

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STOCKHOLM (Reuters) – Ericsson on Wednesday laid out plans to restructure its operating units to focus on mobile infrastructure and business customers, and announced that two senior executives will leave the company.

A new business unit was created by merging digital services and managed services to increase its cloud expertise and build products for automation and artificial intelligence.

The unit will be led by Per Narvinger, who joined Ericsson in 1997.

A new unit for enterprise wireless business, to be led by Cradlepoint CEO George Mulhern, will develop 5G-related products to meet the needs of big businesses.

Ericsson executives, Arun Bansal, currently executive vice president, and Peter Laurin, head of business area managed services, will leave the company.

The new organisation will take effect June 1.

(Reporting by Supantha Mukherjee, European Technology & Telecoms Correspondent, based in Stockholm)

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The dollar fell for a third straight day on Tuesday, pulling back from a two-decade high against a basket of major peers, as an uptick in investors’ appetite for riskier bets diminished the U.S. currency’s appeal.

Upbeat earnings views from Home Depot and United Airlines along with optimism around the easing of China’s crackdown on tech and COVID-19, helped to lift risk sentiment.

The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was down 0.7% at 103.41, its lowest since May 6. The index hit a two-decade high last week supported by a hawkish Federal Reserve and worries over the global economic fallout from the Russia-Ukraine conflict.

“The mood in markets has improved dramatically relative to last week with most asset classes bouncing and retracing the moves seen last week,” Brad Bechtel, global head of FX at Jefferies, said in a note to clients.

“The result is a rally in equities and sell-off in fixed income with nearly every currency in the world rallying against the USD,” Bechtel said.

The dollar remained subdued after data showed U.S. retail sales increased solidly in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, showing no signs of demand letting up despite high inflation.

The dollar index pared losses after Federal Reserve chair Jerome Powell said at a Wall Street Journal event on Tuesday, the Fed will “keep pushing” to tighten U.S. monetary policy until it is clear inflation is declining.

The euro was up 1% at $1.0535, extending its rebound from a five-year low touched last week, and putting more distance between the common currency and parity with the U.S. dollar.

The currency, which benefited from ECB policymaker Francois Villeroy de Galhau saying on Monday that a weak euro could threaten price stability in the currency bloc, rose after hawkish comments from Dutch central bank chief Klaas Knot.

Knot said that not only was the European Central Bank set to hike rates by 25 basis points in July, it was also ready to consider a bigger rise if inflation proved higher than expected.

“We think the euro sell-off is starting to look stretched,” said Shaun Osborne, chief currency strategist at Scotia Bank.

Sterling also took advantage of the softer dollar to jump 1.26% to its highest level since May 5 after strong labour market data reinforced expectations that the Bank of England would continue to raise rates to fight inflation.

The Australian dollar, viewed as a liquid proxy for risk appetite, rose 0.52%.

Australia’s central bank considered a sharper rise in interest rates at its May meeting, minutes published on Tuesday showed, in a heavy hint it will hike again in June.

The Chinese offshore yuan gained 0.8% after a steep slide that has knocked it about 7% lower since mid-April.

Shanghai logged three consecutive days with no new COVID-19 cases outside quarantine zones on Tuesday, a milestone that in other cities has signalled the beginning of lifting restrictions.

Meanwhile, bitcoin, the world’s largest cryptocurrency, was about flat on the day at $29,745.69, as it struggled to stay above $30,000 after bouncing from the multi-month lows hit last week.

(Reporting by Saqib Iqbal Ahmed; editing by Barbara Lewis and Nick Zieminski)

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By Amruta Khandekar and Noel Randewich

(Reuters) – Wall Street rallied on Tuesday, lifted by Apple, Tesla and other megacap growth stocks after strong retail sales in April eased worries about slowing economic growth.

Ten of the 11 major S&P sector indexes advanced, with financials, materials and technology each up over 2%.

Investors were cheered by data showing U.S. retail sales increased 0.9% in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants.

Recently punished shares of Microsoft Corp, Apple Inc, Tesla Inc and Amazon gained between 1.3% and 4.4%, lifting the S&P 500 and the Nasdaq.

Tuesday’s broad rally followed weeks of selling on the U.S. stock market that last week saw the S&P 500 sink to its lowest level since March 2021.

“The largest pockets of stocks that investors tend to buy have been essentially beaten up. They’re either in correction or bear market territory,” said Sylvia Jablonski, chief investment officer of Defiance ETF. “I think investors are looking at these opportunities to buy on the dip, and I suspect that today is a good day to do that.”

The S&P 500 Banks index jumped 3.1%, with Citigroup climbing 7.9% after Warren Buffett’s Berkshire Hathaway disclosed a nearly $3 billion investment in the U.S. lender.

Another set of economic data showed industrial production accelerated 1.1% last month, higher than estimates of 0.5%, and faster than a 0.9% advance in March.

“This is consistent with continued economic growth in the second quarter and not a recession underway,” said Bill Adams, chief economist for Comerica Bank in Dallas.

The U.S. Federal Reserve will “keep pushing” to tighten U.S. monetary policy until it is clear inflation is declining, Fed Chair Jerome Powell said at an event on Tuesday.

Traders are pricing in an 85% chance of a 50-basis point rate hike in June.

In afternoon trading, the S&P 500 was up 1.27% at 4,059.02 points.

The Nasdaq gained 1.76% to 11,868.20 points, while Dow Jones Industrial Average was up 0.74% at 32,461.93 points.

GRAPHIC-S&P 500’s busiest trades: https://fingfx.thomsonreuters.com/gfx/mkt/zgpomemlwpd/SPX_by_busiest_trades.png

Walmart Inc tumbled about 11% after the retail giant cut its annual profit forecast, signaling a bigger hit to margins.

Retailers Costco, Target and Dollar Tree fell between 0.9% and 2.1%.

United Airlines Holdings Inc gained 7.3% after the carrier lifted its current-quarter revenue forecast, boosting shares of Delta Air, American Airlines and Spirit Airlines.

A positive first-quarter earnings season has been overshadowed by worries about the conflict in Ukraine, soaring inflation, COVID-19 lockdowns in China and aggressive policy tightening by central banks.

The S&P 500 is down about 15% so far in 2022, and the Nasdaq is off 24%, hit by tumbling growth stocks.

U.S.-listed Chinese stocks jumped on hopes that China will ease its crackdown on the technology sector.

Advancing issues outnumbered declining ones on the NYSE by a 3.58-to-1 ratio; on Nasdaq, a 3.15-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 21 new highs and 108 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru, and Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Lisa Shumaker)

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(Reuters) -Netflix on Tuesday said it has laid off about 150 people, mostly in the United States, as the streaming service company faces slowing growth.

The layoffs represent approximately 2% of the company’s workforce in the United States and Canada.

“These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues,” the company said in a statement. “We’re working hard to support them through this very difficult transition.”

The job cuts come as Netflix reported its first loss of subscribers in more than a decade and forecast deeper losses in the coming quarter. It said the war in Ukraine and fierce competition contributed to the loss of customers.

As a result of its declining growth, Netflix said it would introduce a cheaper, ad-supported tier and look more closely at its spending.

“We’re trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business,” Netflix Chief Financial Officer Spencer Neumann told investors during the company’s most recent earnings call.

(Reporting by Dawn Chmielewski in New York; Editing by Mark Porter, Bernard Orr)

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By Sabrina Valle

HOUSTON (Reuters) – Equinor SA and Exxon Mobil Corp have taken the first steps to expand an $8 billion oil development off Brazil’s coast, the Norwegian oil producer told Reuters.

The firms want to boost future production from the Bacalhau oil field, Equinor’s largest project outside of Norway with more than 1 billion barrels of oil, the company said.

A second drilling rig and a second floating production platform are being considered for the next phase along with a more than 100-mile-long gas pipeline, three people close to the discussions said.

For Exxon, Bacalhau could provide its first barrel of oil from offshore Brazil, one of its top growth prospects, and a new supply of oil from lower carbon operations. First oil is due in 2024 from the venture’s 220,000 barrel per day (bpd) production vessel.

Exxon referred questions to Equinor, which operates the field. Equinor told Reuters it plans to drill a new appraisal well in the north of the Bacalhau field next year “to better understand the reserves base for the Phase 2 development.”

The partners are assessing awarding a contract for a second drilling rig. Pre-drilling of phase 1 wells should start in the third quarter this year, a spokesperson said. Equinor did not comment on plans for a new FPSO or pipeline.

INVESTMENT MAY DOUBLE

“Bacalhau is a globally competitive project with a break even below $35 in a key energy region,” the spokesperson said in response to Reuters questions.

The second phase could potentially double the project investment if the new exploration works are successful, two people close to discussions said.

One of the issues to be decided is whether the field will produce enough oil to justify a second floating platform, or FPSO, and a gas pipeline to bring the field’s natural gas to shore, two of the people said.

Equinor and Exxon could use a subsea tieback if the findings do not justify a second platform, two of the people said. Wells would be connected to the first FPSO, which would reinject the gas into the reservoir.

The first FPSO is being built by Japan’s Modec Inc and was designed to keep greenhouse gas emissions intensity 65% below Exxon’s average, according to a company presentation.

DRILLING TO COMMENCE

The partners last year signed a $380 million, four-year contract with Seadrill Ltd for the phase 1 campaign.

Bacalhau is Brazil’s first pre-salt field not to be developed by state-controlled Petroleo Brasileiro SA, which made the discovery in 2012 and sold it to pay down debt. Equinor holds a 40% stake, as does Exxon. Petrogal Brasil owns a 20% share.

Seadrill’s West Saturn rig will drill Bacalhau’s first six of 19 approved wells, according to Equinor. It is the same rig that Exxon has used in offshore blocks it operates in Brazil, with no exploration success.

(Reporting by Sabrina Valle; Editing by Sam Holmes)

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By Marcelo Teixeira

(Reuters) – Brazilian sugar cane mills are cancelling some sugar export contracts and diverting production to ethanol to cash in on high energy prices, according to people with direct knowledge of the deals, raising concerns of a sugar shortage.

Nearly every company involved in sugar trading in Brazil has seen cancellations, a trader at a large international commodities merchant told Reuters on the sidelines of Sugar Week in New York last week. He estimated total cancellations so far at 200,000 to 400,000 tonnes of raw sugar.

“It is happening because of the production mix change and also because of the crop delay,” the trader said.

Brazil exports around 2.2 million tonnes of sugar per month during the peak of the crop. A large fall in sugar output could lead to a global sugar shortage, some traders say.

Most mills in Brazil are flexible and can partially shift from sugar or ethanol production. Right now, production is shifting in favor of ethanol as high energy prices driven by pandemic recovery and war in Ukraine spur more fuel output.

Recent analyst projections show lower sugar output numbers and higher ethanol volumes because biofuel sales have become more profitable for mills. Ethanol sales increased 2.6% in April.

A second trader, also working for a large international food merchant, confirmed the cancellations – known in the industry as washouts – and said most traders are trying to be flexible when negotiating. “These are take-or-pay contracts, there is a fee, so sometimes the cost could be high for the mill,” he said.

An executive at one of the largest mills in Brazil who asked not to be named said the gains from shifting from sugar to ethanol offset the costs of cancellations. Brazil is second largest ethanol producer after the United States.

“Ethanol sales are paid in one or two days, while export sugar takes much longer, and mills have many bills to pay in the harvest kick-off,” he said.

Hydrous ethanol was trading at the equivalent of a sugar price of 20 cents per pound late last week, while sugar futures in New York were trading a bit over 19 cents per pound. [SOF/L]

Last season mills used 45% of the sugarcane crop to make sugar and 55% to make ethanol. Every percentage point corresponds to around 700,000 tonnes of sugar.

According to data from sugar industry group UNICA, the lowest sugar mix was 34.3% in 2019, a year of low sugar prices. The highest was 49.7% in 2006, when higher prices prevailed.

(Reporting by Marcelo Teixeira; editing by Richard Pullin)

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