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Commodity currencies pressure eases as stocks rebound

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© Reuters. FILE PHOTO: A man walks past various currency signs, including the dollar (top R), Australian dollar (top L), pound sterling (centre L) and Euro (bottom L), outside a brokerage in Tokyo October 28, 2014. REUTERS/Yuya Shino

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By Joice Alves

LONDON (Reuters) – The Norwegian crown and the Australian dollar recovered some ground on Tuesday after hitting their lowest levels in nearly two years against the U.S. dollar, tracking a rebound in European stock markets after a sharp selloff.

The dollar edged lower but safety flows kept the safe haven near 20-year highs, while risk aversion kept the euro flat.

Commodity currencies fell overnight to multiple-year lows and oil prices fell more than 1%, hurt by fears of recession and an economic slowdown in China, the top oil importer, before trimming some of those declines.

The Australian and Canadian dollars both edged both higher by 0900 GMT, after falling to their weakest since 2020. While the Norwegian crown rose 0.26% to 9.6345 crowns per dollar, after falling to its lowest since June 2020.

“Commodity currencies have a high correlation with swings in market risk sentiment, and followed both yesterday’s equity sell-off lower and today’s recovery in European stocks higher,” said Francesco Pesole, FX strategist at ING.

European stocks bounced back after a sharp selloff on Monday, and China stocks also rebounded on Beijing’s vows to support its struggling economy, with signs of bargain hunting in both markets. (EU)

Any further recovery in risky currencies should come mostly to the detriment of the dollar, Pesole added. “However, we do not expect any correction in the dollar to have long legs in the current market environment”.

The euro flattened on the dollar at $1.0563, and sterling rose 0.1% to $1.2340.

“I would still describe sentiment as fragile given the overhang of the war in Ukraine, Fed tightening and COVID restrictions in China,” Jane Foley, head of FX strategy, at Rabobank in London.

“Medium-term, we expect the USD to remain well underpinned by safe haven flows,” she added.

The dollar index, which measures the greenback against six peers fell 0.13% to 103.58, having risen as high as 104.19 on Monday, a 20-year peak.

Also a factor in the slightly weaker dollar were overnight remarks from Atlanta Fed President Raphael Bostic who hosed down talk of a 75-basis point rate hike at the Fed’s next meeting, causing U.S. Treasury yields to pause their march higher.

The Aussie dollar was last up 0.2% at $0.6966, after dropping as low as $0.6911, to its weakest since July 2020, having fallen 1.7% overnight. While the Canadian dollar edged 0.2% higher to C$1.29910, after dropping to its weakest since November 2020.

There was also excitement in crypto markets, where bitcoin fell below $30,000 for the first time since July 2021, before bouncing to trade 2.9% firmer at around $31,800.

Economy

Best Buy sees lower TV, computer sales as inflation hits shoppers’ wallets

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© Reuters. FILE PHOTO: A person enters a Best Buy store in Manhattan, New York City, U.S., November 22, 2021. REUTERS/Andrew Kelly

By Uday Sampath Kumar

(Reuters) -Best Buy Co Inc cut its annual profit forecast on Tuesday due to lower demand for TVs and computers, making it the latest major retailer to underline the impact of 40-year high inflation on shoppers’ spending power.

The company’s shares, which fell more than 16% last week in a broader retail selloff, were up about 2%, as the electronics seller reported first-quarter sales that were not as bad as feared.

“We believe investors had anticipated the earnings miss and guidance reduction to a large degree following reports of similar struggles at other retailers,” said Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.

A spike in prices for everything from toothpaste to gas is taking a toll on consumer spending, while driving companies such as Best Buy, Walmart (NYSE:WMT) Inc and Target Corp (NYSE:TGT) to report their worst earnings miss in at least five years.

“Electronics are highly discretionary, big-ticket items. This puts them directly in the firing line of households looking to trim expenditure,” said Neil Saunders, managing director of GlobalData.

Best Buy reported earnings of $1.57 per share, missing estimates of $1.61, according to Refinitiv IBES data, with the company saying it was forced to discount more than expected in some product categories to clear inventory.

Adjusted earnings forecast for 2023 was cut to a range of $8.40 to $9 per share from a range of $8.85 to $9.15.

Still, even with higher gas and food prices, rising interest rates, and the war in Ukraine all affecting consumer behavior, Best Buy is not currently planning for a full recession, Chief Executive Officer Corie Barry said on an analyst call.

Quarterly comparable sales fell 8%, but beat tempered expectations of a 9.1% drop. It forecast full-year comparable sales to fall 3% to 6% versus its previous outlook of a 1% to 4% drop.

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Economy

EU proposes to make seizing assets easier, including of sanctioned oligarchs -document

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© Reuters. FILE PHOTO: Russian oligarch Roman Abramovich’s super yacht Solaris is seen at Barcelona Port in Barcelona, Spain, March 3, 2022. REUTERS/ Albert Gea

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By Francesco Guarascio and Jan Strupczewski

BRUSSELS (Reuters) – The European Commission wants to make it easier to confiscate assets linked to serious illegal activities and suspected criminals, including those evading European Union sanctions against the Kremlin, according to a draft document seen by Reuters.

The legislative proposal, due to be published on Wednesday and still subject to changes, is aimed at addressing a longstanding weakness in the EU where many states lack sufficiently robust legal frameworks to seize criminal assets, making it easier for criminals to hide their resources and benefit from illegal activities.

The war in Ukraine further exposed this weakness, as many states are struggling to freeze assets of people sanctioned by the EU for their ties to the Kremlin – and many more lack legal powers to confiscate frozen assets.

The legislative proposal would address these weaknesses by creating a common legal framework.

Crimes for which the new rules would apply are terrorism, participation in a criminal organisation, human trafficking, money laundering, and also the violation of EU sanctions, which under a separate proposal, also to be published on Wednesday, would become a crime across the EU.

Asset seizures would generally require a conviction, but under the draft law, they could be allowed pending trial in some cases for suspected criminals, and also when they are “transferred by a suspected or accused person to third parties,” including family members.

Authorities in EU states have said one of the main obstacles they faced in enforcing the sanctions against Moscow was that affected people had their assets registered under somebody else’s name, or transferred them before sanctions were implemented.

“We are working on a European tool to make confiscations possible everywhere in all EU states”, the EU justice commissioner Didier Reynders said while pre-announcing the incoming measures earlier in May. He said one of the ultimate aims was to redistribute proceeds from these confiscations to Ukraine.

To become law, the proposal needs the backing of EU governments, which have traditionally been cautious about reforms that require changes to their criminal laws.

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Economy

Oh Snap! Social media firms sink after bleak warning from Snapchat parent

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© Reuters. FILE PHOTO: A woman stands in front of the logo of Snap Inc on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson

By Nivedita Balu and Medha Singh

(Reuters) – Snap Inc (NYSE:SNAP)’s shares plunged nearly 40% on Tuesday after a profit warning from the Snapchat parent signaled tough times ahead for the once-booming digital ad industry, sparking a sector-wide selloff.

The company was on course to erase more than $14 billion in market value, while Meta Platforms, Pinterest (NYSE:PINS), Twitter (NYSE:TWTR) and Google-parent Alphabet (NASDAQ:GOOGL) were altogether set to lose nearly $140 billion if losses hold.

Snap said on Monday it expected to miss quarterly revenue and profits targets that it set just a month earlier and would have to slow hiring and lower spending.

The bleak view from one of the sector’s most known players underlines how the Russia-Ukraine war, surging inflation and rising interest rates are hobbling social media companies at a time when they had just started recovering the impact of changes to Apple (NASDAQ:AAPL)’s iOS operating system.

“Snap is a proxy for online advertising and when you see weakness there then you automatically think Facebook (NASDAQ:FB), Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC in Las Vegas.

“Once you start thinking about Google, that’s when the markets starts to sell off.”

Tuesday’s selloff comes days after a Bank of America (NYSE:BAC) fund managers survey indicated investors are becoming increasingly bearish on tech stocks, a stark reversal to a bullish trend in the past 14 years.

Analysts also said Snap’s outlook for core profit suggested expenses will outpace its revenue growth, given headcount was up 52% in the prior quarter. The company also faces pressure from TikTok and a shift in ad budgets to Google and Facebook, they added.

“There’s a lot to deal with in the macro environment today,” Chief Executive Officer Evan Spiegel said at a tech conference on Monday.

Graphic: Digital advertising stocks this year – https://graphics.reuters.com/DIGITAL%20ADVERTISING-STOCKS/dwpkrnzogvm/Digital%20advertising%20stocks%20this%20year.png cb55bba9-860d-4771-9546-5eaef7b68cf01

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