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Economy

U.S. stock futures rebound, Twitter falls

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© Reuters. FILE PHOTO: A man holding an umbrella looks at an electronic stock quotation board outside a brokerage in Tokyo April 7, 2015. REUTERS/Issei Kato

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By Carolyn Cohn

LONDON (Reuters) – U.S. stock index futures rebounded ahead of the Wall Street open on Friday, keeping fears of a bear market at bay, though Twitter (NYSE:TWTR) shares slid after Elon Musk put his $44 billion deal for the company temporarily on hold.

Markets are becoming anxious about the possibility of recession, with the S&P getting close to a bear market on Thursday, at nearly 20% off its January all-time high. [.N]

In an interview late on Thursday, U.S. Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain”.

Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed’s next two policy meetings, while pledging that “we’re prepared to do more”.

The war in Ukraine has aggravated supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks enjoyed a bounce on Friday.

“There’s an awful lot of negative sentiment out there, we’re looking at a 40% chance of recession,” said Patrick Spencer, vice chairman of equities at Baird Investment Bank.

“A lot of fund managers have cut their equity allocations and raised cash, though we think this is a correction rather than a bear market.”

S&P futures jumped 1.09% after the S&P index dropped 0.13% overnight, though the index is still eyeing a sixth straight week of declines.

Graphic: S&P 500 set for a sixth straight week of falls- https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoglxgvx/stx1305.PNG

Twitter shares fell 17.7% to $37.10 in pre-market trading after Musk suspended his plans to buy the company, saying he was awaiting details in support of calculations showing spam and fake accounts represent less than 5% of users.

“This is straight out of the Musk playbook, keeping shareholders on their toes,” said Michael Hewson, chief markets analyst at CMC Markets.

MSCI’s world equity index rose 0.34% after hitting its lowest since November 2020 on Thursday, though it was heading for a 4% fall on the week, its sixth straight week of losses.

European stocks rallied 1.44% and Britain’s FTSE 100 gained 1.64%.

Markets are likely to experience a short-term rebound before resuming the sell-off which has sent Wall Street’s Nasdaq tech index down over 25% since the beginning for of the year, BofA analysts wrote in a weekly strategy note.

Investors liquidated global equity funds worth $10.53 billion in the week ended May 11, compared with $1.65 billion of net selling in the previous week, according to Refinitiv Lipper.

The U.S. dollar was unchanged at 104.77 against a basket of currencies, but remained close to the previous day’s 20-year highs due to safe-haven demand.

Russia has bristled over Finland’s plan to apply for NATO membership, with Sweden potentially following suit.

Moscow called Finland’s announcement hostile and threatened retaliation, including unspecified “military-technical” measures.

The dollar rose 0.47% to 128.83 yen, while the euro was steady at $1.038, above Thursday’s five-year lows.

Headline inflation in the euro zone will fall in the second half of the year but so-called core prices, which strip out food and energy, will keep rising, the European Central Bank’s vice-president Luis de Guindos said on Friday.

Cryptocurrency bitcoin also turned higher, cracking through $30,000 after the collapse of TerraUSD, a so-called stablecoin, drove it to a 16-month low of around $25,400 on Thursday.

“Some traders may see the sharp fall this month as an opportunity to buy the dip, but given the hugely volatile nature of the coins, the crypto house of cards could tumble further,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV).

The moves higher in equities were mirrored in U.S. Treasuries, with the benchmark U.S. 10-year yield edging up to 2.8985% from a close of 2.817% on Thursday.

The policy-sensitive 2-year yield was at 2.582%, from a close of 2.522%.

German 10-year government bond yields edged up to 0.8870%.

MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.6% from Thursday’s 22-month closing low. Japan’s Nikkei stock index jumped 2.64%.

In China, the blue-chip CSI300 index was up 0.75% and Hong Kong’s Hang Seng rose 2.68%, encouraged by comments from Shanghai’s deputy mayor that the city may be able to start easing some tough COVID restrictions this month.

Oil prices were headed for their first weekly loss in three weeks as worries about inflation and China’s COVID lockdowns slowing global growth offset concerns about dwindling supplies from Russia. [O/R]

U.S. crude rose 1.99% to $108.10 a barrel, and global benchmark Brent crude was up 1.86% at $109.45 per barrel.

Spot gold, which has been under pressure from the soaring dollar, fell 0.3% to a three-month low of $1,806.49 per ounce. [GOL/]

Economy

Japan’s Nomura targets up to 90% jump in core pretax income in 3 years

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© Reuters. FILE PHOTO: A logo of Nomura Holdings is pictured in Tokyo, Japan, December 1, 2015. REUTERS/Toru Hanai

TOKYO (Reuters) -Nomura Holdings Inc, Japan’s biggest brokerage and investment bank, said on Tuesday it is targetting an up to 90% jump in pretax income in three years as it plans to beef up digital and advisory services.

Setting out guidance in a mid-term presentation, Nomura said it would target annual pretax income of between 350 billion yen and 390 billion yen ($2.7 billion and $3.0 billion) for its three core divisions in the year to end-March 2025.

That compared to 205.2 billion yen it posted for the year ended in March 2022.

Nomura also said it will create a new digital asset company later this year that will allow institutional investors to trade products linked to cryptocurrencies, stablecoins, decentralized finance and non-fungible tokens.

($1 = 128.9100 yen)

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Economy

Analysis-Alarmed by Solomon Islands-China pact, NZ finds its voice on security

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© Reuters. FILE PHOTO: A car with a New Zealand flag waits for New Zealand Prime Minister Jacinda Ardern outside the Great Hall of the People during her visit in Beijing, China, April 1, 2019. REUTERS/Jason Lee

By Lucy Craymer

WELLINGTON (Reuters) – New Zealand has long been seen as the moderate, even absent, voice on China in the “Five Eyes” western alliance, so much so that its commitment to the group was questioned just 12 months ago.

The recent signing of a security pact between China and nearby Solomon Islands appears to have changed that.

New Zealand’s tone on both security and Beijing’s growing presence in the South Pacific has toughened, a shift analysts say reflects concerns the agreement will give Beijing a strategic foothold and potentially a military presence in the Pacific that could destabilise Western influence.

“It’s a real challenge to New Zealand’s sense of where the Pacific is heading,” said Robert Ayson, Professor of Strategic Studies at Victoria University of Wellington.

Prime Minister Jacinda Ardern described the pact as “gravely concerning” and called on Solomon Islands to discuss it within the Pacific Islands Forum.

“What is really changing around us is the level of assertiveness and aggression we see in the region,” Ardern said later at a United States-New Zealand Business Summit.

New Zealand has previously often shied away from such criticisms, which analysts put down to the country’s heavy trade reliance and close economic relationship with China.

Both China and the Solomon Islands have said the new pact will not undermine peace in the region. Details of the final agreement have not been released but Chinese foreign ministry spokesman Wang Wenbin said the agreement called for China to help the Solomon Islands maintain social order and cope with natural disasters, and did not pose a risk to the United States.

SOFT POWER

But statements by Ardern and Foreign Minister Nanaia Mahuta were a clear signal they shared U.S. and Australian concerns about Chinese security engagement in the Pacific, said Anna Powles from the Centre for Defence and Security Studies at Massey University.

“It also sent a signal to the Pacific that New Zealand supported regional collective security initiatives, and to third parties, specifically China, that regional crises in the Pacific would be managed by the region,” she said.

While small and with limited military capabilities, New Zealand’s soft power in the Pacific is arguably stronger than its allies. It has a large Pacifika population and strong family, business, sporting and cultural ties along with territories in the region.

New Zealand sees itself as a Pacific country and wants stability and prosperity for its neighbours, and needs a free and open Indo-Pacific to protect trade and telecommunication connections.

David Vaeafe, programme manager at non-governmental organisation Pacific Cooperation Foundation, said the relationship with the Pacific was not all about money but about listening and understanding what the region needs.

“New Zealand’s foreign policy towards the Pacific is slowly evolving and engaging from being ‘you shouldn’t do this’ to consulting and being part of that process,” he said.

FIVE EYES CRITICISMS

A year ago, there were questions over Wellington’s commitment to the Five Eyes alliance with Australia, Britain, Canada and the United States, after Mahuta said Wellington was uncomfortable with expanding the role of the group.

There had been criticism after New Zealand opted not to sign joint statements from other Five Eyes members, including one on Hong Kong and another on the origins of COVID-19.

White House Indo-Pacific coordinator Kurt Campbell told a business summit earlier this month that New Zealand’s underestimation of security risks in the past appeared unlikely to be an issue.

“I think there is an understanding that the challenges that are presenting themselves on the global stage are not so distant – they’re closer and they have direct implications,” he said.

Already New Zealand and Japan have announced plans to increase security ties and other moves are afoot.

Mahuta visited Fiji at the end of March and signed an agreement that among things will facilitate information on shared security challenges.

At the start of the month, a partly New Zealand-backed tuna processing plant for the Solomon Islands that is set to create more than 5,500 jobs was announced.

The Ministry of Foreign Affairs and Trade has quietly shuffled more money into Pacific development cooperation budget for 2021-2024, according to changes made on its website. The fund has been increased since December by nearly NZ$120 million ($75 million) to $1.55 billion.

New Zealand’s budget on Thursday will likely give further detail on Pacific spending with New Zealand’s defence minister previously highlighting the region as a priority.

“New Zealand is quite strongly aligned to the United States and Australia,” VUW’s Ayson said. “That doesn’t mean we always see eye-to-eye and it doesn’t mean the we’re as closely aligned as Australia, but New Zealand’s security alliance is quite strong.”

($1 = 1.6038 New Zealand dollars)

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Economy

After delay, U.S. Senate edges toward passing $40 billion Ukraine war aid

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© Reuters. FILE PHOTO: Military aid, delivered as part of the United States’ security assistance to Ukraine, is unloaded from a plane at the Boryspil International Airport outside Kyiv, Ukraine February 13, 2022. REUTERS/Serhiy Takhmazov/File Photo

By Patricia Zengerle

WASHINGTON (Reuters) – The U.S. Senate voted on Monday to advance $40 billion more aid for Ukraine in its war against Russia, setting the stage for a vote on the bill possibly later this week, after the military and humanitarian assistance was delayed due to opposition from one Republican senator.

The tally was 81 to 11 on the first of a potential three procedural votes paving the way for final Senate passage of the funding, requested by President Joe Biden’s administration to keep aid flowing and boost the government in Kyiv nearly three months after the start of the Russian invasion.

All 11 “no” votes were from Republicans.

The House of Representatives approved the aid on May 10. But it stalled in the Senate after Republican Senator Rand Paul refused to allow a quick vote. Biden’s fellow Democrats narrowly control both the House and Senate, but Senate rules require unanimous consent to move quickly to a final vote on most legislation.

Paul said he wanted an inspector general to be appointed to oversee the funds, but declined an offer from Senate leaders to hold an amendment vote on his proposal. Changing the bill would force the House to vote on it again, causing further delay.

There is strong support from both parties for assisting Ukraine. The House passed the measure by 368 to 57, with substantial Republican support, despite all 57 of the “no” votes in the House coming from Republicans.

Mitch McConnell, the top Republican in the U.S. Senate, led a small delegation to Ukraine this weekend. He said on Sunday the Senate could approve the aid on Wednesday.

The Biden administration had said additional money for Ukraine must be approved by Thursday in order to avoid a lapse in U.S. assistance.

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