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Financial Markets Underestimate Geopolitical And Fiscal Risks, ECB Warns
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- The European Central Bank warned investors underestimate risks from the Middle East conflict and rising government debts.
- The ECB said market moves to the Middle East conflict reflect complacency, leaving financial asset prices vulnerable to sharp repricing.
- Rising U.S. and Japanese government bond yields, plus increased hedge fund activity, could pressure eurozone bond prices.
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BOJ Governor Sees Oil Price Surge as Test of Inflationary Mettle
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- Bank of Japan Gov. Kazuo Ueda stated the current energy shock could rewrite Japan’s inflation outlook, but its impact is complex.
- Gov. Ueda explained oil price increases have varied effects depending on wages, expectations, demand, and exchange rates.
- The Bank of Japan’s policy board is worried about recent crude price increases, fueling market expectations for a June rate hike.
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New Zealand’s Central Bank Narrowly Votes to Hold Rates, Signals Hikes Are Coming
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- New Zealand’s central bank kept its official cash rate at 2.25% for the third meeting, narrowly deciding to assess Middle East conflict effects.
- The decision was not unanimous, with three external members voting to raise the cash rate by 25 basis points.
- New Zealand’s first-quarter consumer inflation rose 3.1% from a year earlier, exceeding the central bank’s target.
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Australia Rate Increases Stay in Play Despite Easing Inflation
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- Australia’s consumer-price growth slowed to 4.2% in April from 4.6% in March, but remained high enough for potential rate increases.
- The slowdown followed a temporary federal fuel tax cut, which caused transport costs to fall 2.7% month-over-month.
- Trimmed mean annual inflation rose to 3.4% in April, indicating underlying price pressures and increasing the risk of another rate hike.
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China’s Industrial Profits Rise, Defying Economic Headwinds
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- China’s industrial firms reported a 24.7% year-over-year profit increase in April, driven by rising energy prices and resilient tech demand.
- Profits in the chemical industry surged 73.4% and nonferrous metals jumped 117.8% in the January-April period.
- Despite strong headline figures, consumer-oriented industries saw profits slump due to weak domestic demand and broader economic slowdown.
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French Consumer Confidence Hits Three-Year Low
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- French consumer confidence fell to 82 points in May from 84 in April, reaching its lowest level since March 2023.
- The statistics agency said households’ views on their personal financial situation and intentions for major purchases deteriorated.
- Uncertainty and rising energy prices from the war in Iran, along with an elusive U.S.-Iran deal, dented sentiment.
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