In hot job market, Fed still frets about low inflation

NEW YORK/SAN FRANCISCO (Reuters) – Despite a U.S. unemployment rate that has plumbed its lowest levels in nearly 50 years, Federal Reserve policymakers remain worried about excessively low inflation, a view that helps explain the central bank’s recent decision to put interest-rate hikes on hold.

Traditionally, economists have found that when labor markets run hot, eventually inflation will as well. A spate of new research from within and outside the Fed, however, has suggested that relationship may have weakened.

Speaking Friday at a University of Chicago Booth School of Business conference, New York Federal Reserve Bank President John Williams and San Francisco Fed President Mary Daly both said they still believe that tight labor markets do put upward pressure on inflation, and that with unemployment at 4 percent, the Fed must guard against prices surging.

But, they said, they are just as concerned about excessively low inflation.

“Inflation has been below our target for a long time,” Daly said. “Complacency can go both ways and it’s important to be vigilant on both sides of the target, not just on the upside but also on the downside.”

Williams cited his own analysis that showed low unemployment does in fact still exert upward pressure on prices and said he concurred that the Fed should be vigilant about a takeoff in inflation.

“We must be equally vigilant that inflation expectations do not get anchored at too low a level,” he said.

The concern about excessively low inflation is remarkable, given that the Fed was until recently raising interest rates to keep the economy from overheating as unemployment fell and businesses hired hundreds of thousands of new employees month after month.

But it is indicative of a Fed newly cautious about downside risks to the economy and increasingly convinced that globalization and new technologies have upended old inflation dynamics. This new wariness is in part behind the Fed’s January promise to be “patient” about further rate hikes, putting a three-year-old process of policy tightening on hold.

Indeed, Williams and Daly said Friday, inflation expectations are key to keeping inflation on track, and expectations are shaped in large part by experience.

That is why inflation’s recent track record of riding well below the Fed’s 2-percent target is concerning.

They made the remarks in response to a paper released on Friday that argued that the Fed should not ignore the possibility that low unemployment rates and rising wages could eventually spark higher inflation, as it did in the 1960s. The paper’s authors, including the global head of economic research at Deutsche Bank AG’s securities division, Peter Hooper, also warned that political pressures could make the Fed complacent about the danger of inflation.

U.S. President Donald Trump last year publicly chastised the Fed for raising rates and tightening monetary policy, describing it as an obstacle to his administration’s goal of boosting the economy.

A Fed economic report released Friday showed why concerns about weak inflation have suddenly taken such public root. After raising rates amid faster than expected growth through 2018, the Fed said a series of developing risks likely began slowing the economy late in the year and into 2019.

That included weakening consumer spending and business investment, risks from a global slowdown and trade tensions, “deteriorated” risk appetite among investors, and even a nick to gross domestic product from the partial government shutdown.

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Margins in focus as results drive big swings in European stocks

LONDON (Reuters) – Europe’s main share benchmarks rose marginally on Friday but company results including Sweden’s Elekta and France’s Sopra Steria drove big swings in stocks as investors awaited news from crucial U.S.-China trade talks.

The STOXX 600 and Germany’s DAX were up 0.2 and 0.3 percent respectively, with the main action at the share level.

Sopra Steria topped the STOXX 600, up 17.8 percent after the French IT services and consulting firm reported full-year results and said it was targeting an improvement in margins this year.

“This should help ease concerns of on-going pricing pressure as the worst seems to be behind us now following the profit warning in Q3 2018,” said Georgios Kertsos, an analyst at Berenberg.

Chipmaker ASM International jumped 11.9 percent after it said fourth-quarter order intake hit a record high of 301.6 million euros, well above its forecast.

Its strong results bucked a trend of weakness in a semiconductor sector hit by trade tariffs and slowing global car demand.

Swiss construction chemicals maker Sika also rose 4 percent after full-year profit beat expectations.

Elekta brought up the rear with a 13.5 percent slide after the Swedish radiation therapy equipment maker reported third-quarter earnings well below market expectations, and cut its full-year margin forecast.

Margin pressure has been a broader theme across European shares this earnings season, with the gap between revenue beats and earnings beats growing as companies face rising costs.

According to UBS strategists this gap has reached an eight-year high.

Elsewhere the food and beverage sector was the worst-performing, down 0.8 percent, after U.S.-based Kraft Heinz reported weak results.

AB Inbev fell 3.6 percent, Nestle lost 0.9 percent and Danone dipped 0.5 percent. Unilever also dropped 1.6 percent.

Kraft Heinz and AB InBev share a stakeholder: 3G Capital.

RBC analysts said that “given overlapping ownership between the two companies and similar cultures of margin maximization, we wouldn’t be surprised if investors make some connection.”

In other results, Saint Gobain shares fell 1.6 percent after the company reported a slump in annual net profit, blaming asset impairments amid uncertainty over the economy.

French meal vouchers firm Edenred jumped 5.3 percent after reporting record 2018 earnings and sounding a confident note about growth this year.

In the UK, M&A livened up trading. Dairy Crest shares surged 15.3 percent after Canada’s Saputo bought Britain’s largest dairy food company for about 975 million pounds ($1.3 billion).

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German biotech Centogene plans Nasdaq IPO: sources

FRANKFURT (Reuters) – German biotech company Centogene is considering a stock market flotation in New York this year as it seeks to raise funds to finance further expansion, people close to the matter said.

Centogene, which says it is the global leader in the field of rare disease diagnosis, is expected to file its initial public offering (IPO) plans with the Nasdaq stock exchange shortly, they said.

A deal could take place as early as the second or third quarter, they added.

Biotechnology firms often choose Nasdaq as a venue for an IPO as the large number of peers listed on that exchange means they are often able to secure higher valuations than they would get in their home country.

Centogene, headquartered in Rostock, is owned by investors such as DPE Deutsche Private Equity, Careventures, TVM Capital and CIC Capital. It has annual sales of 45 million euros and employs about 300 staff.

A company spokesman said Centogene continuously examines financing options, declining to specify.

DPE declined to comment, while the other investors had no immediate comment.

Centogene was founded in 2006 by neurologist Arndt Rolfs with a view to speeding up the diagnosis of rare diseases using worldwide clinical data. It received 25 million euros from investors in a July 2017 financing round.

The firm says it has built the world’s largest data repository for genetic information on rare hereditary diseases. It sells genetic testing products and helps pharma firms develop drugs with its big data solutions.

Centogene says it has a test portfolio covering 2,800 genes, biochemical tests, biomarkers and genome sequencing. It has grown by more than 40 percent annually over the last five years.

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No sign of terrorist background to Munich shooting which left 2 dead: Police

MUNICH (REUTERS) – There are no indications that a shooting in the southern German city of Munich which left two people dead had a terrorist background, a police spokesman said on Thursday (Feb 21). 

Spokesman Sven Mueller said the two dead people were both men and one of them had fired the shots. There are no indications that anyone else was hurt, Mueller added. 

“There is no danger for people there anymore,” Mueller said, adding that he had no other details for the time being.

Germany has been on high alert since December 2016, when a Tunisian asylum seeker with Islamist links hijacked a truck, killed the driver and then ploughed it into a crowded market place in Berlin, killing 11 more people and injuring dozens.

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Germany aims to reset ties with Vietnam after kidnapping case

BERLIN (Reuters) – German Foreign Minister Heiko Maas said on Wednesday he would use a meeting with his Vietnamese counterpart to discuss resetting ties between the two countries after past differences over the kidnapping of a Vietnamese businessman in Berlin.

Maas said Vietnam was a key partner for Germany in Southeast Asia, and lauded Hanoi for making important progress in opening its economy and enacting other reforms in recent years. Germany is Vietnam’s leading trading partner in Europe.

“In the past there were noticeable differences between Germany and Vietnam, above all over the kidnapping of the Vietnamese citizen Trinh Xuan Thanh in Berlin,” he said in a statement. “Today we want to reach agreement about resetting the strategic partnership between Vietnam and Germany and filling it with new substance.”

Ties between the two countries soured in 2017 after Germany accused Vietnam of breaching international law by kidnapping businessman Trinh Xuan Thanh, who had sought asylum in Germany, from a Berlin street and taking him back to Vietnam, where he was tried and jailed for life.

A German court in July sentenced a Vietnamese man to three years and 10 months in jail after he confessed to helping his country’s secret services kidnap Thanh.

In a statement issued before his meeting in Berlin with Vietnamese Foreign Minister Pham Binh Minh, Maas underscored the importance of human rights and common values in any strategic partnership. The two officials did not hold a news conference.

“Vietnam, like Germany, is committed to multilateralism and free trade. It has taken on increasing global responsibility and is engaged in climate protection,” Maas said. “These are all areas in which Germany and Vietnam can work together more closely in the future.”

Maas also said Germany supported a rapid agreement on a free trade agreement between the European Union and Vietnam.

The two countries began diplomatic relations in 1975 and elevated their ties to a strategic partnership in 2011.

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Germany: Decisions on arms exports to Saudi will depend on Yemen conflict

BERLIN (Reuters) – German Foreign Minister Heiko Maas said on Wednesday that future decisions on whether to deliver arms to Saudi Arabia will develop on how the conflict develops in Yemen.

“The German government’s position is that we are not delivering any weapons to Saudi Arabia at the moment and we will make future decisions depend on how the Yemen conflict develops and whether what has been agreed in the peace talks in Stockholm is being implemented,” Maas told a news conference.

Germany said last November it would reject future arms export licenses to Saudi Arabia over the killing of Saudi journalist Jamal Khashoggi. It has not formally banned previously approved deals but has urged industry to refrain from such shipments for now.

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Man loses gun license after being shot by own dog

BERLIN — A German court has ruled that a dog owner isn’t fit to carry a firearms license after his dog shot him with a rifle.

The Munich administrative court on Tuesday dismissed the man’s appeal against an earlier decision by Bavarian authorities to withdraw his license to own a rifle, as well as his hunting permit.

The decision followed a 2016 incident in which the man, a passionate hunter, was shot in the arm after his dog managed to release the trigger on a loaded rifle that was lying in his car.

The court ruled the hunter couldn’t be relied upon “because it must be assumed that he will handle firearms and ammunition carelessly in future as well.”

The man, whose name wasn’t released, can appeal the verdict.

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Sainsbury's, Swedbank sink while trade talk progress boosts European shares

LONDON (Reuters) – Encouraging signs from trade talks between the world’s two biggest economies helped boost European shares on Wednesday while the threat of a blocked merger deal sank Sainsbury’s shares.

Germany’s trade-sensitive DAX led the way with a 0.6 percent gain and the pan-European STOXX 600 rose 0.4 percent.

U.S. President Donald Trump said on Tuesday that trade talks with China were going well and suggested he was open to pushing off the deadline to complete negotiations, saying March 1 was not a “magical” date.

The autos sector, which has been very vulnerable to rising protectionism, jumped 1.7 percent and miners gained 1.1 percent.

The top gainers — Glanbia, Simcorp, and Fresenius — were boosted by well received results.

Fresenius shares jumped 5.9 percent after the German healthcare firm said it expects earnings to grow faster than sales from 2020 after investments dent profit this year.

The company’s separately-listed dialysis business Fresenius Medical Care gained 6.8 percent after announcing a 1 billion euro share buyback.

Irish nutrition company Glanbia jumped 9.5 percent after its fourth-quarter results, while Danish software company Simcorp also rose 7.4 percent after reporting.

British supermarket chain Sainsbury’s and Swedish lender Swedbank marred the positive picture overall.

Sainsbury’s shares sank 12.5 percent after Britain’s competition regulator said its merger with Asda should either be blocked or require significant concessions.

Swedbank shares fell 5.6 percent after a Swedish television programme said it had uncovered documents linking the lender to a money laundering scandal involving Denmark’s Danske Bank.

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Dollar falls on U.S.-China trade hopes, Swedish crown tumbles

NEW YORK (Reuters) – The dollar slipped against a basket of other currencies on Tuesday as traders scaled back their safe-haven greenback holdings on optimism that a fresh round of talks between China and the United States would help resolve their trade conflict.

The dollar index hit a near-two-month peak on Friday after last week’s negotiations in Beijing failed to result in a deal, although officials from both sides said the talks had produced progress on contentious issues.

Bloomberg TV reported on Monday that the White House is pushing for a pledge from China that it will not devalue its currency as a part of a trade deal.

“We are hoping to hear more positive news on trade,” said Dean Popplewell, chief currency strategist at Oanda in Toronto. “The dollar should come under pressure as it loses some safe-haven appeal.”

The dollar index, which tracks the greenback against six other major currencies, was down 0.42 percent at 96.5. On Friday, it hit 97.368, the highest since Dec. 17.

The yuan hit a two-week peak versus the greenback at 6.7425 in offshore trading.

U.S. financial markets were closed on Monday for the Presidents Day holiday.

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Among other major currencies, the Swedish crown tumbled after weak inflation data spurred sales of the currency and a paring of bets that interest rates would rise this year.

Last week, the crown rose after Sweden’s central bank said it would stick to its plan to raise rates in the second half of 2019.

The currency plunged more than 1 percent to a two-year low against the dollar at 9.4180, after a report showed inflation slowed in January.

Against the euro, it was headed for its biggest daily decline in more than 15 months. It touched 10.621, its weakest since September.

The euro appreciated against the dollar on trade optimism. It reversed earlier losses after data showed Italian industrial orders dropped 5.3 percent in December from a year earlier.

Euro zone bond yields, notably those of German bunds, fell amid the cloudy European economic outlook, weighing on the euro. When European Central Bank policymakers meet on March 7, they are expected to lower growth and inflation projections.

The euro was up 0.25 percent at $1.13410 , holding above a three-month low of $1.1234 set last week.

The single currency, however, fell against the British pound as data showed domestic workers’ salaries grew at the fastest pace in a decade in late 2018.

The euro was 0.83 percent lower at 86.80 pence, while the pound was up 1.13 percent at $1.307.

Sterling’s gains were limited ahead of British Prime Minister Theresa May’s meeting with the EU to find a way to get their Brexit deal through the UK Parliament.

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Fashion's 'creative genius' Karl Lagerfeld dies at 85

PARIS (Reuters) – Haute-couture designer Karl Lagerfeld, artistic director at Chanel and an icon of the fashion industry with his extravagant outfits and striking catwalks, has died aged 85.

Instantly recognizable in his dark suits, pony-tailed white hair and sunglasses, Lagerfeld was best known for his association with Chanel but delivered collections for LVMH’s Fendi and his own eponymous label.

Rumors of Lagerfeld’s ill-health had swirled after he failed to show up at Chanel’s January show in Paris for his customary bow.

Chanel chief executive Alain Wertheimer recalled how he had given carte blanche to Lagerfeld in the 1980s to reinvent the brand, from the Chanel jacket to its tweeds and two-tone shoes.

“Thanks to his creative genius, generosity and exceptional intuition, Karl Lagerfeld was ahead of his time, which widely contributed to the House of Chanel’s success throughout the world,” Wertheimer said in a statement.

A craftsman who combined artistic instinct, business acumen and commensurate ego, Lagerfeld was known for his strikingly visual fashion show displays.

LVMH chairman and chief executive Bernard Arnault said the fashion world had lost a creative genius who helped make Paris the fashion capital of the world, and Fendi one of the most innovative Italian houses.

“I will always remember his immense imagination, his ability to conceive new trends for every season, his inexhaustible energy, the virtuosity of his drawings, his carefully guarded independence, his encyclopedic culture and his unique wit and eloquence,” Arnault said.

Chanel said Virginie Viard, director of the house’s creative studio, would take over creative work for the brand’s collections. Several sources told Reuters the appointment was transitional and that Lagerfeld’s successor would be announced after the mourning period.

Born in Hamburg in 1933, Lagerfeld made his debut with designer Pierre Balmain as an apprentice before moving on to Patou and Chloe and then Fendi.

“He was one of the most influential and celebrated designers of the 21st century and an iconic, universal symbol of style,” his own Karl Lagerfeld brand wrote on Instagram.

“He leaves behind an extraordinary legacy as one of the greatest designers of our time.”

Fendi said it would go ahead as planned with a Milan fashion show of Lagerfeld’s latest line for the brand on Thursday.

“The House of Fendi is in deep mourning following the death of Karl Lagerfeld, who left his mark and genius with us for more than five decades,” it said.

“Now is not the time to discuss his succession. We intend to take the time to honor his life and pay him the tribute he deserves.”

“KAISER KARL”

It was after he joined French fashion house Chanel in 1983 that Lagerfeld gained rock-star status, credited with helping jazz up the label founded by Coco Chanel in 1910 and attracting younger clients.

He was known for staging lavish shows, building Chanel catwalks amid replicas of a supermarket, casino and even an airport terminal.

On Jan. 22, Chanel hosted guests in a mocked-up Mediterranean garden for its haute-couture show. In a collection inspired by Lagerfeld’s favorite period, the 18th century, feathers adorned new twists on the brand’s classic tweed suits, which came with ankle length or fishtail skirts.

Tributes poured in from around the world for the man affectionately nicknamed “Kaiser Karl” and “Fashion Meister”.

Britain’s Victoria Beckham wrote on Instagram: “So incredibly sad to hear this. Karl was a genius and always so kind and generous to me both personally and professionally.”

Italian fashion designer Donatella Versace, sister of the late Gianni Versace, wrote: “Karl your genius touched the lives of so many, especially Gianni and I. We will never forget your incredible talent and endless inspiration. We were always learning from you.”

Italian designer Giorgio Armani described Lagerfeld as “an extraordinary man, both for his professional talent and his life, which he blended and turned into a unique art: the Lagerfeld way of being”.

Actress Keira Knightley, who starred in the campaign for Chanel’s Coco Mademoiselle perfume, described him as “a legend both as a man and a creative force”.

French celebrity online magazine Purepeople said Lagerfeld died on Tuesday after being taken to hospital in Neuilly-sur-Seine outside Paris the night before.

“He has inspired generations and, above all, he gave us the possibility to dream, with his capability to embrace the present and invent the future,” Carlo Capasa, chairman of Italy’s national fashion association CNMI, said.

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