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- Hamas official urges US to pressure Israel to end Gaza war

- France faces 'consequential' vote as far-right rout prompts Macron gamble

- Putin to visit North Korea, Vietnam in coming weeks, Vedomosti newspaper says

- Economy, migration, war top voters' concerns in EU election - survey

- Iraq's Mosul springs back to life 10 years after it fell to ISIS

- Blinken set to travel to Egypt, Israel for Gaza ceasefire push

- New Zealand PM says China Premier Li Qiang to visit this week

- South Korea, US to hold new round of nuclear planning talks in Seoul

- Australia PM condemns graffiti attack on US consulate in Sydney

- North Korea leader's sister warns of new response against South Korean loudspeakers, leaflets

- Italy's PM Meloni comes out on top in EU vote, strengthening her hand

- Benny Gantz, man in the middle squeezed out by Israel's Netanyahu

- Macron calls shock French elections after far-right rout

- Israel's centrist minister Benny Gantz quits Netanyahu government

- Far-right advances in EU election, France calls snap national vote

Hamas official urges US to pressure Israel to end Gaza war | Reuters

CAIRO, June 10 (Reuters) - A senior Hamas official urged the United States on Monday to pressure Israel to end the war in Gaza, ahead of the planned visit on Monday by U.S. Secretary of State Antony Blinken to the region to push forward ceasefire efforts.

Blinken is set to visit Egypt and Israel on Monday. He also aims to ensure the war does not expand into Lebanon.

"We call upon the U.S. administration to put pressure on the occupation to stop the war on Gaza and the Hamas movement is ready to deal positively with any initiative that secures an end to the war," senior Hamas official Sami Abu Zuhri said.

In his eighth visit to the region since Hamas militants attacked Israel on Oct. 7, triggering the bloodiest episode in the decades-long Israeli-Palestinian conflict, Blinken is also set to travel to Jordan and Qatar this week.

He is set to meet with Egyptian President Abdel Fattah al-Sisi in Cairo before traveling to Israel later on Monday, where he will meet with Prime Minister Benjamin Netanyahu and Defence Minister Yoav Gallant, according to a State Department schedule.

On Monday, Palestinian residents said tanks had been trying to thrust deeper towards the north in the early hours of Monday, edging Shaboura, one of the most densely populated and militant stronghold neighborhoods at the heart of the city.

Israeli tank forces have since seized Gaza's entire border strip with Egypt running through Rafah to the Mediterranean coast and invaded many districts of the city of 280,000 residents, prompting around one million displaced people who had been sheltering in Rafah to flee elsewhere.

Blinken's visit comes after U.S. President Joe Biden on May 31 outlined a three-phase ceasefire proposal from Israel that envisions a permanent end to hostilities, the release of Israeli hostages and Palestinian prisoners, and the reconstruction of Gaza.

The Hamas attack killed 1,200 people and took some 250 others hostage, according to Israeli tallies. In response, Israel launched an assault on the Gaza Strip that has killed more than 37,000 Palestinians, the health ministry in the Hamas-run territory said in its Sunday update.

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Reporting by Nidal Al-Mughrabi Editing by Bernadette Baum and Angus MacSwan

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A senior correspondent with nearly 25 years’ experience covering the Palestinian-Israeli conflict including several wars and the signing of the first historic peace accord between the two sides.

- Macron calls early election after far-right surge in EU vote

- Finance minister predicts historic impact of French election

- Possible hung parliament, risk to Macron's domestic agenda

- Euro and French stocks fall after far-right gains at EU level

PARIS, June 10 (Reuters) - Political parties and

business leaders

alike tried to figure out what a possible far-right win could mean for France following President Emmanuel Macron's decision to call a snap election after a

bruising loss

in a E

uropean Parliament

ballot.

Macron's shock decision offers the

far right a shot at real political power

. Amounting to a roll of the dice on his political future, it immediately

sent the euro down

and hit French stocks and government bonds.

A source close to Macron said the 46-year-old leader, whose power has been diminished since he lost his absolute majority in parliament two years ago, calculated that there was a chance he could win back a majority by taking everyone by surprise.

But if Marine Le Pen's National Rally (RN) does take over, the source said, the gamble is that the next three years would demonstrate their incompetence to voters and undermine their bid for the presidency in 2027.

But that is not without risk, that source said.

"I knew this option was on the table, but when it becomes reality it's something else," they said. "I didn't sleep last night."

Voting will take place in two rounds on June 30 and July 7 for 577 lawmakers. The next government will take over in July.

For Le Pen, the challenge is transform her rising popularity into a win at home too. The vote is likely to revolve around discontent with Macron's style of power, cost of living and immigration policies, but also about whether the RN can be trusted to run a major European government.

"Everything points to the RN winning a relative or absolute majority," Emmanuel Pellerin, a lawmaker from Macron's Renaissance party, told Reuters. "But that forces the French to think about what is at stake."

Even if the eurosceptic, anti-immigration RN did score a majority, Macron would remain president for three more years and still be in charge of defence and foreign policy.

But he would lose the power to set the domestic agenda, ranging from economic policy to security and immigration to finances, which would in turn impact other policies, such as aid to Ukraine, as he would need parliament's backing to finance any support as part of France's budget.

LEAKED POLL

The early election will also come shortly before the July 26 start of

the Paris Olympics

, when all eyes will be on France.

"This will be the most consequential parliamentary election for France and for the French in the history of the Fifth Republic," Finance Minister Bruno Le Maire told RTL radio, referring to Charles de Gaulle's 1958 constitution, considered the starting point of modern French politics.

Among policies put forward by the party, the RN has proposed higher public spending, despite already significant levels of French debt, threatening to further raise funding costs at banks.

It also wants to expel more migrants, stop family reunification, restrict childcare benefits to French citizens, give French nationals preference in access to social housing and jobs and withdraw residency for migrants that are out of work for more than a year.

The euro fell 0.5% in early European trade, while Paris blue-chip stocks dropped by as much as 1.9% at the opening, led by steep losses in banks BNP Paribas

(BNPP.PA), opens new tab

and Societe Generale

(SOGN.PA), opens new tab

.

Motorway operators Eiffage

(FOUG.PA), opens new tab

and Vinci

(SGEF.PA), opens new tab

also traded around 5% lower. The RN has proposed to nationalise French motorways to reduce road tolls by 15%.

The result is likely to depend on how committed leftist and centre-right voters are to the idea of blocking the far-right from power.

An unofficial poll from December showed the RN on track to double or triple its score and possibly obtaining a majority.

Parties on the left and right were on Monday organising meetings and talking with each other to field candidates and discuss possible alliances.

HUNG PARLIAMENT?

Eurasia Group said the RN was no shoo-in for a majority, predicting a hung parliament as the most likely scenario.

"We foresee a losing struggle for serious domestic reform or strict deficit reduction in the remaining three years of Macron's term," it said.

Helmed by 28-year-old Jordan Bardella, the RN won nearly 32% of Sunday's European Parliament vote, over double the Macron ticket's 14.6%. The Socialists came within a whisker of Macron with nearly 14%.

Another source close to Macron said the president hoped to mobilise voters who abstained from voting on Sunday.

Some RN leaders appeared to have been caught off-guard.

"We didn't think it would be immediately after the European elections," RN deputy chairman Sebastien Chenu said on RTL Radio. Bardella will be the party's candidate for prime minister, he added.

Macron's Renaissance party currently has 169 lower house lawmakers out of a total of 577. The RN has 88.

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Reporting by Gabriel Stargardter, Tassilo Hummel, Blandine Henault, Benoit Van Overstraeten, Michel Rose, Dominique Patton, writing by Ingrid Melander and Gabriel Stargardter; Editing by Bernadette Baum, Angus MacSwan and Mark Heinrich

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Tassilo is a trained lawyer who first joined Reuters in Berlin, then re-joined in Paris. He covers French politics and business, EU institutions and NATO.

MOSCOW/HANOI, June 10 (Reuters) - Russian President Vladimir Putin will visit North Korea and Vietnam in the coming weeks, Russia's Vedomosti newspaper reported on Monday, with an official telling Reuters the Vietnam visit was planned for June 19-20 but has not yet been confirmed.

Putin's visit to Pyongyang is being "actively prepared", Russian Ambassador to North Korea Alexander Matsegora confirmed to the newspaper.

The newspaper reported that Putin could visit Vietnam as early as June and most likely immediately after his visit to North Korea.

An official in Vietnam told Reuters the dates of the Hanoi visit had been agreed, but the agenda was still under discussion. Energy, military cooperation, settlement of payments and an agreement in the education field are among the main issues expected to be discussed, the official said.

Vedomosti quoted Russia's trade representative in Vietnam as saying last month that the most pressing trade issue between the two countries was banking support for settling payments.

Vietnam's foreign ministry did not reply to a request for comment.

NORTH KOREA TIES

North Korean leader Kim Jong Un visited Russia last September for talks with Putin. He toured Russia's Vostochny Cosmodrome space launch centre in Russia's Far East and Putin promised to help North Korea build satellites.

The Kremlin has said Russia wants to build a partnership with North Korea "in all areas" but has not confirmed the date of the visit.

Russia has stepped up ties with North Korea and other countries hostile to the United States such as Iran since the start of the war with Ukraine - relations that are a source of concern to the West.

The United States and Ukraine in January accused Russia of firing North Korean-supplied short-range ballistic missiles at Ukraine, something Russia declined to confirm or deny.

Vedomosti said Putin and Kim may discuss whether Russia will bring in migrant workers from North Korea. Russia is suffering acute labour shortages because of the Ukraine war; many hundreds of thousands of men have either gone to fight or fled abroad to avoid being mobilised.

Putin's only previous trip to North Korea was in 2000, the first year of his presidency.

(This story has been refiled to add the missing word 'been' in paragraph 1)

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Reporting by Reuters; Francesco Guarascio in Hanoi; writing by Mark Trevelyan; editing by Gerry Doyle and Jason Neely

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Economy, migration, war top voters' concerns in EU election - survey | Reuters

BRUSSELS, June 10 (Reuters) - The economy, migration and international conflicts were the top concerns for voters in the European Union election, data from the bloc's biggest member countries suggested on Monday.

Provisional results in the European Parliament election on Sunday night showed gains for nationalist and euro-sceptic parties that campaigned on tickets including clamp-downs on migration, citizens' economic woes and scrapping green policies.

"Improving the economy and reducing inflation" ranked highest among citizens asked what was the most important thing influencing their vote, in a survey by polling platform Focaldata, shared with Reuters.

"International conflict and war" was the second most important concern, followed by "immigration and asylum seekers", in the poll of 6,000 citizens in the EU's five biggest countries by population - Germany, France, Italy, Spain and Poland - plus Sweden.

The survey was done on June 6th, the day voting began in the EU Parliament election.

Respondents placed "acting on climate change" fifth on the list of issues influencing their vote, behind "reducing inequality", which ranked fourth.

Climate change was ranked highest by respondents who said they planned to vote for Green parties. Europe's Green parties were among the biggest losers in the EU election, with initial results suggesting they would lose 18 seats to end up with 53 EU lawmakers.

But even among respondents planning to vote for the parties in the EU Parliament's far-right Identity and Democracy group, which has opposed EU green measures, 58% said climate change was "very important" or "somewhat important" to them in deciding how to vote.

In France, Italy and Poland, voters said economic concerns were the main thing influencing their vote, with immigration in second place in France, and war, the number two concern in Italy and Spain.

German respondents ranked "immigration and asylum seekers" as their top concern, followed by wars, and then economic concerns.

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Reporting by Kate Abnett; Editing by Shinjini Ganguli

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Kate Abnett covers EU climate and energy policy in Brussels, reporting on Europe’s green transition and how climate change is affecting people and ecosystems across the EU. Other areas of coverage include international climate diplomacy. Before joining Reuters, Kate covered emissions and energy markets for Argus Media in London. She is part of the teams whose reporting on Europe’s energy crisis won two Reuters journalist of the year awards in 2022.

Iraq's Mosul springs back to life 10 years after it fell to ISIS | Reuters

Item 1 of 8 People walk past stores as rebuilding work continues in Mosul, Iraq June 9, 2024, 10 years after Islamic State militants seized control of the city and ruled for three years before being ousted by Iraqi forces and their allies. REUTERS/Khalid Al-Mousily

[1/8]People walk past stores as rebuilding work continues in Mosul, Iraq June 9, 2024, 10 years after Islamic State militants seized control of the city and ruled for three years before being ousted by Iraqi forces and their allies. REUTERS/Khalid Al-Mousily Purchase Licensing Rights, opens new tab

- Under ISIS, city was rife with abductions, executions, crime

- Minorities were killed, music banned, ancient sites destroyed

- Now residents say city is at its most peaceful in 20 years

- Mosul has new bridges, souk, restaurants, cultural life

- But long way to go before Mosul sheds ISIS legacy

MOSUL, Iraq, June 10 (Reuters) - It was the simple night-time act of watering flowers on his street in Mosul's Old City that made Saqr Zakaria stop and think about just how safe this last bastion of Islamic State militants had become since it was

liberated in 2017

.

"I thought for a second, 'where am I?'" said Zakaria, who left the city in 2005 but returned to set up a cultural centre, the Baytna Foundation, in 2018 at a time when

thousands of bodies

were still being cleared from the ruins.

The jihadist group declared its caliphate at the Grand al-Nuri Mosque just down the road after taking Mosul a decade ago, imposing an extreme form of Islam that saw them kill members of minority groups, ban music and destroy archaeological sites.

The maze of alleyways in this part of the city on the west bank of the Tigris River became a site of regular killings, kidnappings and crime with the rise of Islamist insurgents after the 2003 US.-led invasion.

Much of it was pulverized, and thousands of civilians were killed, in the battle to free it.

But despite political infighting,

allegations of corruption and delayed reconstruction

, life is returning on both sides of the river.

Many of the more than two dozen people who spoke to a Reuters reporter on a four-night visit to the city said they felt more secure today than at any time in the last two decades.

"Life consisted of eating and sleeping and locking your door so you're not kidnapped or killed or blown up. We were deprived, and today we are making that up," said Zakaria. His foundation, housed in a traditional Moslawi home with an inner courtyard, has become a leading attraction for local and foreign visitors, including French President Emmanuel Macron in 2021.

Shortly after he spoke, an elderly man walked into the courtyard and shed tears at the sight of pictures, hung on a wall, of the city's intellectual and cultural elite that harkened back to better days.

"This is Mosul," said Nizar Al-Khayat, a former school director in his 70s, his voice wavering. "No matter what, it remains a cultured, civilized city."

Local officials and residents say there is a long way to go before Mosul sheds the legacy of ISIS.

Rubble is still being cleared seven years after the city was liberated. Pockmarked buildings with collapsed floors and exposed rebar can still be seen around Mosul. The Old City is in ruins.

But bridges have gone up. New restaurants have opened where patrons tuck into Lebanese cuisine and sway their heads to the nostalgic sound of Syrian tenors.

A souk and curbside cafes by the river buzz with life late into the night, formerly unthinkable in a city where people locked themselves in their homes by late afternoon.

Even as the city works to restore basic infrastructure, it is focused on expanding green areas and touristic attractions like a new riverside corniche, said Firas al-Sultan, a technical adviser to Mosul municipality.

Monuments to the city's rich inter-faith history, like the Grand Nuri Mosque and the Al-Tahera Church

visited by Pope Francis in 2021

, are being rebuilt.

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Reporting by Timour Azhari and Khalid Al-Mousily in Mosul, Editing by William Maclean

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Blinken arrives in Egypt as US pushes for Gaza ceasefire | Reuters

Item 1 of 3 U.S. Secretary of State Antony Blinken arrives at Cairo airport, Egypt, Monday, June 10, 2024. Amr Nabil/Pool via REUTERS

[1/3]U.S. Secretary of State Antony Blinken arrives at Cairo airport, Egypt, Monday, June 10, 2024. Amr Nabil/Pool via REUTERS Purchase Licensing Rights, opens new tab

CAIRO, June 10 (Reuters) - U.S. Secretary of State Antony Blinken landed in Egypt on Monday at a critical time as Washington seeks to increase pressure on Hamas and Israel to reach a ceasefire in Gaza and ensure

the war

does not expand into Lebanon.

Blinken met with Egyptian President Abdel Fattah al-Sisi in Cairo and is scheduled to travel to Israel later on Monday, where he will meet with Prime Minister Benjamin Netanyahu and Defense Minister Yoav Gallant.

In his eighth visit to the region since Hamas militants attacked Israel on Oct. 7, triggering the bloodiest episode in the decades-long Israeli-Palestinian conflict, the top U.S. diplomat is also set to travel to Jordan and Qatar this week.

The visit comes after U.S. President Joe Biden on May 31 outlined a

three-phase ceasefire proposal

from Israel that envisions a permanent end to hostilities, the release of Israeli hostages and Palestinian prisoners, and the reconstruction of Gaza.

The Hamas attack killed 1,200 people and took some 250 others hostage, according to Israeli tallies. In response, Israel launched an assault on the Gaza Strip that has killed more than 37,000 Palestinians, the health ministry in the Hamas-run territory said in its Sunday update, and reduced the enclave to a wasteland.

Israeli forces rescued

four hostages

held by Hamas since October in a raid in Gaza on Saturday, during which 274 Palestinians were killed, according to Gaza's health ministry.

Blinken's trip comes after Israeli minister Benny Gantz

announced his resignation

from Prime Minister Benjamin Netanyahu's emergency government on Sunday, withdrawing the only centrist power in the embattled leader's otherwise far-right coalition during the war in Gaza.

Blinken is expected to meet with Gantz on Tuesday, a senior State Department official said.

The departure of Gantz's centrist party will not pose an immediate threat to the government. But it could have a serious impact nonetheless, leaving Netanyahu reliant on hardliners, with no end in sight to the war and a possible escalation in fighting with Lebanese Hezbollah.

Blinken has previously met with Gantz in visits to Israel.

The conflict between Israel and Lebanon's Hezbollah is

dangerously poised

after more than eight months of fighting triggered by the Gaza war, with hostilities escalating and both sides signaling a readiness for a bigger confrontation.

Blinken during this week's trip will discuss with partners the need to reach a ceasefire agreement that secures the release of all hostages, as well as the need to prevent the conflict from escalating further, State Department spokesperson Matthew Miller said in a statement on Friday.

He will emphasize the importance of Hamas accepting the proposal on the table, Miller added.

Ceasefire talks have intensified since Biden's speech and CIA director

William Burns

met senior officials from mediators Qatar and Egypt on Wednesday in Doha to discuss the plan.

Biden has repeatedly declared that ceasefires were close over the past several months, but there has been only one, week-long truce, in November.

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Reporting by Daphne Psaledakis in Cairo and Humeyra Pamuk in Washington; Editing by Bill Berkrot, Lincoln Feast and Chizu Nomiyama

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Daphne Psaledakis is a foreign policy correspondent based in Washington, D.C., where she covers U.S. sanctions, Africa and the State Department. She has covered the rollout of U.S. sanctions on Russia after Moscow’s invasion of Ukraine, Washington’s efforts to enforce its sanctions and the U.S. response to the conflict in Ethiopia, among other issues. She previously covered European Union politics and energy and climate policy for Reuters in Brussels as part of an Overseas Press Club Foundation fellowship in 2019. Daphne holds a Bachelor of Journalism in Print and Digital News and a Bachelor of Arts in International Studies.

New Zealand PM says China Premier Li Qiang to visit this week | Reuters

WELLINGTON, June 10 (Reuters) - New Zealand Prime Minister Christopher Luxon said on Monday that China's Premier Li Qiang would visit the country this week, in the first trip to the nation in seven years by a Chinese premier.

Luxon said in a statement that he looked forward to warmly welcoming Premier Li in New Zealand and that the visit would be a valuable opportunity for exchanges on areas of cooperation between the two countries.

“The challenging global outlook makes it vital that we are sharing perspectives and engaging China on key issues that matter to New Zealand,” Luxon said.

This is the second high-profile visit from a high-ranking Chinese official to New Zealand this year, with China’s Foreign Minister Wang Yi visiting in late March.

New Zealand has long been seen as a moderate or absent voice on China in the Five Eyes intelligence-sharing alliance, which includes the United States, but in recent years

has spoken up

about what it considers to be concerning actions by China.

During Yi’s March visit, ministers

discussed

trade, business and security in the Pacific, as well as "areas of difference" including human rights and the situation in Xinjiang, Hong Kong and Tibet, according to a statement after the visit.

China is New Zealand's top trading partner. Statistics New Zealand reported two-way goods and services trade was nearly NZ$38 billion ($23.2 billion) in the year that ended in March 2024.

Luxon said on Monday that he is confident that trade with China would continue to grow, supporting the government’s goal to double the value of exports in the next decade.

The government has not yet released dates for Li’s visit.

Luxon also said he would travel to Japan with a business delegation from June 16-20.

($1 = 1.6383 New Zealand dollars)

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Reporting by Lucy Craymer; Editing by Sonali Paul and Gerry Doyle

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South Korea, US work on joint strategy over North nuclear threat | Reuters

SEOUL, June 10 (Reuters) - Senior South Korean and U.S. defence officials met in Seoul on Monday to work on new guidelines to coordinate their response to any nuclear threat from North Korea, officials said.

The guidelines laid out the principles and procedures for maintaining and enhancing a "credible and effective" nuclear deterrence policy and posture, according to a joint statement from the allies' third closed-doors talks on the issue.

The Nuclear Consultative Group meeting came amid signs North Korea is racing to develop its nuclear arms and

delivery systems

.

Some South Korean

politicians

, including senior members of President Yoon Suk Yeol's party, have called for Seoul to develop its own nuclear weapons rather than just rely on the U.S. nuclear umbrella, a step Washington opposes.

Monday's meeting followed up on last year's

summit

, when the United States promised to give South Korea more insight into its nuclear planning for any conflict with the North.

Vipin Narang, acting U.S. assistant secretary of defence for space policy who co-chaired the talks, said the guidelines set up an architecture for how the allies integrate conventional and nuclear capabilities which will be ultimately provided to each country's leadership in a crisis.

"The guidelines cover the principles and procedures for consultations, particularly in a DPRK nuclear crisis and inform alliance operational concepts and exercises," Narang told a news conference, using the acronym of North Korea's official name, the Democratic People's Republic of Korea.

Cho Chang-rae, South Korea's deputy defence minister for policy, said high-level officials from both countries will hold a simulated tabletop exercise before regular summertime drills, with a focus on the possibility of North Korea using a nuclear weapon.

The two Koreas are still technically at war after their 1950-53 conflict ended in an armistice, not a peace treaty.

In late May, North Korea's attempt to launch a military reconnaissance satellite

failed

after a newly developed rocket engine exploded in flight.

Seoul and Washington condemned the launch as a violation of U.N. Security Council sanctions banning Pyongyang's use of ballistic technology.

After their second meeting in December, both sides

warned

that any nuclear attack by North Korea against the United States or its allies will be met with a "swift, overwhelming and decisive response" and result in the end of Kim Jong Un's regime.

Their next meeting will be held in Washington near the end of the year, the joint statement said.

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Reporting by Hyonhee Shin; Editing by Gerry Doyle and Andrew Heavens

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Australia PM condemns graffiti attack on US consulate in Sydney | Reuters

SYDNEY, June 10 (Reuters) - Australian Prime Minster Anthony Albanese on Monday condemned vandalism of the U.S. consulate in Sydney after the building was defaced in what local media said appeared to be a pro-Palestinian protest.

The building in the northern suburbs of Australia's largest city was attacked and sprayed with paint by a person carrying a small sledgehammer at around 3 a.m. local time on Monday.

"I would just say that people should have respectful political debate and discourse," Albanese said in a televised media conference from Canberra when asked about the incident.

"Measures such as painting the U.S. Consulate do nothing to advance the cause of those who have committed what is of course a crime to damage property," he added.

Nine windows of the consulate were damaged and the building's door was graffitied, police said.

"CCTV has been sourced that shows a person wearing a dark coloured hoodie with their face obscured carrying what appears to be a small sledgehammer," a police spokesperson told Reuters by phone.

Australian Prime Minister Anthony Albanese gives an address to the Leadersâ€™ Plenary during the 2024 ASEAN-Australia Special Summit at the Melbourne Convention and Exhibition Centre in Melbourne, Australia, March 6, 2024. JOEL CARRETT/Pool via REUTERS/File Photo Purchase LicensingÂ Rights, opens new tab

A spokesperson for the U.S. consulate confirmed the building had been damaged but said staff and operations were unaffected.

"Australian Federal Police and New South Wales Police are investigating the incident," the spokesperson said in a statement.

Photos of the consulate on the website of the Sydney Morning Herald newspaper showed inverted red triangles sprayed on the building's front. The symbol is used by some pro-Palestinian activists, it reported.

The same building was sprayed with graffiti in April, while the U.S. consulate in Melbourne was graffitied by pro-Palestine activists in May, according to the newspaper.

Long a stalwart ally of Israel, Australia has become

increasingly critical

of its conduct in Gaza, where an Australian aid worker was killed in an Israeli attack earlier this year.

Last month,

camps sprang up

at universities in Sydney, Melbourne, Canberra and other Australian cities protesting Israel's war in Gaza and claiming the Australian government has not done enough to push for peace.

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North Korea leader's sister warns of new response against South Korean loudspeakers, leaflets | Reuters

SEOUL, June 10 (Reuters) - The influential sister of North Korean leader Kim Jong Un warned of a new response against South Korea if the South continued with loudspeaker broadcasts and allowing leaflet balloon flights amid simmering tensions.

"If the ROK simultaneously carries out the leaflet scattering and loudspeaker broadcasting provocation over the border, it will undoubtedly witness the new counteraction of the DPRK," Kim Yo Jong said in a statement late on Sunday carried by state news agency KCNA, using the official names of South and North Korea.

South Korea resumed

loudspeaker broadcasts

directed at North Korea on Sunday, its military said, following through on a warning that it would do so if Pyongyang kept sending balloons carrying trash into the South.

Signs that North Korea was installing its own loudspeakers have been detected, the Joint Chiefs of Staff said, adding that South Korea does not plan to operate its loudspeakers on Monday.

North Korea on Saturday launched about 330 balloons with trash attached; about 80 of them landed over the border, South Korea's military said. On Monday South Korea said a further 310 balloons had been launched, with about 50 landing in the South.

"This is a prelude to a very dangerous situation," said Kim, a vice department director in the ruling Workers' Party, referring to the South's loudspeaker broadcasts.

Kim said North Korea had sent 1,400 balloons over the border from the night of June 8 to the dawn of June 9.

Pyongyang started sending balloons carrying trash and fertilizer, including possible manure, across the border in May, calling it

retaliation

for anti-North leaflets flown by South Korean activists as part of a propaganda campaign.

"Seoul does not want military tension at the inter-Korean border, and Pyongyang does not want outside information threatening the legitimacy of the Kim regime," said Leif-Eric Easley, a professor at Ewha University in Seoul. "For both sides, ‘escalating to deescalate’ is a risky proposition."

The U.S.-led United Nations Command (UNC), which oversees the armistice that established the Demilitarized Zone between the two Koreas as fighting ended in the 1950-1953 Korean War, has said it is conducting an investigation into the balloons, including the reports of possible decal matter and other waste products.

Item 1 of 3 South Korean soldiers walk past a military facility (Green box) where loudspeakers dismantled in 2018 used to be, near the demilitarized zone separating the two Koreas in Paju, South Korea, June 10, 2024. REUTERS/Kim Hong-Ji

[1/3]South Korean soldiers walk past a military facility (Green box) where loudspeakers dismantled in 2018 used to be, near the demilitarized zone separating the two Koreas in Paju, South Korea, June 10, 2024. REUTERS/Kim Hong-Ji Purchase Licensing Rights, opens new tab

"We’d hope that everyone would come to the table to resolve their issues," said U.S. Army Colonel Isaac Taylor, a spokesman for UNC.

South Korea's broadcasts include world news and information about democratic and capitalist society, with a mix of popular K-pop music. The sound is believed to travel more than 20 kilometres (12.4 miles) into North Korea, though some analysts say their actual reach is much less.

Steve Tharp, a retired U.S. Army officer who spent years working along the DMZ, said loudspeaker broadcasts from both sides sounded day and night when he deployed as infantry in the 1980s.

"The loudspeakers carry farther at night," he noted. "First couple nights were eerie, then it became the background noise of your life after a while."

Later, as a public affairs officer in 2015, Tharp said he helped review messages being broadcast by the South Koreans, who are part of a combined command with U.S. troops.

North Korea has in some cases fired weapons at the balloons and speakers.

South Korea stopped the broadcasts under an agreement signed by the two Korea's leaders in 2018 but tensions have increased since then as Pyongyang pushed ahead with weapons development.

North Korean troops have been seen clearing trees and building fences within the DMZ in recent weeks.

Taylor said that UNC does not assess that the intent of the work is to enable a "disparate" military buildup in the border zone, which would be a violation of the armistice.

He noted that since North Korea's recent declaration that unification with the South is no longer a goal, it has pursued measures to "harden" its boundaries.

(This story has been refiled to remove an extraneous word from the headline)

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Reporting by Ju-min Park; Additional reporting by Hyunsu Yim; Editing by Will Dunham and Gerry Doyle

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Item 1 of 2 Italy's Prime Minister Giorgia Meloni speaks following the announcement of the partial results of the European Parliament elections, in Rome, Italy, June 10, 2024 REUTERS/Alberto Lingria

[1/2]Italy's Prime Minister Giorgia Meloni speaks following the announcement of the partial results of the European Parliament elections, in Rome, Italy, June 10, 2024 REUTERS/Alberto Lingria Purchase Licensing Rights, opens new tab

ROME, June 10 (Reuters) - Prime Minister Giorgia Meloni's arch-conservative Brothers of Italy group won the most votes in the

European parliamentary election

over the weekend, boosting her standing both at home and abroad.

With almost all ballots counted, Brothers of Italy won 28.8%of the vote, more than four times what it took in the last European Union election in 2019, and exceeding the 26% it secured in the 2022 national ballot, when it rose to power.

"I am proud that Italy will present itself to the G7, to Europe with the strongest government of all. This is something that has not happened in the past but is happening today, it is a satisfaction and also a great responsibility," Meloni said early on Monday from the party's headquarters.

The opposition centre-left Democratic Party came in second with 24% of the vote, while another opposition group, the 5-Star Movement, was third with 9.9% - its worst showing at a countrywide level since its creation in 2009.

The EU ballot indicated that Meloni's ruling coalition, made up of parties that stretch from the centre-right to the far right of the political spectrum, saw its support climb to more than 47% from just under 43% in 2022.

"The results weren't at all given, it is a resounding achievement and shows that all the parties of the majority have been able to grow together," Meloni said later in the morning on RTL 102.5 Radio.

"It's a spur for (the government) to move forward. Italians are giving us a loud and clear message to go ahead with our work ... and if possible with greater determination."

Forza Italia

, founded by the late Silvio Berlusconi, was in fourth place with 9.7% of the vote, surpassing the anti-immigrant

League

, which had 9.1%, a disappointment for leader Matteo Salvini, who has pushed his party hard right, antagonising its old guard.

Underscoring tensions in the League, party founder Umberto Bossi voted for Forza Italia this time around, his allies told Italian media this weekend, sending a jolt through the group.

MELONI STRENGTH

Meloni's

party traces its roots back to a neo-fascist group, and her 2022 victory set the tone for

far-right gains

across Europe, including in the latest EU ballot, which has seen the continent swing right.

However, Meloni has moderated her image on the international stage, dropping her previous anti-EU rhetoric and presenting herself as a bridge between the mainstream centre-right and her own national conservative camp, which was previously shunned.

Her strong showing on Sunday came in stark contrast to setbacks suffered by French President

Emmanuel Macron

and German Chancellor

Olaf Scholz

, whose parties were routed.

Speaking on radio, Meloni said, however, it was still too early to say whether she would back a second term for centre-right

European Commission President

Ursula von der Leyen.

Her group of lawmakers might prove decisive should Meloni decide to back von der Leyen, potentially giving Rome leverage over the new EU executive.

"What we need is a Europe that will listen to citizens, that will look more to the centre-right and has more pragmatic and less ideological policies," Meloni said, adding that, given the results, Italy would necessarily have a fundamental role.

Sunday also represented a big success for Meloni's main opponent - Elly Schlein, who took charge of the centre-left PD party in 2023 and had struggled to impose her will on the old guard. The PD won 19% of the vote in 2022 and Schlein was anxious to improve on that.

The hard left Green and Left Alliance won around 6.7%, meaning that its candidate,

Ilaria Salis

, an Italian activist detained in Hungary for more than a year for allegedly assaulting far-right militants, is now an EU lawmaker.

The one disappointment for all parties was the turnout, which was just below 50%, initial data suggested, a record low in a country that has had historically strong voter participation.

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Reporting by Angelo Amante and Crispian Balmer; additional reporting by Giulia Segreti Editing by Keith Weir, Bernadette Baum and Shinjini Ganguli

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Benny Gantz, man in the middle squeezed out by Israel's Netanyahu | Reuters

JERUSALEM, June 9 (Reuters) - In the traumatic aftermath of the

Oct. 7 attacks

on Israel, as hundreds of thousands of Israeli reservists rushed to join the ranks to fight Hamas, Benny Gantz said he felt it was his duty to join the war effort.

"This is not a political partnership I am in," the centrist former general told a group of reporters, shortly after agreeing to join Prime Minister Benjamin Netanyahu in an emergency wartime government of unity. Instead, it was "destiny".

"Hamas started the war but Israel will win it. There is no doubt about it. We will win this war," he said.

Now, eight months in, the early confidence of those remarks made as Israel was starting to get back on its feet following the shock of Oct 7, appears to have ebbed.

Having tangled repeatedly with the prime minister and the hardline nationalist religious parties in his coalition, Gantz

has quit

, three weeks after laying down a deadline for Netanyahu to come up with a clear postwar strategy for Gaza.

His departure will remove one of the few in Israel's government who still appeared to enjoy the confidence of a U.S. administration whose frustration with Netanyahu has become ever more evident as the war has gone on.

Even before the deadline, he had appeared increasingly unhappy with the government, quarrelling over issues ranging from the army leadership to opening a path towards a

two state solution

with the Palestinians. In April he called for

new elections

to be held in September, only to see the call rejected.

The commanding lead over Netanyahu he and the centrist party he leads once held in the opinion polls has

shrunk

, and, with the ruling coalition's parliamentary majority still solid, his political future is unclear.

Item 1 of 2 Israeli Minister Benny Gantz addresses the media after his ultimatum to withdraw his centrist party from Israeli Prime Minister Benjamin Netanyahu’s emergency government expired, in Ramat Gan, Israel June 9, 2024. REUTERS/Nir Elias

[1/2]Israeli Minister Benny Gantz addresses the media after his ultimatum to withdraw his centrist party from Israeli Prime Minister Benjamin Netanyahu’s emergency government expired, in Ramat Gan, Israel June 9, 2024. REUTERS/Nir Elias Purchase Licensing Rights, opens new tab

A former paratrooper who grew up on a kibbutz and commanded the elite Shaldag commando unit, Gantz, the son of a Holocaust survivor, spent most of his career in the military. As army chief of staff in 2012, he oversaw an eight day-operation in the Gaza Strip that began with the killing of the chief of Hamas' military wing in Gaza.

He served as defence minister in the previous government and for months, his hawkish military credentials allied to his opposition to Netanyahu's divisive campaign to trim the powers of the judiciary last year, made him seem like the natural choice to lead a future government.

He has also been notably more open to the idea of a

political settlement

with the Palestinians than either Netanyahu or his right-wing allies like Finance Minister Bezalel Smotrich or National Security Minister Itamar Ben-Gvir, for whom a Palestinian state is an anathema.

Gantz, while mistrusting many Palestinian leaders, always seemed more willing to accept that Israelis and Palestinians eventually had to learn to live in the same region. "No one is going anywhere," he said.

With relations between Washington and Israel at their lowest point in years over the conduct of the war and the mounting casualty toll in Gaza, Gantz, along with Defence Minister Yoav Gallant, appeared to be one of the few in government trusted by U.S. President Joe Biden's administration.

Earlier this year, he visited Washington,

infuriating

allies of Netanyahu, who has so far not received an invitation to the White House. But his political instincts have been no match for Netanyahu, one of Israel's wiliest operators, who rode out the rebuff from Biden and is due to

address

both houses of Congress next month.

Many on the left thought Gantz and his centrist partners should have left the government sooner. Others, like Einav Tsengaukar, the mother of one of the Israeli hostages left in Gaza, who begged him to stay and try to agree to a deal to get the hostages home, wanted him to remain. But in the end, his departure appeared inevitable.

Aviv Bushinski, a former communications adviser to Netanyahu, said in the end, Gantz's own attempt to pressure Netanyahu had only succeeded in paving the way for his own exit.

"Benny Gantz cornered himself because he cannot retreat, he cannot back off from the ultimatum."

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Reporting by James Mackenzie, Editing by William Maclean

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- French President Macron calls snap parliament vote

- Move follows defeat to far-right RN in Europe election

- Macron risks losing control of domestic agenda

- RN's Le Pen has eye set on 2027 presidential vote

PARIS, June 9 (Reuters) - French President Emmanuel Macron rolled the dice on his political future on Sunday, calling snap legislative elections for later this month after he was trounced in the

European Union vote

by Marine Le Pen's far-right party.

Macron's shock decision set off a political earthquake in France, offering the

far-right a shot at real political power

after years on the sidelines and threatening to neuter his presidency three years before it ends.

If Le Pen's National Rally (RN) party wins a parliamentary majority, Macron would be left with little sway over domestic affairs.

Macron said the EU result was grim for his government, and one he could not ignore. In an address to the nation, less than two months before Paris hosts the Olympics, he said lower house elections would be called for June 30, with a second-round vote on July 7.

"This is an essential time for clarification," Macron said. "I have heard your message, your concerns and I will not leave them unanswered ... France needs a clear majority to act in serenity and harmony."

After Macron's announcement, a few hundred anti-far-right protesters gathered at Paris' Place de la Republique, waving flags for green and leftist groups and chanting against the RN.

Led by telegenic 28-year-old Jordan Bardella, the RN won about 32% of the vote in Sunday's vote, more than double the Macron ticket's 15%, according to exit polls. The Socialists came within a whisker of Macron, with 14%.

Le Pen, widely seen as the frontrunner for the 2027 election in which Macron is unable to stand, welcomed his decision.

"We are ready to take over power if the French give us their trust in the upcoming national elections," she said at a rally.

Macron's Renaissance party currently has 169 lower house lawmakers, out of a total of 577. The RN has 88.

If the RN wins a majority, Macron would still direct defence and foreign policy, but would lose the power to set the domestic agenda, from economic policy to security.

"Emmanuel Macron is a poker player, we've seen that tonight," said Green Party lawmaker Sandrine Rousseau.

UNCOMFORTABLE 'COHABITATION'

Teneo, a consultancy, said "Macron has called an election he might lose."

It said his ultimate "goal might be to bring an RN victory forward in time to expose the party's lack of experience in government and make them confront politically painful decisions ahead of the 2027 presidential election."

Olivier Blanchard, a former International Monetary Fund official who is now at the Massachusetts Institute of Technology, said Macron had made the best of a weak hand.

"Either the incoherence of the RN program becomes clear during the campaign and it loses the election. Or the RN wins, gets to govern and quickly makes a mess of it," he wrote on X.

Macron's gambit has echoes of Spanish Prime Minister Pedro Sanchez's move to call a snap national election last year after the far right thrashed his party in local government polls.

Sanchez managed to retain power but only after months of wrangling with regional parties and a controversial deal to offer an amnesty to Catalan separatists.

France has known so-called "cohabitation" periods before, when the president is from a different political party than the parliamentary majority. In such cases, the majority party's prime minister becomes France's top domestic decision-maker.

In the last such period, from 1997-2002, President Jacques Chirac played second fiddle to Socialist Prime Minister Lionel Jospin.

The euro

slipped

to its lowest level in around a month in early trading in Asia, reflecting the uncertainty.

Macron's decision underlined what was a grim night for centrist parties across Europe, with Eurosceptic nationalists

making the biggest gains

in the European Parliament vote.

SUCCESSION BATTLE HEATS UP

Le Pen's strong electoral showing, notching a 10-point increase on her 2019 EU result, is likely to lure conservative rebels to the RN, a party with a clear sense of momentum.

On Sunday night, Le Pen's niece Marion Marechal, a political ally of Eric Zemmour and his far-right Reconquete party, said she was prepared to meet with her aunt to explore a pact.

"A right-wing coalition to me seems more necessary than ever," Marechal said.

Le Pen's ascent is also likely to turbocharge the centrist succession battle to replace Macron.

Several big names - including Interior Minister Gerald Darmanin, former Prime Minister Edouard Philippe, the current one, Gabriel Attal, and Finance Minister Bruno Le Maire - are all eager to take the top job, political sources say.

"We'll have to do some soul-searching and explain to the French why we haven't been able to listen to them enough," Darmanin said in comments prior to Macon's announcement.

Sunday's results also saw the resurgence of the French centre-left, with Socialist candidate Raphael

Glucksmann

, a pro-Ukraine moderate, who won some 14%. His strong showing will embolden the Socialists, who had faced electoral oblivion after Macron's 2017 election win.

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Reporting by Tassilo Hummel and Michel Rose, Writing by Gabriel Stargardter, Editing by William Maclean and Keith Weir

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Tassilo is a trained lawyer who first joined Reuters in Berlin, then re-joined in Paris. He covers French politics and business, EU institutions and NATO.

Israel's centrist minister Benny Gantz quits Netanyahu government | Reuters

JERUSALEM, June 9 (Reuters) - Israeli minister Benny Gantz announced his resignation from Prime Minister Benjamin Netanyahu's emergency government on Sunday, withdrawing the only centrist power in the embattled leader's far-right coalition amid a months-long war in Gaza.

The departure of Gantz's centrist party will not pose an immediate threat to the government. But it could have a serious impact nonetheless, leaving Netanyahu reliant on hardliners, with no end in sight to the Gaza war and a

possible escalation

in fighting with Lebanese Hezbollah.

Last month, Gantz presented Netanyahu with a

June 8 deadline

to come up with a clear day-after strategy for Gaza, where Israel has been pressing a devastating

military offensive

against the ruling Palestinian militant group Hamas.

Netanyahu brushed off the ultimatum soon after it was given.

On Sunday, Gantz said politics was clouding fateful strategic decisions in Netanyahu's cabinet. Quitting while hostages were still in Gaza and soldiers fighting there was a excruciating decision, he said.

"Netanyahu is preventing us from advancing toward true victory," Gantz said in a televised news conference. "That is why we are leaving the emergency government today, with a heavy heart but with full confidence."

Netanyahu responded in a social media post, telling Gantz it was no time to abandon the battlefront.

With Gantz gone, Netanyahu would lose the backing of a centrist bloc that has helped broaden support for the government in Israel and abroad, at a time of increasing diplomatic and domestic pressure eight months into the Gaza war.

While his coalition remains

in control

of 64 of parliament's 120 seats, Netanyahu will now have to rely more heavily on the political backing of ultra-nationalist parties, whose leaders angered Washington even before the war and who have since called for a complete Israeli occupation of Gaza.

Ramat Gan, Israel June 9, 2024. REUTERS/Nir Elias Purchase Licensing Rights, opens new tab

This would likely increase strains already apparent in relations with the United States and intensify public pressure at home, with the months-long military campaign still not achieving its stated goals - the destruction of Hamas and the return of more than 100 remaining hostages held in Gaza.

Polls have shown Gantz, a former army commander and defence minister, to be the most formidable political rival to Netanyahu, whose image as a security hawk was shattered by the Oct. 7 attack by Hamas on Israel.

Warning that the conflict in Gaza could take years, he urged Netanyahu to agree on an election date in the autumn, to avoid further political infighting at a time of national emergency.

Gantz joined a unity government soon after Oct. 7 as part of Netanyahu's inner war cabinet where he, Netanyahu and Defence Minister Yoav Gallant alone had votes.

On Sunday, Gantz described Gallant, who has sparred with Netanyahu and some ultra-nationalists ministers, as a brave leader and called on him 'to do the right thing,' though he did not elaborate on what that meant.

Far-right National Security Minister Itamar Ben-Gvir demanded Gantz's now vacant seat at the war cabinet soon after the resignation was announced.

Finance Minister Bezalel Smotrich said in a statement Gantz was giving Israel's enemies what they want.

Asked whether he was worried about his departure impacting Israel's standing abroad, Gantz said Gallant and Netanyahu both know "what should be done."

"Hopefully they will stick to what should be done and then it will be okay," he said.

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Reporting by Maayan Lubell; editing by James Mackenzie, William Maclean

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- Far-right parties perform strongly in Europe vote

- France's President Macron calls national poll after defeat

- EU chief von der Leyen pledges "bastion against extremes"

BRUSSELS, June 9 (Reuters) - Gains by the far-right in voting for the European Parliament on Sunday prompted a bruised French President Emmanuel Macron to call a

snap national election

and added uncertainty to Europe's future political direction.

While the centre, liberal and Socialist parties were set to retain a majority in the 720-seat parliament, the vote dealt a domestic blow to the leaders of both France and Germany, raising questions about how the European Union's major powers can drive policy in the bloc.

Making a risky gamble to try to reestablish his authority, Macron

called a parliamentary election

, with the first round on June 30.

Like Macron, German Chancellor Olaf Scholz also

endured a painful night

where his Social Democrats scored their worst result ever, suffering at the hands of the mainstream conservatives and hard right Alternative for Germany (AfD).

Meanwhile, Italian Prime Minister

Giorgia Meloni saw her position strengthened by her

arch-conservative Brothers of Italy group winning the most votes, exit polls showed.

A

rightwards shift

inside the European Parliament may make it tougher to pass new

legislation that might be needed

to respond to security challenges, the impact of climate change or industrial competition from China and the United States.

However, exactly how much clout the euro-sceptic nationalist parties will wield will depend on their ability to overcome their differences and work together. They are

currently split

between two different families, and some parties and lawmakers for now lie outside these groupings.

Reuters Graphics

Reuters Graphics Reuters Graphics

"ANCHOR OF STABILITY"

The centre-right European People's Party (EPP) will be the biggest political family in the new legislature, gaining five seats to field 189 deputies, a centralised exit poll showed.

In Poland,

Prime Minister Donald Tusk's

centrist Civic Coalition, a member of the EPP, was set to win the European vote.

In Spain as well

, the centre-right People's Party, also part of the EPP, came out on top, outperforming Socialist Prime Minister Pedro Sanchez.

Such results were good news for EPP member Ursula von der Leyen who

seeks a second five-year term

at the helm of the powerful EU executive arm.

And she was quick to present herself as a shield against extremes.

"No majority can be formed without the EPP and together ... We will build a bastion against the extremes from the left and from the right," she told supporters at the EPP's election night event in Brussels.

Item 1 of 32 French President Emmanuel Macron appears on a screen as he delivers a speech following results after the polls closed in the European Parliament elections, in Paris, France, June 9, 2024. REUTERS/Christian Hartmann

[1/32]French President Emmanuel Macron appears on a screen as he delivers a speech following results after the polls closed in the European Parliament elections, in Paris, France, June 9, 2024. REUTERS/Christian Hartmann Purchase Licensing Rights, opens new tab

She added, later in the evening: "But it is also true that extremes and on the left and the right have gained support and this is why the result comes with great responsibility for the parties in the centre."

Von der Leyen may still need support from some right-wing nationalists, such as

Meloni's

Brothers of Italy to secure a parliamentary majority, giving Meloni and her European Conservative and Reformists (ECR) allies more leverage - which could upset other potential allies.

VOTERS' WORRIES

The centre-left Socialists and Democrats are poised to be the second biggest political family, even as they lost four lawmakers to end up with 135, the exit poll showed.

Political observers attribute the shift to the right to the rise in the cost of living, concerns about migration and the cost of the green transition as well as the war in Ukraine -- worries that nationalist and populist parties have seized on.

"I think a lot of people felt that Europe is doing things not with people, but just doing it on top of people," Greens' lead candidate Bas Eickhout told Reuters in an interview, asked why the far right was doing so well.

"And I think here we need to come up with a credible answer, otherwise, we're only getting further to the far right," he said, after the Greens and liberals lost ground in the election.

Eurosceptic nationalist groups ECR and Identity and Democracy (ID) and hard-right lawmakers not yet affiliated to an

EU political family

from Germany's AfD secured together 146 seats, a gain of 19, the centralised exit poll showed.

The exit poll projected that pro-European centre-right, centre-left, liberal and Green parties will retain a majority of 460 seats, but one which is slimmed down compared to their 488 in the outgoing chamber of 705 deputies.

Europe's Green parties in particular suffered heavy losses, subsiding to 53 deputies from 71 in the outgoing parliament.

The

European Parliament co-decides

with the intergovernmental European Council on laws governing the 27-nation bloc of 450 million people.

The exit poll gave the ECR three more deputies than in the last parliament for a total of 72 and the far-right ID group nine more seats for a total of 58.

The number of non-affiliated deputies who may choose to join other groups, including the euro-sceptics, jumped by 33 to 95, the exit poll said.

In Austria, the count of votes cast in polling stations on Sunday plus a projection for postal ballots confirmed the far-right Freedom Party won but by a smaller margin than had been forecast, national broadcaster ORF said.

In the Netherlands, estimates based on most of the votes counted confirmed exit polls that showed a Labour/GreenLeft combination was set to have won eight seats, slightly ahead of the anti-immigration party of Geert Wilders' six seats.

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Reporting by Philip Blenkinsop, Kate Abnett, Jan Strupczewski, Sudip Kar-Gupta in Brussels, Belen Carreno, Graham Keeley in Madrid, Gus Trompiz, Manuel Ausloos, Michel Rose, Tassilo Hummel in Paris, Francois Murphy in Vienna, Sarah Marsh and Thomas Escritt in Berlin, Stephanie Van den Berg in The Netherlands; Writing by Jan Strupczewski and Ingrid Melander; Editing by Alexander Smith and Keith Weir

Our Standards: The Thomson Reuters Trust Principles., opens new tab

Jan is the Deputy Bureau Chief for France and Benelux, running the Reuters office in Brussels. He has been covering European Union policy, focusing on economics, since 2005 after a five year assignment in Stockholm where he covered tech and telecoms stocks, the central bank and general news. Jan joined Reuters in 1993 in Warsaw from the main Polish TV news programme "Wiadomosci", where he was a reporter and anchor for the morning news edition. Jan won the Reuters Journalist of the Year award in 2007 in the Scoop of the Year category, a second time in 2010 for his coverage of the euro zone sovereign debt crisis and for the third time in 2011, this time as part of the Brussels team, for the Story of the Year. A Polish national, Jan graduated from Warsaw University with a Master’s in English literature. He is a keen sailor, photographer and bushcraft enthusiast.

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LONDON, June 10 (Reuters Breakingviews) - If all countries obeyed international rules, there would be little need for regional blocs. The United Nations Charter would ensure strong states did not bully, let alone invade, weaker ones. The World Trade Organisation would underpin fair play in international commerce.

But since this is not how the world works, smaller countries need to come together to protect themselves. This is even more pressing now that Russia has invaded Ukraine, and both China and the United States are undermining the global free trade system. If Donald Trump returns to the White House, relying on a rules-based international order will look even more quaint.

This is the geopolitical backdrop that the European Union, whose parliament has just held elections, is facing as it chooses its leaders for the next five years. The elections have strengthened nationalist parties and weakened French President Emmanuel Macron, the most vocal pro-European leader, so much that he has called national parliamentary elections.

That said, the traditional centre-right and centre-left parties have held their ground, so the EU's 27 member states may still be able to create a stronger union. If they are serious about doing so, they will consider picking Mario Draghi, who helped save the euro as president of the European Central Bank, to chair their discussions.

The official once known as “Super Mario” believes the EU must adapt to the new reality. In a

speech, opens new tab

in April he called for “radical change”, saying the EU’s “organisation, decision-making and financing are designed for ‘the world of yesterday’”. Draghi is putting the finishing touches to a soon-to-be-published report on how to boost the bloc’s competitiveness. This could almost serve as a personal manifesto for a top EU role, though the Italian

said, opens new tab

in 2022 that he does not want another big position.

Reuters Graphics

The EU has two particularly senior jobs. Traditionally the most powerful is president of the European Commission, the bloc’s executive arm. Ursula von der Leyen, the current incumbent, is favourite to continue in that role, as she was also the lead candidate for centre-right European People’s Party which is expected to hold the most seats in the new

parliament

.

The other top post is president of the European Council, the decision-making body for the EU’s 27 national leaders. This could be unusually influential in the coming years. While Draghi has the credentials for either position, the latter one probably suits him best.

BLOC BUILIDNG

Although the EU calls itself a union, it is far from united. It is too fragmented and doesn’t have sufficient pooled financial resources. This is partly because national governments have kept much of the power to themselves. Every state can pursue its own foreign and defence policy. EU governments have often taken different approaches, as during the U.S. invasion of Iraq in 2003.

Although the EU came together in response to Russia’s invasion of Ukraine, it has been slow to ramp up its defence industry and has sometimes

squabbled

over what to do. Moscow could still prevail – a

scenario

that would shake the EU to its core.

Even the union’s single market, where a form of supermajority voting by member states has helped to break down national barriers, is far from perfect. It does not include three key industries: capital markets, energy and electronic communications.

What is more, the EU budget requires the unanimous approval of the 27 national governments. This helps explain why the budget of

160-180 billion euros, opens new tab

a year is equivalent to just 1% of the EU’s economic output.

The EU will need more collective financial firepower if it is going to reinforce its position. Its defence industry will need to be larger and more integrated, while the bloc will also need funds to help rebuild a war-ravished Ukraine. It will require a

targeted industrial policy

to compete with both China and the United States, whose subsidies to high-tech and green industries threaten to marginalise EU-based businesses.

WHY DRAGHI?

This is where Draghi could come in. He offers a unique package of experience and talents, which could enable him to coax the 27 states into agreeing to take a leap forward together.

Draghi’s record at the ECB gives him financial and economic credibility. Saving the euro was a technical feat and a brilliant communication job when he pledged to do “whatever it takes” to rescue the single currency. But it also required deft behind-the-scenes networking, principally with Germany’s then Chancellor Angela Merkel, to ensure that the euro zone’s largest economy did not torpedo the plan.

Draghi is a skilled pragmatist, who uses his expertise across multiple areas to find solutions to complex problems. Although he is not a conventional politician, he is acutely alive to what is politically possible.

As Italian prime minister, Draghi played a

central role, opens new tab

in the decision by developed countries to freeze Russian assets at the start of the Ukraine crisis. He believes in a strong EU as part of a strong Western alliance. In other words, he is much more than an economist.

Draghi could, in theory, push his agenda to create a more unified bloc from either the European Council or the European Commission. But since the central task is to get national leaders to agree, the former role may better suit the 76-year-old.

None of this means national leaders will choose him, though. They typically give the top jobs to members of one of the EU’s main political groupings. If centre-right von der Leyen becomes president of the Commission, there will be strong pressure to put a centre-left politician such as Danish Prime Minister Mette Frederiksen or former Portuguese premier Antonio Costa in charge of the Council. Draghi’s lack of electoral credentials – ordinary voters have never chosen him for any position – could count against him, but might also help him appeal to leaders across the political spectrum.

The EU’s 27 prime ministers and presidents may ultimately reject Draghi because they do not want to centralise more power. If they pick Super Mario, however, it would be a good indication they are prepared to do whatever it takes to create a stronger EU.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Peter Thal Larsen and Streisand Neto

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Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Suburban sprawl gives insurers the blues | Reuters

NEW YORK, June 7 (Reuters Breakingviews) - Insurance losses from natural disasters are rising: last year they topped $100 billion globally for the fourth year in a row. While climate change means damage from hurricanes and wildfires are increasing, the bigger risk is thunderstorms and tornadoes. They are whipping through the suburban sprawl that has happened rapidly in sunbelt cities like Dallas-Fort Worth.

If lots of warm, wet air rises from the earth, thunderstorms and strong winds start to grow, and, if conditions are right, hail and tornadoes, too. A large series of such storms over the Memorial Day weekend hit suburbs of Dallas-Fort Worth.

These weather fronts

aren’t becoming, opens new tab

significantly more frequent or stronger, and yet losses still grew 11.5% annually over the last 20 years, according to insurance broker Gallagher Re. Severe convective storms, as they are called, caused $70 billion of insured losses last year according to consulting firm Aon. That’s 59% of all losses from natural disasters and over three quarter of these storms occurred in the United States.

Reuters Graphics

The rapidly-expanding suburbs of second-tier U.S. cities bear much of the blame. The Dallas-Fort Worth metropolitan area is the country’s fourth biggest with over 8 million people, and it’s adding more people than any other according to the

U.S. Census Bureau, opens new tab

. The hottest growth is occurring in exurbs like Kaufman county, as the Dallas-Fort Worth region sprawls over some 9,300 square miles. Kaufman was declared a disaster area recently.

The Texas city and other rapidly expanding areas like Austin and Denver are at much higher risk for these storms. Dallas, for example, is in what’s known as Tornado Alley. Severe thunderstorms, hurricanes and hail are notorious for localized damage. As metropolises spread out, there’s a lot more land covered with valuable houses. A city where development moves from 30 miles out to 35 miles out will see its area expand over 1,000 square miles. This sprawl, combined with rising construction costs, an increased stock of housing assets, and higher incomes account for over 80% of the uptick in losses from these storms according to Aon.

U.S. property and casualty insurers continued a string of underwriting losses last year, chalking up some $21 billion according to

AM Best, opens new tab

. Exurbs are often known for their affordability. Like

hurricane

-stricken regions, though, suburban dwellers will see insurance premiums rise fast in coming years.

CONTEXT NEWS

Over 268,000 homes and businesses in Texas, Louisiana and Arkansas were without power in the evening on May 30 after severe thunderstorms and tornadoes hit the states over Memorial Day Weekend. The number peaked at close to 1 million on May 28.

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Editing by Lauren Silva Laughlin and Pranav Kiran

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Spanish bank M&A lies in lap of interest-rate gods | Reuters

LONDON, June 7 (Reuters Breakingviews) - The fate of a 12 billion euro Spanish deal may be decided in Frankfurt. Not by European Central Bank regulators, who generally

favour

consolidation, but by its ratesetters. Sharp changes to monetary policy could make or break the investment case for Banco de Sabadell

(SABE.MC), opens new tab

– and therefore its M&A defence against Banco Bilbao Vizcaya Argentaria

(BBVA.MC), opens new tab

.

Sabadell’s board rejected BBVA Chair Carlos Torres Vila’s late-April approach. In response, the 55 billion euro bidder went hostile with its all-share bid in early May. Among the deal’s obstacles is an antitrust review, which the Spanish government could in theory co-opt to make life hard for Torres and BBVA. Economy minister Carlos Cuerpo has

criticised, opens new tab

the takeover, citing threats to financial inclusion and small regional businesses’ access to finance. Torres reckons the political heat will die down.

Those factors will only matter, however, if Sabadell investors plan on tendering their shares when BBVA launches its offer in late 2024 or early 2025. The situation looks finely balanced. Torres’s all-share

bid, opens new tab

initially implied a premium of 30% over Sabadell’s April 29 price, but that has roughly halved after a slide in BBVA’s stock.

Arguably, the true premium is even smaller: other mid-sized Spanish banks are up 7% on average since Torres’s approach. Assume Sabadell would have done the same absent a deal, and the implication is that the current offer is just 9% above Sabadell’s fair value. That’s before factoring in analysts’ recent earnings-forecast upgrades. It’s hard to judge whether such a slim upside will be enough to get 50.01% of the shares – Torres’s minimum acceptance threshold.

Reuters Graphics

Euro zone monetary policy could swing things one way or another. Spain-focused Sabadell is more exposed to the bloc’s lending rates than BBVA, which has a big Mexican business. Higher-for-longer ECB rates, which boost interest income, therefore help Sabadell’s M&A defence.

Markets started 2024 expecting an end-year policy rate of around 2.3%, using derivatives prices collated by LSEG, but this has since risen to 3.3%. That helped fuel Sabadell’s roughly 50% share-price rally in the year to April 29, far outstripping BBVA’s near-30% rise. A further hawkish ECB turn, perhaps in response to sticky inflation, would boost Sabadell’s standalone prospects even further, probably killing BBVA’s offer.

The opposite is also true. If the ECB accelerates the pace of the rate-cutting it commenced on Thursday, Sabadell’s 12% return on equity target will seem less achievable. Its standalone fair value would fall relative to BBVA’s, boosting the implied premium on offer from the all-share bid. Sabadell has tried to lock in the boost from higher rates by reinvesting floating-rate hedges into fixed-rate ones, but that only smooths the hit from looser monetary policy.

The ECB isn’t the only external party with the ability to influence things. Any anti-bank measures by the new Mexican government, for example, would also hurt BBVA and strengthen its target’s resistance. In any case, the upshot is that battles within Spain could easily become a sideshow to the wider financial fight over Sabadell.

Reuters Graphics Reuters Graphics

CONTEXT NEWS

Spanish bank BBVA's shareholders will vote on July 5 on whether to approve a share issue to fund its hostile takeover bid for smaller rival Banco de Sabadell.

Banco Bilbao Vizcaya Argentaria on May 9 said it was taking its all-share merger offer directly to Sabadell’s shareholders, after the smaller Spanish bank’s board rejected the approach on May 6.

The terms are the same as the ones that BBVA proposed to Sabadell’s directors: one new BBVA share for every 4.83 Sabadell shares, implying a value of 2.26 euros per share using undisturbed April 29 prices, or 12.3 billion euros ($13.3 billion).

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Editing by George Hay and Streisand Neto

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Japan has ways to avoid a sovereign debt crunch | Reuters

LONDON, June 7 (Reuters Breakingviews) - As interest rates rise, investors are once again fretting about the sustainability of government debt across the developed world. Attention naturally turns to the country with the highest debt load relative to economic output and the heaviest debt-service burden. Some bond investors liken Japan’s national accounts to a Stephen King

horror story, opens new tab

. However, appearances are deceptive. Though Japan needs to rein in its fiscal deficit, its debt looks far less perilous than some of its peers.

Financial crises, sluggish growth and the pandemic have pushed up government debt for many wealthy countries. At more than 250% of GDP, Japan’s gross debt stands out. Combined with sluggish growth and a shrinking population, many financiers and economists see it as an existential risk.

Yet economists at the Federal Reserve Bank of St. Louis

point out, opens new tab

that this ratio provides little insight into debt sustainability. It is important to look at the public sector’s balance sheet in its entirety. The Japanese state is asset-rich. Many of its liabilities are held by state institutions. The Bank of Japan

(8301.T), opens new tab

owns domestic government bonds equivalent to around 100% of GDP. It also owns around 7% of Tokyo-listed stocks, as well as many foreign securities.

This means Japan’s consolidated net liabilities in late 2022 amounted to 119% of GDP, according to the St. Louis Fed, less than half the gross figure. On this basis, Japan has the same level of indebtedness as the United States.

Reuters Graphics

Debt servicing costs are another potential cause for concern. If a government spends a large chunk of its revenue paying interest, the bill can quickly spiral. In its presentation of the 2024 budget, Japan’s Ministry of Finance (MoF) reports “national debt service” costs at 27 trillion yen, or a hefty 21% of total central government expenditure.

Yet this figure is misleading. According to Alex Kinmont of Milestone Asset Management, a separate disclosure by the MoF shows that around two-thirds of this national debt service goes towards so-called sinking funds, which set aside money for future repayments, and mandatory redemptions. The true cost, Kinmont claims, is closer to 10 trillion yen, or 10% of the budget. That’s somewhat below the U.S. government’s current expenses.

Other factors also make Japan unusual. In recent years the BoJ has engaged in a massive and highly profitable carry trade. The central bank has acquired high-yielding domestic stocks and foreign securities which it funded by issuing short-term debt on which it until recently paid negative interest rates. As a result, Japan’s consolidated net interest costs in 2022 were close to zero, according to Robert Feldman, chief economist of Morgan Stanley MUFG Securities.

Now that Japanese interest rates have turned positive, the BoJ has less freedom to operate like a giant hedge fund. Still the country has the luxury of issuing debt in its own currency and controlling its central bank. That is true of other countries like the United States and Britain, but not of countries in the euro zone.

The duration of debt also matters. The average maturity of outstanding Japanese government bonds is around nine years, while the weighted average maturity of U.S. Treasury bonds is less than six years. Thus Washington will feel the impact of rising interest rates sooner than Tokyo.

Another key factor is who owns the debt. Overseas creditors are more likely to demand higher rates to hold government bonds. But most of Japan’s debt is owned by domestic investors. The country’s external position is bolstered by a large current account surplus and foreign exchange reserves worth more than $1 trillion.

At the end of last year, Japan’s overseas assets were around 84% of its annual economic output. By contrast, the net international investment positions of the United States and France were negative to the tune of 70% and 30% of their respective GDP. Since both countries run current account deficits, the sustainability of their government debt ultimately depends on the continued willingness of foreign investors – many of them Japanese - to buy their bonds.

The fact that most of Japan’s debt is held domestically means there is little internal pressure to inflate away or otherwise default on public liabilities. Much of the interest paid on Japanese government bonds is the taxable income of banks and private savers. Estate duties in Japan are punitive. Thus, a fair part of the government’s interest expense and debt principal eventually returns to the state’s coffers.

A final factor to consider is a government’s ability and willingness to service its borrowings. Japan is not close to this “fiscal limit”. The government’s tax take, at 37% of GDP, is roughly in line with other developed economies. It’s higher than the United States, which collects 32% of GDP, but well below that of France at over 50%. Japan’s prolonged bout of deflation depressed tax receipts. Since inflation returned, its tax income has risen faster than nominal GDP.

Reuters Graphics

This does not mean Japan is crisis-proof. The government is projected to run large fiscal deficits for years to come. Yet its debt may actually be safer than the U.S. government’s, John Cochrane, a senior fellow at the Hoover Institution, suggested in a recent

paper, opens new tab

delivered to a BoJ symposium.

In the past, inflationary debt crises have tended to occur during periods of severe internal discord, such as those the United States and parts of Europe are facing today. “There is a greater faith in the general function and long run responsibility of fiscal policy in Japan than the U.S., a greater reverence for repaying debt,” says Cochrane.

In order to keep public debt under control, Japan needs stronger economic growth. Japanese officials are hardly complacent, however. They are

pushing listed companies

to improve their governance as a way to improve productivity and improve capital allocation.

The government has several other options to reduce future deficits. It could raise the retirement age from the relatively low level of 65 years. Boosting returns on the state’s large pension assets would also help. One option is for the BoJ to transfer its equities to the Government Pension Investment Fund in exchange for government bonds, which could then be cancelled. Not only would this shrink Japan’s gross debt ratio, but it would give the world’s largest pension fund an even greater incentive to exhort Japanese companies to improve their performance.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

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Editing by Peter Thal Larsen and Pranav Kiran

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Five reasons financial disasters are hard to avoid | Reuters

LONDON, June 6 (Reuters Breakingviews) - If we understand the causes of financial crises and how to prevent them, why do they keep happening? That was the provocative question posed to a group of regulators, academics, and investors at the London School of Economics last week. The participants, who had gathered to mark the 10th anniversary of the university’s

Systemic Risk Centre, opens new tab

, reached a sober conclusion: old problems and new dangers create the conditions for more turbulence.

The Systemic Risk Centre was set up after the 2008 meltdown to study what had gone wrong and, more importantly, be better prepared for future trouble. The intervening period has hardly been calm. The centre opened its doors shortly after the euro zone crisis peaked in 2012. In recent years, financiers and watchdogs have grappled with a succession of system-wide problems: the extreme market turbulence caused by the onset of the Covid pandemic, the collapse of

Archegos Capital Management, opens new tab

in 2021, the turmoil in

UK sovereign debt, opens new tab

in 2022, and the failures of

Credit Suisse

and several

U.S. regional banks

a few months later. It’s therefore no surprise regulators are anxiously scanning the horizon for the next source of trouble.

Potential problems fall broadly into five categories. The first stems from efforts to make sure banks have bigger shock absorbers. U.S. broker-dealers now have assets worth less than 20 times their equity, down from more than 40 at the pre-crisis peak, Hyun Song Shin, economic adviser and head of research at the Bank for International Settlements, told the seminar. As traditional lenders retrenched, much of the riskier activity they left behind has ended up happening instead through investment funds, intermediated through securities exchanges and clearing houses.

This shift creates new sources of stress, as central banks discovered early in 2020 when they intervened to support debt markets freaked out by the pandemic. Yet asset managers like Blackstone

(BX.N), opens new tab

and Apollo Global Management

(APO.N), opens new tab

continue to push aggressively into private markets, at times bypassing banks entirely. Executives like Apollo CEO Marc Rowan argue that these structures are more robust because they have less leverage and, unlike bank depositors, investors cannot quickly withdraw their money. Still, given the growth of private markets, the real-world consequences of a sudden downturn are hard to predict.

Reuters Graphics

Regulators also bear some responsibility for another potential vulnerability: they have made banks more alike. Tougher rules and tighter supervision make it less likely that different banks will pursue different business models, SRC Director Jon Danielsson argued.

Smaller upstarts

also find it harder to get a foot in the door. The result is a system where a small number of large banks do similar things. When something goes wrong – as it inevitably does – the problems are unlikely to be confined to one institution.

A third issue is that banking has evolved. After 2008, policymakers concluded customer deposits were a more stable funding source than wholesale finance, which had dried up at the first sight of trouble. Last year’s bank failures on both sides of the Atlantic have forced a rethink, however. One of Silicon Valley Bank’s weak spots was its heavy dependence on large corporate depositors, whose holdings exceeded the $250,000 limit for U.S. deposit insurance. When the bank got into trouble, those customers scattered, aided by online apps which enabled near-instant withdrawals. Credit Suisse’s private and corporate clients withdrew tens of billions of dollars in a matter of days.

Regulators are catching up. Last month

Michael Barr, opens new tab

, the U.S. Federal Reserve’s vice chair for supervision, signalled the regulator was planning to change its assumptions about the stability of large deposits when calculating banks’ liquidity reserves. It’s a reminder that financial systems are constantly evolving.

Reuters Graphics

The fourth reason crises are hard to stamp out is that the financial system still suffers from some fundamental weaknesses. Take the practice of allowing companies to deduct debt interest from taxes. This creates a bias for borrowing, which in turn makes the system more fragile.

Charles Goodhart, the veteran economist, identifies an even more elemental flaw: the widespread use of limited liability ownership structures. This allows financiers and entrepreneurs to take risks in the knowledge they will not personally be on the hook if things go wrong. Stock-based compensation, which ties executives’ fortunes to the riskiest part of the capital structure, offers further incentives to gamble. “Limited liability is the most extreme structure of moral hazard that we have in our system,” Goodhart told the seminar. “We have based our capitalist system on moral hazard.”

This is ironic, because regulators explicitly designed many of the rules introduced after 2008 to reduce moral hazard. If banks have sufficient buffers of equity capital and subordinated debt, the theory is that investors will bear the brunt of the losses – not taxpayers. Yet policymakers have been reluctant to use their crisis management tools. U.S. regulators protected

uninsured depositors

at SVB and other regional banks. The Swiss government, meanwhile, arranged a hurried takeover of Credit Suisse by local rival UBS

(UBSG.S), opens new tab

with a taxpayer backstop, rather than winding down the troubled Swiss lender.

Why this continued fondness for bailouts? One explanation is that people in developed countries have become more exposed to the financial system, through retirement savings and mortgages. In good times, they oppose regulation which might rein in risk-taking. “There is hardly any constituency against the inebriating feeling of getting richer during a financial boom,”

Claudio Borio, opens new tab

, the head of the monetary and economic department of the BIS, wrote in 2019.

But in times of turmoil, governments and regulators face increased political pressure to protect this constituency from losses. The LSE’s Jeffrey Chwieroth and the University of Melbourne’s Andrew Walter studied U.S.

newspaper editorials, opens new tab

during financial crises dating back to the mid-19th century and found that support for bailouts was much higher in recent decades.

Opinions differ on what will cause the next financial crisis. Some expect the rapid growth in government debt to cause problems; others think real estate will be a source of instability. The history of finance suggests trouble often begins in areas people mistakenly believed were safe. Either way, it seems likely that observers of financial crises will not have to wait too long for the next case study.

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Editing by Liam Proud and Pranav Kiran

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

UK building plans will fail to get off the ground | Reuters

LONDON, June 6 (Reuters Breakingviews) - If they don’t come, they can’t build it. UK Prime Minister Rishi Sunak and opposition leader Keir Starmer tout ambitious plans to ease Britain’s chronic housing shortage by adding more new homes. But with little hope of luring builders from abroad, the plunge in the number of domestic construction workers will ensure those remain empty election promises.

Starmer

told, opens new tab

a televised debate on Tuesday that Britain’s dream of homeownership has “all but gone” due to sky-high prices caused by a lack of housing supply. If his Labour party wins the July 4 election – as seems likely given its 22-percentage-point lead in the polls – he has

pledged, opens new tab

to build 1.5 million new homes over five years. That’s remarkably similar to the government’s

estimate, opens new tab

that the country needs 300,000 new homes a year.

Both parties’ diagnosis is correct. UK first-time homebuyers face the most difficult financial environment in 70 years, according to a recent report by the Building Societies Association. That’s because real wages, discounted for inflation, have stagnated over the past 15 years but house prices have risen by around 80%, according to official figures.

Yet Sunak and Starmer don’t base their proposed solution on solid ground. Their pledges to “get Britain building again” overlook a simple fact: there aren’t enough workers to do that.

In the first quarter of this year, there were fewer than 2.1 million construction workers in Britain. That’s the lowest level since 2001, when just 146,700 new homes were built. The biggest loss of workers occurred during the pandemic, when building activity plunged. More than 346,000 construction jobs have disappeared since 2019. Noble Francis, economics director at the Construction Products Association, estimates that construction vacancies are currently 42% higher than the average of 2018 and 2019.

Reuters Graphics

On top of that, the number of new houses is already behind the politicians’ target – only 234,400 net homes, subtracting demolitions and conversions, for example into offices, were built in 2022-23, government figures

show, opens new tab

. And given the lack of workers, the CPA forecast a drop in new housing volumes to around 180,000 in each of the next two years.

Better training would alleviate this problem but only over the long run. A shorter-term solution – immigration – is currently anathema to both parties. Without either, though, an unprecedented surge in housing activity is a pipe dream. A more realistic approach would be to ensure that house prices don’t grow faster than earnings by changing lending rules, taxation and planning permissions.

Once the electioneering ends, whoever lives in 10 Downing Street – an old home not available to first-time buyers – will have to start building a better housing policy.

CONTEXT NEWS

UK Prime Minister Rishi Sunak told a televised debate with opposition leader Keir Starmer on June 4 that the Conservatives had built 1 million homes since 2019. Starmer countered that a Labour government would build 1.5 million homes in five years.

The two were meeting in the first live debate ahead of a general election on July 4.

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Editing by Aimee Donnellan and Oliver Taslic

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Wall Street is contorting to replace China trade | Reuters

HONG KONG, June 6 (Reuters Breakingviews) - Western investment banks spent years going all-in on China. Now, slowing growth and lacklustre listings from Asia’s largest economy have them scrambling to find business elsewhere. The alternatives are either too small to make up the difference, or suffer from a short supply of talent.

Last year, fees paid to investment banks by Chinese companies fell more than a quarter to $6.1 billion, the lowest level in almost a decade, according to data from Dealogic. And at $1.9 billion so far this year, fees from the People's Republic account for less than 40% of the Asia-Pacific total, compared to a pre-pandemic norm of about half. China's draw is sharply reduced from a peak of nearly $12 billion in 2021.

Wall Street once raked in bumper revenue from big Chinese names going public in New York or Hong Kong, but now those offshore initial public offerings are

few and far between

. What listings do still come through mostly head to Shanghai or Shenzhen, where stiff local competition keeps fees low.

That contraction is forcing both Wall Street and domestic state-backed firms like Citic Securities

(600030.SS), opens new tab

and China International Capital

(3908.HK), opens new tab

to consider slashing investment banking headcount on the mainland and in Hong Kong, Reuters

reported

. JPMorgan CEO Jamie Dimon admitted last month that parts of the bank's China business have "fallen off a cliff", according to the

Financial Times, opens new tab

.

Wall Street is unlikely to fully give up on its China ambitions. The recent rally in Chinese stocks will give executives hope that business will return, at least in part.

Advisers, nonetheless, are on the hunt to replace disappearing mandates in the People's Republic with deals in South Korea and India – where revenue has held up reasonably well – and to a lesser extent, Australia. But those markets lack sufficient scale.

Reuters Graphics

Japan is the great hope. Fees there rose by nearly a third last year to $3.2 billion, and the $1.2 billion paid by Japanese corporates so far in 2024 accounts for more than a quarter of the regional total. One veteran financier at a Wall Street firm in Tokyo estimates investment banking revenue in the country could double over the next three years. That could offset much of the income western banks have lost from China, provided they can capture enough of that new business.

The boom is prompting financiers with any Japan experience to mull moving there. But investment banks hoping to bulk up in Tokyo could nonetheless face staffing problems: in recent years private equity firms have been hoovering up many of the best candidates. The saga of how to replace Chinese investment banking business has a long way to run.

Follow @KangHexin on X

Context news

JPMorgan CEO Jamie Dimon told attendees at the bank’s Shanghai conference on May 23 that parts of its investment banking business in China had “fallen off a cliff”, according to the Financial Times.

Chinese companies paid $6.1 billion in fees to investment banks last year, the lowest level since 2014, data from Dealogic show.

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Editing by Antony Currie and Aditya Sriwatsav

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Immigration benefits outweigh US border troubles | Reuters

WASHINGTON, June 5 (Reuters Breakingviews) - A sense that the United States’ southern border is porous and uncontrolled is a significant political liability for President Joe Biden ahead of the November election. Polls show immigration and border security among the top priorities for voters, and Biden’s handling of the issue is judged harshly. But sustained immigration is also the U.S. economy’s primary advantage over many of its competitors, especially as long-term demographic challenges begin to pinch developed country labor markets. Short-term enforcement measures needn’t change that.

Biden has an immediate problem to solve. Immigration topped the April Gallup poll as the most important problem facing the country—the third consecutive month it placed first. Democratic mayors in places like New York and Chicago are pleading for more federal assistance as migrants, some of them bussed north by border-state Republicans, fill makeshift shelters and strain budgets.

Biden’s

announcement on Tuesday

that he would close the border during periods of surging migration and put some limitations on asylum is an effort to assuage these concerns. It’s also a recognition that Republican rhetoric about borders and crime has resonated with voters. By issuing the order, Biden wins some criticism from Democrats, and a tool to bludgeon Republicans for not supporting a border deal in Congress. Not a bad haul for a Democrat pivoting to the center in a tough re-election fight.

But immigration provides immense economic benefits, especially given the current trajectory of the American workforce. Though the number of

job openings, opens new tab

has fallen since its post-pandemic peak, the ratio of job openings to unemployed workers is 1.2— indicating a persistent demand for more workers despite a historically low unemployment rate. Longer term, the picture worsens. The U.S. total fertility rate fell to 1.6 in 2023, a record low. That figure has been below the 2.1 "replacement level" needed to keep the population stable over time.

Immigrants are key to fixing these structural employment issues. The

share of foreign-born workers, opens new tab

in the labor force rose to 18.6% last year, the highest since the Labor Department began tracking it in 1998. Job openings are among the most elevated in industries that have disproportionate numbers of foreign-born workers, like healthcare and hospitality.

Countries with low birthrates and restrictive immigration policies, like China and South Korea, have no similar silver bullet for future labor shortages. Those countries, with even lower fertility rates, are headed for a demographic cliff, when their shrinking workforce can no longer support their ballooning elderly population. Restrictive immigration policies are doing them no favors.

Proof of the disconnect between the border and overall immigration: The mayors stressed about migrant shelters are

asking about work permits, opens new tab

for their new arrivals. An orderly immigration system should be the hallmark of any functional nation-state. A welcoming immigration system can be the hallmark of a successful economy.

CONTEXT NEWS

U.S. President Joe Biden on Tuesday signed an executive order allowing him to close the border with Mexico during periods of heightened migrant crossings.

The order would prevent migrants who cross the border illegally from claiming asylum and make it easier for them to be quickly deported back to Mexico or their home countries. The new policy is not expected to be implemented immediately, as the daily flow of migrants at the border has plummeted in recent months, in part due to increased enforcement by Mexican authorities.

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Editing by Lauren Silva Laughlin and Sharon Lam

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

再送 コラム：ロシアの新世代オリガルヒ、ウクライナ戦争機に台頭 | Reuters

Item 1 of 2 ６月５日、プーチン政権下のロシアで、新世代の大富豪が誕生しつつある。写真は３月、モスクワのクレムリンの塔にかかる月（２０２４年　ロイター/Marina Lystseva）

[1/2]６月５日、プーチン政権下のロシアで、新世代の大富豪が誕生しつつある。写真は３月、モスクワのクレムリンの塔にかかる月（２０２４年　ロイター/Marina Lystseva） Purchase Licensing Rights, opens new tab

［ロンドン　５日　ロイター　BREAKINGVIEWS］ - プーチン政権下のロシアで、新世代の大富豪が誕生しつつある。

四半世紀前に権力の座に就いたプーチン大統領は、まず１９９０年代に台頭した新興財閥（オリガルヒ）を手なずけ、次いで新たな世代の大物たちを指名していった。その多くは、ロシア情報機関の元同僚たちの間から選ばれた。

そして今、オリガルヒ候補の「第３の波」が現れつつある。接収した西側企業の資産を保有・管理するためにプーチン氏が選んだ有力者たちだ。これまでのオリガルヒよりビジネスの才覚はあるかもしれないが、ロシアの指導者への従属度は旧世代と変わりはない。

初期のオリガルヒは、１９９０年代初頭、当時のエリツィン大統領による強引な民営化に乗じて資産を築いた。そして、プーチン大統領の命令に従っている限り、その巨富を維持することを認められた者もいた。たとえば、時価評価額２４０億ドルの金属大手ノリリスク・ニッケルを保有するウラジーミル・ポターニン氏や、アルミニウム資源関連の資産を基盤とする巨大工業グループを率いるオレグ・デリパスカ氏などだ。

第１世代のオリガルヒの中には、こうした幸運に恵まれなかった者もいる。石油や自動車、メディア産業で財産を築いたボリス・ベレゾフスキー氏は、その後プーチン氏と対立して英国に移住し、そこで命を落とした。かつての石油大手ユコスの創業者で、ロシア一の資産家だったこともあるミハイル・ホドルコフスキー氏は、政治に足を踏み入れ、シベリアの刑務所で１０年間服役した。資産の大半を海外に移しつつロシア政府と良好な関係を維持しているオリガルヒもいる。たとえば石油産業の大物だったミハイル・フリードマン氏の資産は、現在同氏がルクセンブルクに設立した持ち株会社レターワンによって管理されている。

プーチン氏としては、大統領就任後に取り立ててやった第２世代の富豪や資産家については特に心配するべき理由がない。彼らは、プーチン氏が旧ソ連国家保安委員会（ＫＧＢ）で諜報員として、あるいはロシア第２の都市サンクトペテルブルクの地方官僚として働いていた時期の友人や同僚で、「シロビキ」と呼ばれ、２０年以上前にプーチン氏によるエネルギー関連の国有資産の分配の恩恵にあずかった

その１人がイーゴリ・セチン氏だ。プーチン氏により副首相に任命された後、２０１２年には国有石油大手ロスネフチ

(ROSN.MM), opens new tab

のトップに任命された。プーチン氏と同じくＫＧＢ諜報員だったニコライ・トカレフ氏は、２００７年に世界最大のパイプライン企業トランスネフチ

(TRNF_p.MM), opens new tab

の社長に任命された。天然ガス大手ガスプロムのトップを務めるアレクセイ・ミラー氏もこのグループの１人だ。

こうした旧世代もまだ力を失っていないとはいえ、どうやら「衛兵交代」の時期が来たように見える。

数カ月前、アレクサンドル・バルシャフスキー氏やアレクサンドル・ゴボル氏といった実業家の名は、ロシア国外ではほとんど知られていなかった。バルシャフスキー氏はドイツ自動車大手フォルクスワーゲン（ＶＷ）のディーラー網を経営していたが、現在ではＶＷが長年ロシア北部で操業していた工場のオーナー兼経営者で、韓国自動車大手の現代自動車

(005380.KS), opens new tab

の資産も手に入れた。ロシアの独立系ニュースサイト「ザ・ベル」によれば、西側企業から没収され同氏の管理下に入った資産は、２０２１年には７０億ドル近い収益をもたらしていたという。

ゴボル氏は、米ファストフード大手マクドナルド

(MCD.N), opens new tab

)がロシアで展開していたフランチャイズのオーナーだった。パートナーのアルセン・カノコフ氏とともにマクドナルドの店舗網を継承した他、米コーヒーチェーン大手スターバックス

(SBUX.O), opens new tab

とドミノ・ピザの店舗も手中に収めた。これらの資産は、ウクライナ侵攻前には年間約３０億ドルの収益をあげていた。

西側企業各社がロシア撤退を急ぐなかで、今後数カ月間に接収される資産は膨れ上がる可能性がある。プーチン氏が配分するパイもじきに大きくなると考えられる。キーウ・スクール・オブ・エコノミクスによる最新の統計では、ロシアで今も事業を続ける西側企業は１６７９社とされている。

新世代のオリガルヒ候補たちは、旧世代とは多くの点で異なっている。大半はビジネス分野での実績があり、それぞれの分野で相当の能力を発揮してきた者もいる。また、闇の部分が多く腐敗したロシア社会のシステムはもちろん、損益計算や市場競争の基本にも精通している。デンマークのビール大手カールスバーグ

(CARLb.CO), opens new tab

子会社であるバルチカのトップにタイムラズ・ボロエフ氏が抜擢されたのは、プーチン氏との長年の盟友関係ゆえかもしれない。とはいえ、同氏は２０１４年まで１３年間にわたり同社を運営してきた実績がある。

もちろん例外はいる。ロシア南部チェチェン共和国のカディロフ首長のおいであるヤクブ・ザクリエフ氏が仏食品大手ダノンのロシア国内資産を引き継げたのは、プーチン氏との人脈のおかげだろう。過去にザクリエフ氏がヨーグルト製造やミネラルウォーター販売に関して優れた手腕を示したという話は聞かない。

１９９０年代や２０００年代のオリガルヒたちとのもう１つの違いは、活動の舞台が消費財やサービス、小売といった分野であることだ。プーチン氏ががっちりと握っている鉱業資源やエネルギーセクターについては、すでに旧世代のオリガルヒが山分け済みだ。

ところで、新世代オリガルヒの主要な特性として目を引くのは、まったく新しい状況のもとで台頭していることだ。

これまでのビジネス特権層が足場としてきた国内の経済部門は、国際貿易に参入し、グローバル金融システムにどっぷりと浸かっていた。

今日のロシアは海外の金融システムから切り離されており、プーチン氏は、かつて輸入に依存し、あるいは西側企業の傘下で国内生産していた消費財全般に関してロシアの自立度を高めることに注力している。プーチン氏は昨年、ロシアを撤退する企業が売却する資産に関して、買い手が見つかった場合に売却額の５０％値引きを義務付ける措置を導入した。西側先進諸国が来月、凍結したロシア資産３０００億ドルをウクライナ支援に使うことに合意した場合には、さらに広範囲に及ぶ措置を導入することとなっている。

ビジネス界出身の新たな大物たちは、かつてのオリガルヒのように政治に参加してはいない。ロシア政府に多少なりとも影響力を競えるほどの地位に達した者は１人もいない。短期的には、プーチン政権下で過熱する戦時経済の追い風に乗って迅速な成長を遂げる可能性はある。政府支出のおかげで、賃金だけでなく、年金や社会保障給付も上昇しているからだ。だがその先となると、ロシア経済の孤立という壁にぶつかることになるだろう。

またこれまで同様、プーチン大統領が自分が与えたものを自分で奪うことがあり得るだけに、新世代オリガルヒの野心にも歯止めがかかるだろう。旧世代がやっていたように、政府の指示と自由なグローバル市場の要請との間で均衡を保つことはできないだろう。ほとんどのリソースが戦争遂行のために動員され、それ以外の部門が残り物を分け合うようなシステムのもとで活動しなければならない。

ウクライナでの戦争と経済制裁、西側投資家の逃避という構図の中で、プーチン氏には新たな取り巻きたちを指名する以外の選択肢がなかったとも言える。ロシアが石油・天然ガス輸出への過剰依存からの脱却につながるような産業を育てていくのであれば、新たな大物たちが経済に貢献できる場合もあるだろう。結局のところ、過去の対ロシア経済制裁は、特に２０１４年のクリミア半島併合以降、ロシアが食料消費において自給体制を確立する契機となったのだから。

とはいえ、ロシアの孤立のせいで新世代の大物たちが今後の展望を思い描けなくなる可能性は高い。旧世代に比べ、「オリガルヒ」と呼び得る存在になれるかすら危ういかもしれない。

翻訳：エァクレーレン

（筆者は「Reuters Breakingviews」のコラムニストです。本コラムは筆者の個人的見解に基づいて書かれています）

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Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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HONG KONG, June 5 (Reuters Breakingviews) - (This May 5 story has been corrected to read 'China Securities Regulatory Commission' instead of 'China Securities & Futures Commission')

China's "teeth and thorns" are coming for PricewaterhouseCoopers. Those are the words President Xi Jinping has used to outline how he wants regulations enforced in the People's Republic. That could translate into PwC's local unit being hit with a fine of at least 1 billion yuan ($138 million) and some office suspensions, Bloomberg

reported, opens new tab

, for its role as auditor of China Evergrande

(3333.HK), opens new tab

. While rivals are already benefitting from its looming punishment, such a decision would put all financial intermediaries on notice.

As auditor for 107 A-share companies as of 2023, per financial data provider Wind, PwC China was the market leader among overseas accounting firms. That business brought in revenue close to 900 million yuan a year. Almost 20 clients, though, including $250 billion PetroChina

(601857.SS), opens new tab

, $120 billion China Merchants Bank

(600036.SS), opens new tab

and $10 billion China Railway

(601390.SS), opens new tab

have recently severed ties with the firm. More may follow if and when PwC China is censured.

The China Securities Regulatory Commission (CSRC) has already set a standard. On Friday it imposed a 4.2 billion yuan fine on Evergrande's onshore unit after determining the company, once the country's biggest homebuilder, had inflated revenue by

$78 billion

in 2019 and 2020. That's the maximum penalty possible, representing a fifth of bond proceeds raised using fraudulent data.

Reuters Graphics

For auditors, though, the punishment can be up to five times the fees earned from the client in question. PwC China raked in some 270 million yuan from Evergrande between 2009 and 2023, according to state-back financial newswire Cailian.

That explains how the accounting firm's fine could end up surpassing the

previous record

of 212 million yuan which the Ministry of Finance slapped on Deloitte Touche Tohmatsu last year - as well as closing its Beijing office for three months. That was for audit deficiencies in its work with China CITIC Financial Asset Management

(2799.HK), opens new tab

, previously known as China Huarong whose chair was executed in 2021 for accepting bribes.

Deloitte is now one of the firms picking up some of the companies, and staff, deserting its rival, suggesting quick comebacks are possible.

PwC, though, may have to deal with more offices being shuttered for longer. It may also face a damaging lawsuit from liquidators of Evergrande if the CSRC's verdict reinforces their claims. These would harm PwC's prospects of recovery. It would also send a strong message to accountants, law firms, banks and brokers that China's watchdogs have more than enough bite to match their bark.

CONTEXT NEWS

The Ministry of Finance is poised to impose a record $138 million fine on PricewaterhouseCoopers's China unit and suspend some of its local operations over its role in China Evergrandeâs financial scandal, Bloomberg reported on May 31, citing people familiar with the matter. A slew of state firms including PetroChina, China Merchants Bank and China Railway have recently dropped PwC China as their auditor.

The China Securities Regulatory Commission (CSRC) said on May 31 that it had decided to give a maximum 4.175 billion yuan ($587 million) fine to the main unit of Evergrande for information disclosure violations and other misconduct. The stock market watchdog also said it is pushing forward with the investigation of relevant intermediary agencies.

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Editing by Antony Currie and Aditya Sriwatsav

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Investors are hunting securitization’s oddballs: podcast | Reuters

NEW YORK, June 4 (Reuters Breakingviews) - Whether a bundt cake bakery or an internet address, if it generates steady cash, it can be diced up in the financial alchemy of securitization. In this Exchange podcast, Janus Henderson’s John Kerschner explains the promise and perils, and why the oddest assets can be the best.

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Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

LONDON, June 3 (Reuters Breakingviews) - Many Western leaders see India as a bulwark against China. Their fear of the People’s Republic outweighs their concerns about Narendra Modi’s authoritarian tendencies. Now that India’s prime minister is on the cusp of winning a third term in office, exit polls

suggest

, the United States and Europe may double down on the idea that their enemy’s enemy will be a steadfast friend. But the overlap of interests is not large, while the two sides’ values are diverging. The scope for working together will be limited.

During his second term, Modi benefitted from warm welcomes in the West. Last June Joe Biden

rolled out the red carpet

for him during his state visit to Washington. The U.S. president and the Indian prime minister hailed a new era in their countries’ relationship and signed a clutch of defence and other deals designed to counter China’s global influence.

Shortly after, French President Emmanuel Macron

made

Modi his guest of honour at the country’s Bastille Day military parade. They agreed in principle deals for India to buy French-made jets and submarines, though these are still under negotiation. Modi in turn

welcomed

Macron as the chief guest at India’s Republic Day celebrations in January.

Western governments have also promoted India as an alternative supplier of manufactured goods that will help cut their dependence on China. Janet Yellen, the U.S. Treasury Secretary, has described the country as a destination for “

friend-shoring

”, a plan to build up supply chains with friendly countries.

Meanwhile, the United States, India and various other countries last September

announced

a multibillion-dollar rail, port, energy and communications “corridor” to link India to Europe via the Middle East. Israel’s war with Gaza has

delayed, opens new tab

this project.

Relations are not entirely friendly, though. The U.S. government is worried that Modi’s government is cracking down on

Muslims

,

independent media

and

opposition politicians

. The Indian government has responded that such criticism is “

misplaced

”, “

deeply biased

” and “

unwarranted

”.

Washington is also

concerned

that New Delhi was involved in a failed plot to kill a Sikh separatist in the United States. And the Canadian government has said there are “

credible

” allegations linking Indian agents to the murder of another Sikh separatist in Canada.

ENEMY’S ENEMY

Despite these concerns, it is in the West’s interests to work with India to stop China throwing its weight around. But U.S. and European leaders need to be clear-eyed about what they can get from Modi, and what they can offer in return.

The main worry for U.S. leaders is that the People’s Republic will invade Taiwan or bully other countries in the region, especially the Philippines, Japan and South Korea, with which the United States has

defence treaties, opens new tab

. India’s fear is that China may grab parts of its territory near the vast land border the two countries share in the Himalayas.

New Delhi is not going to risk Beijing’s wrath by joining any campaign against China in East Asia. Nor are the United States and its allies likely to do much to fend off any attack by China on India – though they could provide the South Asian giant with useful intelligence.

The West can also sell India military equipment. That may cause China to put armed forces in the Himalayas instead of its large eastern sea frontier. Western governments can also help wean India off its dependence on arms from Russia, traditionally its

main, opens new tab

supplier.

Now that Vladimir Putin has deepened his alliance with Chinese President Xi Jinping, there’s an opportunity to get Modi to downgrade his own alliance with the Russian leader. But New Delhi is not going to cut ties with Moscow, not least because India is making a lot of money by

importing

Russian crude oil at a discount and then re-exporting refined products.

Reuters Graphics

The West should therefore be wary about supplying its most sophisticated military kit to India and transferring technology that would allow New Delhi to build and develop advanced systems on its own.

MIDDLING MANUFACTURER

Western governments and companies are eager to build up alternative manufacturing hubs as they reduce their dependence on goods made in China. But they should not expect India to fill much of the gap. Though India is expected to grow faster than other major countries and will become the world’s third-largest economy by 2027,

according, opens new tab

to the International Monetary Fund, that does not make it a new China.

For a start, India’s economic output of $3.6 trillion last year was only 20% of the People’s Republic. What’s more, its prowess is in services rather than manufacturing. Decades of protectionism, which Modi has continued, mean India does not export much of what it produces. Though the country has an increasingly large internal market, it accounted for only

1.7%, opens new tab

of global exports in 2021, ranking 18th in the world behind smaller emerging economies such as Mexico and Vietnam.

Despite its growth, India has also struggled to attract foreign direct investment. Last year it secured

$28 billion, opens new tab

, below Brazil and Mexico and roughly on a par with Sweden, according to the OECD.

Reuters Graphics

Click

here, opens new tab

for an interactive version of the graphic.

There are other areas where the West and India could, theoretically, cooperate – notably on climate change. The United States and its allies could

help

India fast-track its green transition – for example by providing it with cash to close coal-fired power plants before the end of their useful life.

Modi showed

little enthusiasm, opens new tab

for such a deal when it was discussed in recent years. But if he changes his mind, the West has a strong interest in stopping the upward trajectory of India’s carbon emissions.

Relations between large countries will always be complicated by geography, economics and geopolitics. India’s prime minister appears to view India’s relations with the West as transactional. Western leaders would be wise to take the same approach.

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Editing by Peter Thal Larsen and Oliver Taslic

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Breakingviews: Blackstone music deal can spare just a cent | Reuters

NEW YORK, June 3 (Reuters Breakingviews) - Steve Schwarzman’s buyout shop has perfected the art of the cap rate. But has it perfected the tune? Blackstone

(BX.N), opens new tabraised its bid, opens new tab

by a penny on Monday to acquire Hipgnosis Songs Fund

(SONG.L), opens new tab

, the U.K.-listed music royalty owner behind artists Shakira and 50 Cent. Much like owning an apartment or office building, the music business has steady, predictable cash flows attached to catalogs. But the yield on those assets looks low relative to interest rates. And at $1.6 billion, Blackstone can’t miss any more notes.

Late last year, an auction process kickstarted after shareholders voted against a complicated transaction to break it up. A strategic review by third party investment bank Shot Tower found the fund overpaid for its catalogs and overstated revenue and EBITDA. A battle ensued, and then Apollo Global Management-backed

(APO.N), opens new tab

Concord Chorus was ultimately outbid by Blackstone in May.

Blackstone is newer to this business, but it has a solid background to play off. Music royalties are similar to rents collected by landlords, determined in part by the length of the lease and the classification of the building. Some, like older catalogs, have predictable and stable cash flow. Journey’s “Separate Ways”, revitalized in Netflix’s

(NFLX.O), opens new tab

“Stranger Things,” might be akin to Blackstone’s ownership of New York City’s Stuyvesant Town-Peter Cooper Village, say. Newer songs, which are less proven, are akin to short-term office rentals. Cash flows have more volatility. Passive catalogs are a partial interest in the royalty stream held by another music company. It’s like getting paid to manage a building.

Like real estate, when interest rates increased starting early last year, Hipgnosis’ value fell. Shares halved from its high in 2021 to March before bidders emerged. This dynamic reflects how yields relate to prices. When rates are low, the relative cash flow-to-asset value looks better than when rates are higher. Take Hipgnosis’ portfolio. Investment bank Shot Tower reckons its catalog is currently valued at $1.9 billion with $122 million in royalties, reflecting a yield of around 6%. That’s in-line with current interest rates, which isn’t terrible. But a few years ago, when rates were just above zero, Hipgnosis looked much better. It was before the company had gone on a buying spree for lower yielding songs. A similar figure was 10%, according to Hipgnosis' 2020 annual report.

Reuters Graphics

Signage is seen outside the Blackstone Group headquarters in New York City, U.S., January 18, 2023. Purchase Licensing Rights, opens new tab

Blackstone can take a fresh look at the tunes, and perhaps push them into more television shows or monetize them better through social media. Improving asset quality is what private equity firms do after all. Plus, the firm famously bought real estate mogul Sam Zell’s office property REIT for $39 billion in 2007 right before the great financial crisis. So it can sniff out value. But the measly penny it added to its offer price on Monday shows some necessary discipline. Going up any more octaves would make the deal too far off-key.

CONTEXT NEWS

Blackstone raised its offer for Hipgnosis Songs Fund on June 3 by one penny to $1.31 per share, valuing the music catalog at $1.6 billion.

The revised bid is the result of Hipgnosis incurring lower adviser fees related to the transaction, according to the company’s press release.

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Editing by Lauren Silva Laughlin and Sharon Lam

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

MUMBAI, June 3 (Reuters Breakingviews) - Exit polls in India suggest Narendra Modi's alliance will secure a third term as prime minister with a big majority. High on his to-do list will be improving incomes so that most of the country's 1.4 billion citizens are no longer poor enough to qualify for the government's free food scheme.

An overdependence on agriculture for jobs is to blame. The traditional sector employs less than

one-quarter, opens new tab

of China's workforce. In India, some 43% of workers depend on farming, but it generates only

16%, opens new tab

of the $3.5 trillion national output.

Farmers toil under a state-controlled system designed shortly after the country achieved independence in 1947 when food was in short supply. Today India feeds the world as the top exporter of rice, and its role is of greater importance after Russia's invasion of Ukraine disrupted wheat supplies.

Still, India's farmers are largely poor, thanks to messy regulation, low levels of investment and inadequate infrastructure, including a shortage of cold storage. The result is that most of those who produce crops don’t have direct access to large companies or consumers, and end up with scant control over price.

If Modi is re-elected with a landslide, he's likely to take a second stab at shaking up farm laws, after aborting his first try in 2021. He'll do that while continuing to court big firms like Apple and Tesla to set up factories and boost manufacturing as an alternative source of employment.

His administration has set an internal

target

to raise rural income per capita by 50% by 2030, Reuters reported in May citing official documents. That is ambitious: farm wages grew just 0.2% and rural non-farm wages fell during the 12 months to March 2023, according to Motilal Oswal Financial Services.

Hitting the goal is imperative to make India a more reliable global trading partner, however. New Delhi periodically slaps bans and duties on crop exports to protect consumers against high prices at the expense of farmers, disrupting overseas supplies of everything from sugar to wheat.

Low rural incomes translate into a huge gap between haves and have-nots and threaten social stability as global companies look to India as a hedge against China. The top 1% of people in the South Asian country earned almost 23% of national income, among the

highest, opens new tab

anywhere, according to World Inequality Lab, behind only small countries like Peru and Yemen. That's unsustainable.

TOO BIG TO FAIL

Any attempt to fix India's farms will require a tough stomach. Modi aborted his earlier attempt to overhaul the system after farmer groups from some northern states held a year-long protest in New Delhi.

They feared

big business, opens new tab

including billionaires Mukesh Ambani and Gautam Adani would acquire farmland and worried the new laws could ultimately end generous subsidies the government pays to procure certain crops.

Inaction, though, could upend India's world-beating growth. Private consumption generates nearly three-fifths of GDP but is growing at 4% year-on-year partly because the masses are getting squeezed, making the 7.8% headline pace look shaky.

Reuters Graphics

Outside the cities, consumers are

cutting back

on essentials like milk and cooking oil. British giant Unilever’s

(ULVR.L), opens new tab

Indian unit has a strong presence in villages and is

underperforming

Nestle’s

(NESN.S), opens new tab

local business which targets urban shoppers.

Climate change is making the situation more precarious too. Extreme weather disrupts crop cycles. Forecasting is getting tougher for rate-setters: Food remains a chunky 46% of India's consumer price inflation basket.

These adverse trends could soon force India to increase handouts. As well as free food grains, farmers survive on cash transfers and subsidised fertiliser and power. The overall subsidy bill at

$50 billion, opens new tab

has grown at a slower pace over the last decade compared to the 10 years to 2014, per analysts at Bernstein, but it remains higher than the pre-Covid level of close to 14% of total government spending.

Reuters Graphics

Given Modi's struggle to push through reform, politicians are publicly tiptoeing around the problem. His Bharatiya Janata Party promises in its election manifesto to hike floor prices it pays for crops “from time to time”, for example.

Ultimately, to shore up growth India needs to cut out the middleman. State-backed wholesale markets issue licences to buyers like Walmart

(WMT.N), opens new tab

, Amazon

(AMZN.O), opens new tab

and ITC

(ITC.NS), opens new tab

and charge fees on all transactions. Buyers must have licences for every region where they source produce. Modi attempted to remove fees on sales outside of yards and to standardise direct agreements between farmers and businesses.

It would be a shot in the arm for farmers and a crucial step toward fixing the income gap. A strong, confident leader will recognise that India’s rural population is simply too big to fail.

CONTEXT NEWS

Indian Prime Minister Narendra Modi's Bharatiya Janata Party (BJP)-led alliance is projected to win a big majority in the general election that concluded on June 1, TV exit polls said, suggesting it would do better than expected by most analysts. Votes will be counted on June 4.

Most exit polls projected the ruling National Democratic Alliance (NDA) could win a two-thirds majority in the 543-member lower house of parliament, where 272 is needed for a simple majority. A two-thirds majority will allow the government to usher in far-reaching amendments in the constitution.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Una Galani and Aditya Sriwatsav

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Change is coming to Britain’s macroeconomic policy | Reuters

LONDON, May 31 (Reuters Breakingviews) - “Change”. The single-word slogan under which Britain’s opposition Labour Party has chosen to fight the upcoming general election is certainly succinct. Judging by the opinion polls, nothing more is needed. Labour leads the governing Conservative Party by more than 20 percentage points. Yet when it comes to macroeconomic policy, change is hard to find. The party’s economic manifesto is instead characterised by conspicuous continuity. This position will be hard to sustain.

Shadow Chancellor of the Exchequer Rachel Reeves has pledged not to tinker with the independence of the Bank of England and promised that the central bank’s 2% inflation target is sacrosanct. Her sole flirtation with novelty is a pledge to add fighting climate change as a supplementary objective. Even that is a revival of a tweak first made by then-chancellor Rishi Sunak in 2021.

There’s not much change at the Treasury either. Labour has ruled out increases in any of the government’s three largest sources of revenue: personal income tax, national insurance contributions, and value-added tax. Public spending, meanwhile, will remain subject to the same fiscal rule used by the current government, requiring public debt to be falling as a proportion of GDP at the end of a rolling five-year forecast period. So similar are the macroeconomic prospectuses of Reeves and her Conservative counterpart Jeremy Hunt that some analysts have christened their shared vision “Heevesianism”.

Labour’s commitment to the current policy mix is even more surprising given that impartial observers reckon Britain’s next government is highly unlikely to hit those targets. In its recently completed

annual check-up on the UK economy, opens new tab

, the International Monetary Fund dismissed current departmental spending plans as implausibly austere. The IMF predicts taxes will need to rise significantly or welfare payments decline sharply if the fiscal rule is to remain intact. The Institute for Fiscal Studies (IFS)

puts the same point differently, opens new tab

. The only hope for the Heevesian consensus rests on either upside surprises to growth or downside surprises in interest rates. “For a Chancellor with a goal of reducing debt as a fraction of income, things have arguably never been so bad,” the think tank says.

Reuters Graphics

Click

here, opens new tab

for an interactive version of the graphic.

How did Labour arrive at this strange combination of a headline promise of transformation with an underlying commitment to more of the same? There are three possibilities.

The first and most cynical explanation is that it is an electoral gambit. Labour is so tantalisingly close to power that it has adopted what might be called a “Ming vase” strategy. Like a terrified curator transporting a priceless ancient ceramic across a highly polished floor, the party is focused on minimising any chance of a slip-up as it tiptoes towards polling day.

On this reading, Labour does not really believe in the status quo, and investors should prepare for surprises after the election. There are certainly precedents for that. One of Labour’s first acts after the 1997 election was to grant operational independence to the Bank of England, a policy that did not appear in the party’s manifesto.

Yet the chances of a sudden change of direction seem lower this time. Labour has made explicit policy commitments that stretch into the medium term. Reeves says there will be no new budget before September and has pledged not to raise corporate taxes for the duration of the next parliament. The fiscal rules, meanwhile, will be secured indefinitely by a new “fiscal lock”, with the key kept by the independent Office for Budget Responsibility. When Labour promises minimal disruption to macroeconomic policy, the party appears to mean what it says.

A second, more credible, explanation is that Labour believes the Heevesian approach is a means to an end. On this interpretation, the party is attempting to craft a modern British version of a venerable European political strategy. In the aftermath of Italy’s unification in 1871, politicians developed the philosophy of “trasformismo” — the deliberate preservation of old orthodoxies to facilitate social change peacefully from below. Labour’s analogous bet is that not rocking the macroeconomic boat will deliver the stability to focus on growth-generating microeconomic reforms.

For a party that has been out of power for fourteen years that is an understandable stance. All the same, the risks are obvious. As the IMF and IFS note, it is a hostage to macroeconomic fortune. In its original Italian incarnation, meanwhile, prolonged balancing of competing political interests eventually led to a collapse in voters’ trust and dramatic policy reversals. Investors need hardly fret that Labour’s fiscal lock will lead to the rise of fascism. But the risk that “trasformismo all’inglese” might lead to a future unravelling of UK macroeconomic policy is all too real.

The third possibility is the simplest, but also the most alarming. This is that Labour believes that sticking with the current approach will itself generate growth. That was the implication of Reeves’ first campaign speech this week, where she announced, with a telling whiff of Orwellian Newspeak, that “stability is change”.

Given the upheaval wreaked by successive Conservative governments in recent years, a steadier approach will certainly be different. Given the economic transformation demanded by global challenges, however, it is insufficient.

Across the developed world, the demands of battling climate change, higher defence spending, and securing supply chains in the face of deglobalisation increasingly trump accounting forecasts of debt sustainability when it comes to formulating fiscal policy. Witness the $370 billion of green subsidies in the U.S. Inflation Reduction Act of 2022, passed by Congress even as the budget deficit hit nearly 9% of GDP last year.

Reuters Graphics

As for monetary policy, the failure of central banks to foresee, still less control, inflation has undermined faith in the orthodox model. Just this week Isabel Schnabel, an executive board member of the European Central Bank, offered

a revisionist view, opens new tab

of quantitative easing, questioning whether the costs of central banks buying government bonds and other assets may have outweighed their benefits.

In the “age of insecurity”, as Reeves herself has called it, Labour’s commitment to continuity can’t last. Investors should therefore take Labour at its (single) word. Change is indeed coming – and the UK’s macroeconomic framework will feel it too.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Peter Thal Larsen and Streisand Neto

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Korea’s music industry has more than a BTS problem | Reuters

HONG KONG, May 31 (Reuters Breakingviews) - K-pop may seem to be belting out winning financial tunes, judging purely by some key headline numbers. South Korean pop had a banner year in 2023, with its four largest agencies recording aggregate album sales and streaming revenues of $1.3 billion, per an estimate from Citigroup, a record high. But those same companies, including Hybe

(352820.KS), opens new tab

and SM Entertainment

(041510.KQ), opens new tab

, have shed a collective 8.6 trillion won ($6.2 billion) in market value since a peak last June.

The most obvious cause would appear to be the long absence from stage and recording studio of BTS, the global face of K-pop, whose members are currently on

mandatory military service

for at least 18 months. Their hiatus corresponds with another reason for the share price slump: sales of compact discs started to fall mid-year.

Reuters Graphics

For most of the world, the fate of an obsolete, low-fidelity format might prompt a collective shrug. But in South Korea, they're huge: last year 80% of recorded music sales at label JYP Entertainment

(035900.KQ), opens new tab

, for example, came from physical media, per HSBC. That's because K-pop fans rush to buy the latest CD from their favourite idol group to boost first-week sales, the main metric of a band’s success.

On top of that, there has been an unwelcome drop-off in album exports to China. Shipments evaporated in June last year and have yet to fully recover, Korean customs figures show.

BTS is not the only cause, though - their label, industry leader Hybe, had members of the band record solo work to be released during and after their absence. Analysts at HSBC argue the main drag is from inflation, which has forced fans to cut back and is likely to mean the contraction in physical sales in the second half of last year will last to the end of 2024.

Hybe, meanwhile, is hitting some wrong notes elsewhere. Its breakout girl group, NewJeans, is at the centre of an

ownership row

between the company and its sub-label, Ador.

BTS's reunion next year won't fix these issues. That will require embracing music streaming more, smoothing out release schedules disrupted by conscription, and further cultivating overseas markets like the U.S. and Japan. Only then can the industry make itself more bulletproof.

Follow @KangHexin on X

CONTEXT NEWS

Shares in South Korean entertainment firms HYBE, JYP Entertainment, SM Entertainment and YG Entertainment have dropped between 19% and 55% since June 2023 amid a slump in sales of compact discs.

HYBE, which is home to global K-pop sensation BTS, has dropped more than 8% since a battle over control of sub-label Ador spilled out into the open on April 22.

($1 = 1,381.2700 won)

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Antony Currie and Aditya Sriwatsav

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Breakingviews: Trump’s rich backers normalize criminal behavior | Reuters

Item 1 of 2 Former U.S. President Trump walks alongside his attorney Todd Blanche after a jury found him guilty of all 34 felony counts in his criminal trial at New York State Supreme Court in New York, New York, U.S., 30 May 2024.

[1/2]Former U.S. President Trump walks alongside his attorney Todd Blanche after a jury found him guilty of all 34 felony counts in his criminal trial at New York State Supreme Court in New York, New York, U.S., 30 May 2024. Purchase Licensing Rights, opens new tab

WASHINGTON, May 30 (Reuters Breakingviews) - Even as a New York jury considered Donald Trump’s fate, his rich backers stood behind him. Major Wall Street donors including Blackstone’s

(BX.N), opens new tab

founder Stephen Schwarzman decided to firmly back the presumptive Republican presidential nominee Donald Trump, who was convicted on Thursday of 34 criminal charges. It’s one thing to support a candidate who might cut taxes and regulation, and quite another to endorse a felon. After his historic conviction, it’s collective greed that’s now on trial.

Trump was found guilty of charges against him related to covering up payments to a porn star, in the process becoming the first U.S. president convicted of a crime. Justice Juan Merchan set sentencing for July 11, four days before the start of the Republican National Convention, which is all but certain to formally nominate Trump as the candidate. Trump said he would appeal.

Even donors who had previously said they were finished with Trump have returned. Last week, Schwarzman told

Axios, opens new tab

he would vote for Trump, after repeatedly calling on the GOP to find another candidate. A group associated with casino billionaire Miriam Adelson also said this week it would spend around $100 million on Trump’s campaign. Hedge fund manager

Bill Ackman

is considering throwing his support behind Trump, too, Reuters reported on Thursday before the verdict was announced.

Although President Joe Biden’s campaign coffers are fuller, Trump and the Republican National Committee jointly raised $76 million in April, about 50% more than the comparable haul for the presumptive Democratic nominee and the party’s related committees. Most of Trump’s latest fundraising came from a pricey event hosted by billionaire John Paulson in Palm Beach, Florida.

A similar roster rallied around Trump the last two times he sought the Oval Office. The many questions about his character were overlooked in favor of a perceived pro-business agenda. A criminal conviction, which could lead to a prison term, gives fresh reason for pause. But the country is also more polarized than ever: a growing number of Republicans and Democrats consider the other party immoral, dishonest and closed-minded, according to Pew Research.

This divide helps destigmatize the illegal behavior. In fact, Trump has used his time in New York during his criminal trial to profitable ends, juggling multi-million dollar fundraising events while defending himself from felony charges, sometimes in the same day. Any contributions now will help normalize criminal activity, and show the extent to which the wealthy are willing to ignore it.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

Donald Trump became the first U.S. president to be convicted of a crime on May 30 when a New York jury found him guilty of falsifying documents to cover up a payment to silence a porn star ahead of the 2016 election.

After deliberations over two days, the 12-member jury announced it had found Trump guilty on all 34 counts he faced.

Justice Juan Merchan set sentencing for July 11, days before the start of the Republican National Convention expected to formally nominate Trump for president.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Lauren Silva Laughlin and Pranav Kiran

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

AI will power up buyout barons’ green-energy spree | Reuters

LONDON, May 30 (Reuters Breakingviews) - Artificial intelligence is reviving the moribund renewable-energy market. Following recent green-power take-privates by

KKR (KKR.N), opens new tab

and

EQT (EQTAB.ST), opens new tab

, Canadian investor Brookfield Asset Management on Thursday

said, opens new tab

it was in exclusive talks to buy French solar and wind specialist Neoen

(NEOEN.PA), opens new tab

. The 6.1 billion euro ($6.6 billion) takeover would mark the largest renewable deal since at least 2015, one sector banker told Breakingviews. It won’t be the last big one.

Renewable energy producers like Neoen have taken a beating in recent years as central banks hiked interest rates, which raises the discount rate and shrinks present value of long-term projects. Neoen’s shares closed on Wednesday at roughly half their early 2021 peak, partly because of successive rights issues. Alternative-asset giant Brookfield and fellow investor Temasek are offering the controlling shareholders a 27% premium to the undisturbed price, and will subsequently extend the same offer to the listed group’s minority shareholders.

The valuation looks reasonable, at around 17 times forecast 2024 EBITDA, including debt. Neoen traded at similar levels in the second half of 2021. It also outshines KKR’s recent offer to Encavis

(ECVG.DE), opens new tab

, which valued the German renewables group at

15.8 times, opens new tab

forward EBITDA.

Both parties are motivated to strike the deal. Brookfield has just agreed with Microsoft to build a massive 10 gigawatts of renewable capacity to help supply clean power for data centres for artificial intelligence. Neoen will help, given its pipeline of projects and 2030 target of 20 gigawatts of capacity. The French firm also has a large presence in Australia, where Brookfield wants to expand.

For Neoen and its shareholders, the 2030 production target would be a stretch with its extremely constrained balance sheets. Analysts expect its net debt to EBITDA ratio to hit an eye-popping 8 times by the end of this year, using Visible Alpha consensus forecasts. The company has already called on shareholders multiple times, and may be reluctant to tap them for cash again.

Broader trends are also helping renewables. Goldman Sachs sees the AI boom as a near-$1 trillion opportunity for the sector as tech companies invest in data centres to train their power-hungry large language models. And central banks seem more likely to cut than raise rates, meaning valuation multiples may have found a floor. Other possible sector targets for private equity include Spain’s $7 billion Corporacion Acciona Energias Renovables

(ANE.MC), opens new tab

, and Norway-based $1 billion Scatec

(SCATC.OL), opens new tab

. Green buyouts are in a sweet spot.

Reuters Graphics Reuters Graphics

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.)

CONTEXT NEWS

Canada's Brookfield Asset Management on May 30 said it had entered exclusive negotiations to buy just over half of French renewable-power producer Neoen from its key shareholders, including the family investment vehicle of entrepreneur Jacques Veyrat.

The deal, which Brookfield will pursue through its Global Transition Fund II along with listed subsidiary Brookfield Renewable, values Neoen’s equity at 6.1 billion euros ($6.6 billion). Singaporean state investor Temasek will also invest.

After buying the 53% controlling stake, the bidders plan to make a cash offer for the rest of the equity at the same price of 39.85 euros per share.

Neoen’s shares, which closed at 31.4 euros on May 29, were suspended as of 1007 GMT on May 30.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Liam Proud and Streisand Neto

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

Capital One scales banking’s Mount Improbable | Reuters

NEW YORK, May 30 (Reuters Breakingviews) - It’s easy to imagine that a bank chief nearly 40 years into the job would be looking for new challenges. Capital One

(COF.N), opens new tab

boss Richard Fairbank is taking that to extremes. The $35 billion bid he launched in February for rival Discover

(DFS.N), opens new tab

, which would create the biggest U.S. issuer of credit cards, is a masterclass in self-belief. To make it work, Fairbank will have to win over bank regulators, a combative antitrust watchdog, millions of merchants, investors, and then – if he really wants to make the deal work out – the whole world.

Fairbank founded Capital One in 1987, with a single-product offering: credit cards. The twist was to offer different rates and fees for different customers, at a time when other banks peddled standardized plastic. Capital One went public in 1994, adding in auto loans and bank accounts, and is now the

ninth biggest, opens new tab

U.S. bank. Its total assets have grown almost nine times over in the last 20 years, faster than any of its top-10 peers. Adding Discover would make it the U.S. number 6. Two decades ago, by comparison, it was

number 44, opens new tab

.

Reuters Graphics

From the get-go, the deal differs from most bank mergers, which are about consolidating branches and deposit bases. The two companies combined would have fewer than 300 real-world outlets – compared with around 2,300 at PNC Financial

(PNC.N), opens new tab

, the lender that they would leapfrog in asset size. More importantly, Discover doesn’t just issue credit cards: it also owns a major payments network, akin to Visa

(V.N), opens new tab

, Mastercard

(MA.N), opens new tab

and American Express

(AXP.N), opens new tab

. These payment rails are critical for retailers accepting credit cards that

sit in 80%, opens new tab

of American wallets.

That’s where the ambitious part kicks in. Discover is a distant also-ran to the bigger networks, illustrated by the fact that consumers outside of the United States have basically never heard of it. Visa processed 25 billion credit-card transactions in the last financial quarter, while Discover handled a relatively measly 883 million. Even within the United States, Discover-stamped cards are valid almost everywhere but seldom seen, a challenge Fairbank himself calls low “perceived acceptance.” With blue-sky thinking, the prize is huge.

So, though, are the obstacles, the first of which is to persuade regulators. Capital One’s deal will be approved or denied by the Federal Reserve and Office of the Comptroller of the Currency. But the Department of Justice gets to make its views known, too. And if it doesn’t agree with the banking agencies, it can sue to block the deal.

The first task is to show that bigger isn’t badder, and ideally that the merger can be actively good for competition. On one hand, a larger provider could be better for customers – able to extend credit more widely, and fund more generous reward programs. On the other, size brings market power, and as Fairbank told analysts in February, scale matters in credit cards even more than other kinds of banking. While the two firms will only have 22% of overall credit card balances, the market is not monolithic. Consider less creditworthy customers, and their market share edges closer to the 30% level traditionally seen as problematic, according to rough

numbers crunched, opens new tab

by University of Michigan assistant professor Jeremy Kress.

The Fed and the OCC also have to weigh the risk to the financial system of an enormous bank with more than half of its lending in consumer cards, just as credit conditions are turning south. While Capital One is already subject to onerous oversight, the failures of four lenders last year, including Silicon Valley Bank,

showed holes

in the supervisory process.

Even if the bank overseers are relaxed, there’s the Department of Justice to contend with. After three decades of being relatively laissez-faire, the agency has threatened to toughen up its stance on bank mergers. Antitrust chief Jonathan Kanter says the department will view deals from more angles, although the new approach hasn’t yet been officially detailed. The watchdog’s

sprawling case

against concert promoter Live Nation

(LYV.N), opens new tab

last week shows Kanter is feeling his oats. Credit cards would make for another appetizing meal.

Capital One says the deal leaves only winners, of course, but that’s not necessarily true. The most thorny competitive issue will be how merchants fare after a Capital One-Discover union. Retailers and other businesses that accept cards pay a swipe, or “interchange,” fee with each transaction. Typically amounting to a couple of percent, this fee isn’t something the merchant can haggle over, or easily pass on to customers. Instead, they must take or leave all cards on a given network.

The proposed merger wouldn’t much change that. If anything, a stronger Discover would be one that retailers couldn’t feasibly decline to accept. It would have more power, in theory, to keep its interchange fees high. Merchants might be able to get other perks when they use a beefed-up Discover network, like access to data or anti-fraud services. In any case, they get no direct say on the deal, though will certainly feature in any antitrust deliberations.

Even assuming Fairbank can get his deal through Washington, there’s another group to persuade: his investors. Their expectations are currently low, judging by Capital One’s share-price performance. The two companies’ combined market value has increased by just $3 billion since they announced their merger in February. Had they kept pace with the FTSE USA Banks Index, they would be worth $5 billion more. It’s as if investors fear the deal will destroy value, despite the companies’ estimated annual cost savings of $2.7 billion.

Reuters Graphics

That’s not an idle fear. Discover has been a distant runner-up in credit card transactions for nearly 40 years. Closing the “perceived acceptance” gap will take investment, and lots of it. In particular, any credit card pitched at wealthy customers must be widely usable overseas too. And yet reaching all corners will be costly. Capital One’s $4 billion marketing expense is already almost as big as the colossal JPMorgan’s

(JPM.N), opens new tab

.

Of all the challenges the Discover deal presents, turning a tiny U.S. network into a global one is the greatest. International expansion is rarely successful in retail banking – even JPMorgan is a minnow outside of its home market - and adding enough merchants to achieve critical mass is a guaranteed slog. It’s no accident that Visa’s $540 billion market capitalization is 10 times that of Capital One: it has achieved something impossible to replicate. Fairbank, though, may just see that as the next big career challenge.

For more insights like these, click here, opens new tab to try Breakingviews for free.

Editing by Lauren Silva Laughlin, Pranav Kiran and Streisand Neto

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

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Morning Bid: Europe jolted by Macron's snap election call | Reuters

A look at the day ahead in U.S. and global markets by Samuel Indyk

The expected rightward shift in the European Parliament after a

four-day election

has still managed to jolt European markets as gains for the far-right in France prompted French President Emmanuel Macron to call a

snap parliamentary election

.

French bonds and

stocks

were sold off while the euro dropped as political uncertainty had investors heading for the exits.

French banks were some of the hardest hit, with BNP Paribas

(BNPP.PA), opens new tab

, Credit Agricole

(CAGR.PA), opens new tab

and Societe Generale

(SOGN.PA), opens new tab

all tumbling between 4.5%-7.4%.

It's a big negative shift after what had been looking like a more positive outlook for Europe.

The

European Central Bank

last week began lowering borrowing costs after its steepest ever tightening cycle, inflation has been drifting back towards target and surveys have indicated

growth may have bottomed

.

In contrast, the Federal Reserve looks like it could refrain from cutting

interest rates

until the fourth quarter, growth appears to be shaky - albeit after more robust growth at the start of the year - and inflation looks stickier.

So as global investors had been warming to European markets, the election results and heightened political uncertainty may bring about a shift in sentiment.

At least for now, that's evident. France's main CAC 40 stock index

(.FCHI), opens new tab

was down 1.9%, dragging other European markets lower. Germany's DAX, Britain's FTSE 100, Spain's IBEX and Italy's FTSE MIB were all off between 0.4%-1%.

Yet U.S. futures were relatively unperturbed. E-mini S&P futures are down around a quarter of one percent, while futures on the Nasdaq are lower by a similar amount.

Reuters Graphics

French bonds are similarly as unloved as the equity market.

The spread between France and Germany's 10-year yields, a gauge of risk premium investors seek to hold French bonds over German paper, widened over 6 basis points.

The euro was down 0.4% against the dollar to its lowest level in a month.

The U.S. day looks quieter but with U.S. CPI figures and the conclusion of the Fed's June meeting on Wednesday, the week is not expected to stay that way for long.

Markets are pricing with near certainty that the Fed holds rates this week while a July cut has been almost completely ruled out too. September is now just a 50/50 shot.

A shift in tone from the Fed this week or softer CPI figures could once again have markets betting on more than one rate cut this year.

Key developments that should provide more direction to U.S. markets later on Monday:

* U.S. employment trends data

* U.S. to sell 3- and 6-month bills, 3-year notes

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Reporting by Samuel Indyk; Editing by Toby Chopra

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

SNAPSHOT Wall Street slips as investors prepare for inflation data, Fed meeting | Reuters

June 10 (Reuters) - U.S. stocks indexes edged lower on Monday as investors grew cautious ahead of key inflation data and a Federal Reserve meeting scheduled for this week, looking for hints on the central bank's policy-easing stance this year.

The Dow Jones Industrial Average

(.DJI), opens new tab

fell 14.09 points, or 0.04%, at the open to 38,784.90.

The S&P 500

(.SPX), opens new tab

opened lower by 5.77 points, or 0.11%, at 5,341.22, while the Nasdaq Composite

(.IXIC), opens new tab

dropped 49.68 points, or 0.29%, to 17,083.45 at the opening bell.

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Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Pooja Desai

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Starliner flight is one big step for Boeing's space capsule, but many hurdles remain | Reuters

Item 1 of 2 A United Launch Alliance Atlas V rocket carrying two astronauts aboard Boeing's Starliner-1 Crew Flight Test (CFT), is launched on a mission to the International Space Station, in Cape Canaveral, Florida, U.S. June 5, 2024. REUTERS/Joe Skipper/File Photo

[1/2]A United Launch Alliance Atlas V rocket carrying two astronauts aboard Boeing's Starliner-1 Crew Flight Test (CFT), is launched on a mission to the International Space Station, in Cape Canaveral, Florida, U.S. June 5, 2024. REUTERS/Joe Skipper/File Photo Purchase Licensing Rights, opens new tab

WASHINGTON, June 10 (Reuters) - Boeing's Starliner spacecraft scored a crucial achievement last week with the

delivery of two astronauts

to the International Space Station, but

problems encountered

along its journey in space and more hurdles that lie ahead make the aerospace giant's goal toward routine missions a distant prospect.

The CST-100 Starliner capsule's first crewed docking with two astronauts to the International Space Station on Thursday marked a long-sought safety demonstration for two audiences: NASA, which wants a second U.S. spacecraft for rides to orbit, and the nascent market for private astronaut missions that is currently dominated by Elon Musk's SpaceX and its Crew Dragon capsule.

But before Boeing can chip away at

SpaceX's grip

on government and private orbital human spaceflight, its Starliner has several more test objectives to reach.

"It's a critical step, because if they can't successfully transport human beings to space, and safely return them, then they haven't proven what they need to do to conduct any missions," said Patricia Sanders, who until February was the longtime chair of NASA's Aerospace Safety Advisory Panel.

The crew -

veteran astronauts

and test pilots Butch Wilmore and Suni Williams - could return to Earth as soon as June 14 or stay as long as 45 days, NASA officials said.

During Starliner's 24-hour trek to reach the space station orbiting some 240 miles (386 km) above, the gumdrop-shaped spacecraft

sprang four helium leaks

and had five onboard thrusters go dead, delaying its ISS docking.

"Starliner made us work a little harder to get docked," NASA's commercial crew chief Steve Stich told a news conference Thursday night.

But some achievements include Wilmore taking manual control and testing steering, overall mission safety and the craft autonomously docked at the station. Over the next several days, Starliner will aim to show it can undock, maneuver more, then safely return to Earth.

Still, the helium leaks and propulsion failures, while no danger to astronauts, NASA officials said, are a nagging concern.

Boeing first found a leak of helium - used to add pressure to the thruster's propellants - while Starliner was on the ground last month, and NASA officials deemed it low-risk for flight. NASA officials said the thruster failures appeared similar to those found on Starliner's 2022 uncrewed test to the ISS.

"We don't quite understand why they're happening," Stich said.

Boeing has said it plans to redesign valves on Starliner's propulsion system after the company and NASA identified a flaw in 2022. And the company is receiving $5.5 million from NASA to study potentially redesigning Starliner's batteries, according to federal contract records.

"If they had something that required a design change that was going to be expensive and time-consuming, it may impact their business decision for going forward," Sanders said.

Starliner development challenges already have cost Boeing roughly $1.5 billion.

Starliner redesigns could drag out if Boeing has to involve its supply chain. In 2022, Boeing and its propulsion system supplier, L3 Harris'

(LHX.N), opens new tab

Aerojet Rocketdyne,

feuded for months

over which company was responsible for defects in Starliner's propulsion system valves and who would pay for the components' redesign, Reuters reported that year.

The company said it might implement that design change on a later flight, while a temporary workaround is in place.

Musk has boasted

SpaceX as having an edge

in being more vertically integrated.

A novel valve issue on SpaceX's Crew Dragon in 2019 caused one of its spacecraft to explode during an uncrewed ground test in 2019, prompting SpaceX to redesign the capsule's abort propulsion system. The redesigned system flew its first crew roughly a year later. And the company in 2021 redesigned Crew Dragon's toilet in less than two months.

"Fixing a design flaw or even something of concern like a battery is much, much easier in a vertically integrated company," said Abhi Tripathi, former SpaceX Crew Dragon mission director who was involved in the spacecraft's design changes.

It is not yet clear to NASA officials if the issues that occurred during Starliner's first crewed mission would warrant redesigns. NASA and Boeing will spend months reviewing mission data and examining the flight problems to determine if Starliner can be certified for routine flights.

"It's not a success until they safely return, and until we understand the implications of any anomalies that occurred during the mission," Sanders said.

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Reporting by Joey Roulette; editing by Chris Sanders, Peter Henderson and Josie Kao

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- Apple to showcase AI integration at developer conference

- Revamped Siri, potential OpenAI partnership among highlights

- Apple aims to allay investor doubts in AI race with Microsoft

June 10 (Reuters) - Apple

(AAPL.O), opens new tab

is expected to showcase how it is integrating artificial intelligence across its software suite, including a revamped Siri voice assistant and a possible tie-up with ChatGPT owner OpenAI, at its annual developer conference on Monday.

More is at stake at the Apple Worldwide Developers Conference (WWDC 2024) than in previous such events, as the iPhone maker seeks to reassure investors that it has not lost the AI battle to Microsoft

(MSFT.O), opens new tab

even though it may have forfeited a few rounds.

Apple will have to show the vast majority of its more than 1 billion users - most of whom are not tech aficionados - why they would want the new breed of AI that has swept Silicon Valley, analysts said.

"Apple will put on a show," said Ryan Reith, analyst at market research firm IDC. "If they nail the landing, the potential is to get the consumer actually interested in AI because so far it has been mostly about enterprise."

Apple has been using AI behind the scenes for years to power features on its devices, such as the ability of its watches to detect crashes and falls. But it has been

reluctant to tout

how this technology boosts functionality in its devices, as Microsoft has done with the help of its early bet on OpenAI.

Microsoft overtook Apple as the world's biggest company by market capitalization in January, and Apple's shares have trailed those of other Big Tech companies this year. AI chip giant Nvidia

(NVDA.O), opens new tab briefly overtook Apple last week

as the world's second-most valuable company, underscoring for some investors a shift in power in the tech world.

"Apple's early reticence toward AI was entirely on brand. The company has always been famously obsessed with what its offerings did for its customers rather than how it did it," said Forrester analyst Dipanjan Chatterjee.

"But then the AI silence got deafening. All that will change on June 10," he said.

Apple uses the developer conference at its Cupertino, California, headquarters each year to showcase updates to its own apps and operating systems as well as to show developers new tools they will be able to use in their apps.

Microsoft, Nvidia challenge Apple's market dominance in AI era Microsoft, Nvidia challenge Apple's market dominance in AI era

SIRI MAKEOVER

Apple is expected to enable Siri to essentially control many apps on a user's behalf. This has proven tricky as Siri needs to understand the user's exact intentions and also how the app works.

For example, if a user asks Siri to delete an email, Siri needs to understand which email the user wants to delete and how that function works on, say, Microsoft Outlook versus Gmail.

Apple tried to make Siri smarter in 2018 with tools that allowed developers to code into their apps ways for Siri to have more control, but few showed interest.

Now, Apple is expected to revamp Siri's underlying software with generative AI. Media have reported that Apple and OpenAI struck a deal to integrate the ChatGPT maker's technology into Apple's next iPhone operating system, iOS 18.

Some Apple investors are confident that the AI new features will boost sales of new iPhones at a time when the company is grappling with strong competition in China and slower growth in the U.S.

"This should translate into a strong hardware refresh cycle for Apple," in 2025, said Dan Eye, chief investment officer at Fort Pitt Capital Group, which holds Apple shares. Eye expects Apple to limit some AI features on older models to entice people to buy newer phones.

Reuters Graphics

CHIPS FOR AI

Earlier this month, Apple unveiled a new AI-focused chip in its latest iPad Pro models and analysts expect the company to offer details to developers on how they can use the chip's capabilities to support all the new AI computing.

The company may also begin to talk about its own cloud-computing capabilities amid reports that Apple was planning to use its own chips inside data centers for the first time.

Apple recently hired Sumit Gupta, a former Google and IBM

(IBM.N), opens new tab

executive who worked on AI data center development at both firms.

By using its own chips for cloud services, Apple can roll out advanced AI features that devices cannot handle alone, without requiring expensive processors from Nvidia. The approach also retains many of Apple's privacy and security features that are baked in to the design of its in-house chips.

The developer conference runs until Friday.

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Reporting by Stephen Nellis in San Francisco and Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Matthew Lewis

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June 10 (Reuters) - The latest U.S. payrolls report did little to settle the debate about where the job market is headed, with ample fodder for both "soft-landing" believers and doubters over whether the Federal Reserve can tame inflation without sending millions of workers onto the jobless rolls.

True, the

"blowout" gain

of 272,000 jobs in May exceeded every single estimate among 77 economists polled by Reuters ahead of the release of the report on Friday, and the breadth of hiring was the widest in 16 months.

But also true is that the increase in the unemployment rate to 4% snapped a run of more than two full years below that benchmark. Moreover, that rise happened for the "wrong" reasons: People left the workforce on balance, while more reported as unemployed and far fewer as having a job.

Here are some of the numbers that have economists jawboning.

Reuters Graphics

BREADTH

The employment gain last month was almost exactly in line with the 12-month trailing average of nearly 276,000 jobs and exceeded the average of 188,000 over the 10 years prior to the COVID-19 pandemic by 84,000.

On top of that, hiring was broad. In fact, it was the most widespread among all 250 industries tracked by the Bureau of Labor Statistics since January 2023. For the 72 manufacturing industries tracked by the BLS diffusion index, hiring was the broadest since October 2022, signaling perhaps a turnaround for a sector where employment growth has lagged for roughly a year and a half.

Reuters Graphics Reuters Graphics

ALL BACK

All the major industry groups are now back above their pre-pandemic employment levels, with a revision to the numbers in April lifting the lone laggard - leisure and hospitality - back above its high-water mark from before the onset of the health crisis in early 2020. That group also suffered the largest losses during the pandemic.

Reuters Graphics

THE 4% CLUB PARTIES ON

The unemployment rate rose to the highest level since January 2022, snapping a streak of 27 straight months below 4%, the longest sub-4% run since the 1960s and a bragging point for Democratic President Joe Biden's administration.

But 4% is still a historically low level of joblessness and just six of the 14 presidents in the post-World War Two era have governed during such a stretch, including the two most recent, Biden and his predecessor, Republican Donald Trump. It's a figure to watch as the two rivals face off again in the Nov. 5 presidential election.

Reuters Graphics

PRIME TIME

While the overall number of people in the workforce shrank by 250,000 in May and the labor force participation rate fell, a key demographic held its ground: prime-aged workers between 25 and 54 years old. The participation rate for this group - the largest slice of the U.S. workforce - rose to a record 83.6%.

Women have led the charge. Not only is the prime-aged female participation rate of 78.1% a record high, it's just 11.1 percentage points below the rate for prime-aged males - the smallest gap ever. The rate for men edged up but, at 89.2%, is below where it was before the pandemic and is well below the over-90% range that prevailed prior to the 2007-2009 financial crisis.

Reuters Graphics Reuters Graphics

NEWCOMERS

The immigration wave is still leaving its imprint on the U.S. job market, as foreign-born workers continue to account for the largest share of job gains and workforce growth. That could change in the months ahead, however, with the Biden administration clamping down on crossings at the southern border.

Reuters Graphics

FALTERING FLOWS

Beneath the data on changes in the overall level of the workforce are figures on the flows driving those changes. Every month the workforce status of millions of people changes among the three broad categories: Employed (with a job); unemployed (no job but actively seeking one); and not-in-labor-force (no job and not looking for one).

For example, did a person graduate from high school or college and land a job (not-in-labor-force to employed), get fired from a job and start looking for a new one (employed to unemployed), start a job search after months or years on the sidelines (not-in-labor-force to unemployed), land a job after a period of actively seeking a job (unemployed to employed), or retire from a job or quit to take care of a child or relative (employed to not-in-labor-force)?

Through much of the last two years, more people on balance have flowed into the workforce, either as job recipients or job seekers, than have flowed out of it. That has begun to change, and over the last six months more people on average have flowed out of the workforce altogether than have flowed in. And the share of those quickly landing a job as new members of the labor force is declining.

Reuters Graphics

TALE OF TWO SURVEYS

While the establishment survey of the latest employment report showed payroll job gains of 272,000, the household survey side showed employment dropped precipitously, by more than 400,000. The two frequently do not agree on size or even direction of monthly changes, but over time do track each other.

The household measure of employment has been flat for roughly a year - with declines seen in five of the last eight months - while the establishment survey has shown more than a quarter of a million new jobs a month on average. Economists say that at some point one or the other must give. Which will it be?

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Reporting by Dan Burns; Editing by Paul Simao

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WASHINGTON, June 10 (Reuters) - Updated economic projections from Federal Reserve officials this week are expected to show fewer interest rate cuts than policymakers anticipated three months ago, faster expected inflation, and slower growth, a pinpoint economic outlook that will carry the weight of the U.S. central bank's authority.

It may also come with what amounts to a consumer warning from Fed Chair Jerome Powell: Actual results may vary.

With their forecasts stymied last year by faster economic growth and lower inflation than expected, and now by higher inflation and slowing growth, Fed officials of late have supplemented discussion of their outlook with the top alternate paths they think the economy may follow.

Both a nod to what they don't know and a way to keep public expectations more fluid, it's a strategy Powell may well follow in his press conference after the end of a two-day policy meeting on Wednesday as a way to shift the center of attention from the new Summary of Economic Projections and its market-shaping plot of where officials think the policy interest rate is heading, with a focus on the median.

Reuters Graphics Reuters Graphics

"I always emphasize the importance of a story ... that ties together in a coherent way the macro outlook and policy strategy," Larry Meyer, a former Fed governor who now heads consulting firm Monetary Policy Analytics, wrote last week. "The strength of the story ... depends on the degree of uncertainty, which has spiked of late. In that case, we should pay more attention to alternative scenarios."

Since the end of last year, precision has not been the Fed's ally as officials appeared to lock in three rate cuts for the year, only to be side-swiped by inflation that didn't decline as expected. As a result, they'll likely revise their outlook to just two quarter-percentage-point rate reductions for the year or perhaps just one, with doubts even around that.

Reuters Graphics Reuters Graphics

STIFF INFLATION

The U.S. Labor Department on Wednesday will publish new inflation data just hours before the 2 p.m. EDT (1800 GMT) release of the Fed's updated projections and new policy statement. Powell's press conference will follow at 2:30 p.m. EDT. The central bank, which aggressively raised rates in 2022 and 2023 to combat a surge in inflation, is widely expected to keep its benchmark interest rate in the 5.25%-5.50% range that was set last July.

Key measures of inflation have barely budged

since the last set of projections in March and the April 30-May 1 policy meeting, leaving officials still wary about making an initial rate cut until inflation moves lower. In particular, inflation in the new policy statement is still likely to be described as "elevated," pushing the rate-hike debate further down the road.

As of April, the personal consumption expenditures price index, which is used to set the Fed's 2% inflation target, was increasing at a 2.7% annual rate.

Reuters Graphics Reuters Graphics

Yet unlike the rest of the time since the outbreak of the COVID-19 pandemic in early 2020, the risks now are more nuanced and the data often contradictory. Initially, central bankers were only focused on lowering the unemployment rate after a massive jump in joblessness during the months when many in-person services were shuttered; later the sole focus was on curbing inflation that by mid-2022 had erupted to a 40-year high.

Today, policymakers are neither fully convinced inflation will return to the 2% target without a longer period of tight monetary policy, nor fully assured that the job market won't come under stress and slide fast toward

higher unemployment

.

Data released last week in fact showed one

labor market indicator

returning to where it was before the pandemic, an encouraging sign of normalization that also put it near what one Fed governor described as a sort of trigger point for rising unemployment.

Reuters Graphics Reuters Graphics

'MORE NUANCED PICTURE'

Fed Governor Christopher Waller has looked closely at the relationship between labor demand and unemployment dynamics, and in a speech in January said his research suggests that if the job openings rate fell below 4.5% "there would be a significant increase in the unemployment rate."

The rate as of April was 4.8, down from a pandemic peak of 7.4 in March of 2022 and from 5.3 this past February.

"If Waller is correct, then the economy may sooner than expected approach a point where the Fed needs to take the employment mandate into account," Tim Duy, chief U.S. economist with SGH Macro Advisors, wrote last week, referring to the Fed's dual congressionally-mandated goals of maintaining stable prices and low unemployment.

Yet hiring and wage growth remain robust. Data released on Friday showed U.S. firms added

272,000 jobs

in May, well above the average monthly pace of 183,000 in the decade before the pandemic, with wages rising at a 4.1% annual rate.

After seeing inflation fall quickly last year at little apparent cost to the job market or economic growth, officials have been "trying to wrap their head around" whether further progress in lowering price pressures will require a cooled economy and rising joblessness, Chicago Fed President Austan Goolsbee said in late May.

Reuters Graphics Reuters Graphics

That would mark a return to one of the more traditional economic tradeoffs policymakers contend with, and also be a sign that some of the excesses of the pandemic - the historic jump in job openings, the trillions in excess cash held by businesses and households, and the tangled global supply chains - had largely disappeared.

But it would also put a broader band of doubt around the Fed's own projections, and around the timing and pace of any move on interest rates.

The 4% unemployment rate recorded in May, for example, is already where policymakers at the median expect the U.S. to end the year; yet the ongoing job and wage growth offered clear signs of strength.

Like other recent data, it's a set of conflicting signals that the Fed will somehow have to either reconcile or deflect.

"The combination of robust payroll job creation, firmer wage growth and weaker labor supply pointed to a labor market that remains tight," said Lydia Boussour, a senior economist at EY-Parthenon. Yet the rise in the unemployment rate to more than a two-year high "painted a more nuanced picture and corroborated other data pointing to softer labor market conditions."

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Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao

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Covers the U.S. Federal Reserve, monetary policy and the economy, a graduate of the University of Maryland and Johns Hopkins University with previous experience as a foreign correspondent, economics reporter and on the local staff of the Washington Post.

June 10 (Reuters) - With major Tesla shareholders appearing divided over whether to endorse Elon Musk's $56 billion pay package, the company also is looking for support from retail investors who make up an unusually high percentage of the electric carmaker's ownership base.

Small investors tend to favor management, but they often don't bother to vote, experts said.

The company's June 13 annual meeting is shaping up as a referendum on Musk’s leadership, following a Delaware court's ruling

striking down

the hefty pay package. The company has asked investors to vote to reaffirm it and Musk stands to control more than 20% of the company if he gets it. A ‘no’ vote would be a rebuke with unknown consequences.

Tesla also proposes reincorporating in Texas instead of Delaware and re-electing two directors, including Musk's brother, Kimbal.

While there are a dozen items up for a vote, Tesla is focused on the pay vote and the move to Texas in an ongoing outreach campaign to small shareholders that includes a

website, opens new tab

, engagement with online influencers, and

factory tours

for a few of those who vote.

Big investors have sent mixed signals. T. Rowe Price

(TROW.O), opens new tab

has said the package showed "

strong alignment

" with investor interests. But the California Public Employees' Retirement System meanwhile has said it will likely

oppose Musk's pay

as not commensurate with Tesla's performance, and Norway's

sovereign wealth fund

came out against the pay package on Saturday.

Although small investors have an array of opinions, experts in corporate vote campaigns say the size and CEO-friendly nature of many individual investors at Tesla make them an obvious target.

"The man ends up 10x-ing my investment and he's given nothing? It doesn't seem right or fair," said Andrew Theyken Bench, a lawyer in Allentown, Pennsylvania with fewer than 5,000 Tesla shares, who voted by proxy with management on all items at the meeting, including Musk's pay.

In a post on his social media platform X on Saturday

Musk wrote, opens new tab

: "So far, roughly 90% of retail shareholders who have voted have voted in favor of both resolutions," apparently including the one on his pay.

Bruce Goldfarb, president of Okapi Partners, a proxy solicitor not involved in this vote, said 90% support from retail investors would be "about normal" since the category generally favors management. But such investors usually don't vote, posing a challenge for Tesla.

"Retail shareholders are wildly apathetic even if they’re supportive," Goldfarb said.

Mom-and-pop investors only voted about 30% of their shares in 2023, according to vote-processing company Broadridge, compared to 80% for institutional investors.

The theme of fairness to Musk is the heart of Tesla's campaign. Chair Robyn Denholm described the vote as being about "fairness, respect and the future of Tesla." She also warned Musk has limited time and a variety of interests.

"We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners. But that requires reciprocal respect,” she wrote in a June 5 letter.

A Tesla representative declined to comment.

LEADING THE PACK

Data and research firm S&P Global Market Intelligence found that as of June 5, about 43% of Tesla's common stock is held by the "public and other" category of shareholders that includes retail investors and others outside of the main categories of institutional investors and company insiders.

That is the most of any of the 15 largest companies in the S&P 500.

Reuters Graphics

Musk's own stake in the company is around 13%. Among top outside investors, Vanguard has 7.2% of the shares and BlackRock

(BLK.N), opens new tab

has 5.9%, according to Tesla's proxy. Neither would comment about their voting intentions.

GUT ASSESSMENT: 50% CHANCE

Both major proxy advisers,

Institutional Shareholder Services

and

Glass Lewis

, have recommended investors vote against ratification of the pay package, calling it excessive.

That's a bad sign for Tesla. Among Russell 3000 companies from 2010 to 2020 only 66% of "say on pay" resolutions passed when both proxy advisers recommended votes against them, compared with 99% when both supported the pay, said University of Utah finance professor Chong Shu.

Omar Qazi, an X.com user with 475,300 followers who posts using the handle @WholeMarsBlog and often gets public replies from Musk on the platform, said his "gut assessment" was there is only a 50% chance that a majority of Tesla investors back the re-ratification of Musk's pay.

"Many support Musk and see the importance of compensating him but many are also upset about a variety of factors: politics, slowing sales, stock price etc," Qazi said by direct message on X.

Shares at Tesla closed Friday at $177.48, well below the $248.48 where they ended trading in 2023, as the company faces growing competition and questions about its plans for new models.

A DEAL'S A DEAL

Nonetheless Musk still enjoys support online from influential users. In addition to Qazi these include Alexandra Merz, who posts as @TeslaBoomerMama on X.com and has had several posts

reposted by Musk, opens new tab

to call attention to voting.

Those posts urged non-U.S. banks and brokerages to allow Telsa investors to vote, something the companies' systems did not previously allow. Several subsequently did so including Sweden's Nordnet

(SAVE.ST), opens new tab

.

"I've been invested in other companies before and I've never seen the amount of effort by an informal community to get out the vote like there is on this one," said Troy Dillon, a retired U.S. Air Force officer in Florida and Tesla shareholder.

As for the pay package, "The deal was the deal," Dillon said. He is voting for it.

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Reporting by Ross Kerber; Additional reporting by Abhirup Roy, Hyunjoo Jin, Louise Rasmussen and Gwladys Fouche; Editing by Peter Henderson and Anna Driver

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Ross Kerber is U.S. Sustainable Business Correspondent for Reuters News, a beat he created to cover investors’ growing concern for environmental, social and governance (ESG) issues, and the response from executives and policymakers. Ross joined Reuters in 2009 after a decade at The Boston Globe and has written on topics including proxy voting by the largest asset managers, the corporate response to social movements like Black Lives Matter, and the backlash to ESG efforts by conservatives. He writes the weekly Reuters Sustainable Finance Newsletter.

Aston Martin to raise UK workers' annual pay by 4% | Reuters

June 10 (Reuters) - British luxury carmaker Aston Martin

(AML.L), opens new tab

said on Monday it would raise annual pay by 4% for more than 2,500 employees and contractors across its UK manufacturing sites and offices for 2024 and 2025.

Manufacturing technicians at the London-listed company will also receive a 1.5% rise in 2025, alongside a one hour reduction in the working week, it said.

All eligible employees will also receive a one-off payment of 1,000 pounds ($1,271.60) due to the continued high cost of living, Aston Martin added.

"Following lengthy negotiations between Unite the Union and Aston Martin Lagonda, Unite members have voted in large majority to accept the two-year pay deal," a spokesperson for Unite said in the statement.

The pay deal comes as Aston Martin stopped production of old models ahead of a

ramp-up

of production of fresh models later this year.

($1 = 0.7864 pounds)

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Reporting by Yadarisa Shabong in Bengaluru; Editing by Eileen Soreng

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Exclusive: BP tightens workplace relationships policy after Looney dismissal | Reuters

- BP updates its conflict of interest policy

- Senior staff have three months to disclose relationships

- Staff face potential sacking for failure to comply

LONDON, June 10 (Reuters) - BP

(BP.L), opens new tab

employees must disclose any intimate relationships with colleagues or risk losing their jobs, the oil major told staff in a policy update, following the sacking of former CEO Bernard Looney for failing to do so.

The updated conflicts of interest policy, which was communicated to staff via email last week and seen by Reuters, highlights how Looney's

sudden departure

last September continues to reverberate through the company.

The updated policy "prohibits employees from directly or indirectly managing relatives or those with whom they're in an intimate relationship," according to the memo.

The London-listed company said that employees will face disciplinary action including potential dismissal for failing to comply with the new requirements.

In addition to the updated policy, which is part of BP's code of conduct, thousands of senior leaders are required to declare any intimate relationships with employees or agency workers occurring within the last 3 years. The managers were given a three-month grace period running to Sept. 1 to make such declarations.

BP confirmed the policy update regarding conflicts of interest arising from familial and intimate relationships at work.

"Employees were previously required to disclose and record such relationships if they felt there could be a conflict of interest," the company said in an emailed statement. "Now they are required to disclose intimate relationships at work, whether or not they feel they represent a conflict of interest."

BP concluded its investigation into Looney's conduct with the help of law firm Freshfields earlier this year and has not disclosed its findings or conclusions, two sources familiar with the matter told Reuters.

"The board has looked at the details and is making sure that themes and lessons are taken into consideration and adopted appropriately," BP said in the emailed statement.

BP's board dismissed Looney last December and

clawed back

up to $40 million of his remuneration. The company said Looney had knowingly misled the board by failing to disclose past relationships.

Looney's departure came after the board investigated similar allegations against him in May 2022, following which Looney gave the board assurances over his past and future conduct.

BP's shares have dropped by over 11% since Looney's departure, underperforming rivals amid ongoing investor concerns over the company's energy transition strategy. Its new CEO Murray Auchincloss, who took office in January, has sought to

steady the ship

by promising to boost returns.

Auchincloss' partner is also a BP employee, a relationship he disclosed prior to becoming chief financial officer in 2020.

($1 = 0.7859 pounds)

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Reporting by Ron Bousso; Editing by Emelia Sithole-Matarise

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Ron has covered since 2014 the world’s top oil and gas companies, focusing on their efforts to shift into renewables and low carbon energy and the sector's turmoil during the COVID-19 pandemic and following Russia's invasion of Ukraine. He has been named Reporter of the Year in 2014 and 2021 by Reuters. Before Reuters, Ron reported on equity markets in New York in the aftermath of the 2008 financial crisis after covering conflict and diplomacy in the Middle East for AFP out of Israel.

FACTBOX US energy sector consolidation extends into 2024 | Reuters

June 10 (Reuters) - The consolidation wave in the U.S. energy sector that triggered $250 billion worth of deals in 2023 has stretched into this year, as companies look for opportunities to deploy their cash hoard and boost their reserves.

The majority of energy executives polled in December by the Federal Reserve Bank of Dallas expected more oil deals worth $50 billion or higher to pop up in the next two years.

In 2023, some 39 private companies were acquired by public companies, Enverus data showed.

Below is a list of deals in the U.S. oil and gas sector so far this year:

Following are some of the biggest deals which were announced in 2023:

Reuters Graphics

This graphic does not include the ConocoPhillips-Marathon Oil and Noble-Diamond Offshore deals.

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Compiled by Mrinalika Roy, Sourasis Bose, Tanay Dhumal, Vallari Srivastava and Seher Dareen in Bengaluru; Edited by Vijay Kishore and Savio D'Souza

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Japan's service sector mood hits nearly 2-year low in May | Reuters

TOKYO, June 10 (Reuters) - Japan's service sector sentiment worsened in May to levels unseen in nearly two years, government data showed on Monday, as rising fuel and food costs from a weak yen dragged on household spending.

The data highlights the fragile nature of consumption, making it harder for the Bank of Japan to justify further interest rate hikes.

An index measuring sentiment among service-sector firms like taxi drivers and restaurants stood at 45.7 in May, down 1.7 point from the previous month and hitting the lowest level since August 2022, the survey showed.

Moreover a gauge of firms' sentiment on the economic outlook also fell 2.2 points to 46.3, worsening for the third straight month and marking the lowest level since July 2022.

The "economy watchers" survey is closely watched by markets as a leading indicator of household spending and the broader economy, due to the polled firms' proximity to consumers.

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Reporting by Leika Kihara and Kentaro Sugiyama Editing by Shri Navaratnam

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- As EU probes China auto subsidies, European nations offer their own incentives to land factories

- China EV giants BYD, Chery consider second plants in Europe

- State-owned SAIC has location shortlist for two plants in the region

European governments may be wary of budget Chinese electric vehicles flooding their markets but they're also fiercely competing for a share of the manufacturing investment and jobs the new competitors bring.

While the European Union investigates China's auto subsidies and considers tariffs on imports, national governments across the bloc are dangling their own incentives to attract Chinese automakers looking to build European factories.

Manufacturing costs for Chinese EV makers including BYD

(002594.SZ), opens new tab

, Chery Automobile (CHERY.UL) and state-owned SAIC Motor are much lower at home but they are nonetheless keen to set up in Europe to build their brands and save on shipping and potential tariffs, said Gianluca Di Loreto, a partner at consultancy firm Bain & Company.

"Chinese automakers know their cars must be perceived as European if they want to bear interest among European customers," he said. "This means producing in Europe."

The EU tariff decision is

expected this week

. On one hand, import taxes could help European automakers better compete with their Chinese counterparts, but they may also spur on Chinese automakers which are

already investing heavily

, and for the long-term, in Europe.

Sales of Chinese-brand cars comprised 4% of the European market last year and are forecast to hit 7% by 2028, according to consulting firm AlixPartners.

Hungary, which produced around 500,000 vehicles in 2023, secured the first European-factory investment by a Chinese automaker, announced last year by EV giant BYD which is also considering

a second European plant

in 2025.

Budapest is also negotiating with Great Wall Motor

(601633.SS), opens new tab

for its first European plant, local media have reported, with the country offering cash for jobs creation, tax breaks and relaxed regulation in targeted zones to attract foreign investment.

Hungary has spent more than $1 billion in recent years to support new battery plants of South Korean groups SK On and Samsung SDI

(006400.KS), opens new tab

and Chinese battery giant CATL's

(300750.SZ), opens new tab

planned factory.

Representatives of BYD, Great Wall and Hungary did not respond to requests for comment.

China's Leapmotor

(9863.HK), opens new tab

will use existing capacity of Franco-Italian partner Stellantis

(STLAM.MI), opens new tab

, with Reuters reporting the pair have chosen the

Tychy plant

in Poland as a manufacturing base.

Poland has a number of programmes currently supporting more than $10 billion of investments, the country's development and technology ministry told Reuters, including one favouring the transition to a net-zero economy and another offering corporate income tax relief, of as much as 50% in high-unemployment regions.

Reuters Graphics

SPAIN, ITALY CHASE EV FACTORIES

Spain, Europe's second largest car-making country after Germany, has secured

investment from Chery

, which will start production in the fourth quarter at a former Nissan facility in Barcelona with a local partner.

Chery is expected to benefit from Spain's 3.7 billion-euro programme launched in 2020 to attract electric-vehicle and battery plants.

China's Envision Group has already received 300 million euros in incentives under the scheme for a 2.5 billion battery plant creating 3,000 jobs. Spain might also host Stellantis' planned

fourth gigafactory

in Europe, with CATL.

Chery plans a second, larger facility in Europe, a source with knowledge of the company's plans told Reuters, and has held talks with governments including Rome, which is keen to attract a second automaker to rival Fiat-maker Stellantis.

Italy can tap its national automotive fund, worth 6 billion euros between 2025-2030, for incentives for both car buyers and manufacturers. China's Dongfeng

(0489.HK), opens new tab

is among several other automakers that have held investment

discussions with Rome

.

Italy's industry ministry declined to comment. Dongfeng and Chery did not respond to requests for comment.

SAIC, owner of the venerable MG brand, aims to build two Europe plants, two sources familiar with the matter told Reuters.

The first, based at an existing facility, could be announced as early as July and would employ a kit-assembly technique, targeting annual production of up to 50,000 vehicles, one of the sources said. SAIC's second European plant would be built from scratch and produce up to 200,000 vehicles annually, the source added.

Germany, Italy, Spain and Hungary were on SAIC's location shortlist, the source said.

SAIC did not respond to a request for comment.

Reuters Graphics

CONTROLLING COSTS IN EUROPE

In Europe, Chinese automakers face higher costs for everything from labour to energy to regulatory compliance.

But costs for exporting made-in-China cars can add up quickly and threaten already narrow margins.

Bain & Company's Di Loreto said a 15,000-euro car produced in China requires shipping-and-logistics costs of between 500 and 3,000 euros.

Chinese automakers may find labour costs in Northern Europe too high for competitive production, Di Loreto said, whereas further south, Italy or Spain offer a balance of lower labour costs and relatively high manufacturing standards - particularly important for premium vehicles.

For lower-cost vehicles, Di Loreto said, attractive locations include Eastern Europe and Turkey, which currently produces around 1.5 million cars annually, mostly for the EU, and has

held talks

with BYD, Chery, SAIC and Great Wall.

Turkey's customs union with the EU and free trade deals with non-EU countries guarantee tariff-free vehicle and component exports.

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Australia's Nine Entertainment says Peter Costello steps down as chairman | Reuters

SYDNEY, June 10 (Reuters) - Australian broadcaster Nine Entertainment Co Holdings Ltd

(NEC.AX), opens new tab

said its chairman Peter Costello resigned on Saturday and has been replaced by non executive deputy chair Catherine West.

"Catherine West has been appointed Chair of NEC," the company said in a June 9 statement.

"The board wishes to thank Mr Costello for his contribution to Nine over more than a decade including eight years as chairman."

In addition to resigning as chairman, Costello would "also step down from the board effective immediately", Nine said.

Costello, Australia's former treasurer, said in a separate statement issued by Nine that the board needed a new chair to "unite them around a fresh vision".

West was appointed to Nine's board in May 2016 and became deputy chair in September 2023, according to Nine's corporate website.

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Reporting by Sam McKeith in Sydney; Editing by Muralikumar Anantharaman

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June 10 (Reuters) - The United States is merrily chipping away at the pillars that hold up the dollar as the world's reserve currency, with the latest blows coming from some powerful Americans questioning the rule of law following the conviction of Donald Trump.

In doing so, it is effectively daring the rest of the world to find an alternative - and so far, it appears to be winning.

The attacks on the legal system in the aftermath of former President

Trump’s conviction

follow other moves that are seen by some as the United States throwing down the gauntlet to the rest of the world.

The country has radically increased the use of sanctions as a punitive foreign policy tool. And it is adding on an

immense amount of debt

, leaving hapless foreigners who seek the safety and depth of its markets to fund its excesses.

Over the past three weeks, I have been asking financial services executives, global investors and other experts in Asia and the United States how long they think the Americans can keep at it without meaningful blowback. Several of the sources requested anonymity to speak candidly about the situation.

These conversations showed consternation is growing, both at home and abroad, about the consequences of U.S. hubris. But despite trying, no one so far has been able to find a credible alternative or expects one to emerge anytime soon, and they have partly themselves to blame.

In Asia, for example, people are asking with increasing urgency what's their '

America plus 1

', as they search for ways to reduce their U.S. exposure and boost non-dollar trade flows.

But attempts to build such systems are slow-going or haven't gotten traction. And rising authoritarianism, threats to individual and property rights and geopolitical tensions have meant that even if U.S. assets are less attractive than they were before, other options are worse.

A

recent survey

, for example, shows central bank reserve managers plan to increase their dollar holdings over the next 12-24 months as the rise in global geopolitical tensions and need for liquidity draw them to the currency.

"Perhaps ironically, the U.S. dollar's strength is, in part, due to its near-unchallenged safe-haven status," said Steve H. Hanke, a professor of applied economics at Johns Hopkins University, who served on former President Ronald Reagan's Council of Economic Advisers. "That said, most investors don't understand geopolitics and the dangers that lurk below the surface – until it's too late."

DOLLAR'S DOMINANCE

At its core, the dollar's dominant role in the world draws from the United States' democratic principles. It is supported by the massive size of its economy, the depth of its markets, and the strength of its institutions and the rule of law.

The belief in democracy runs deep. Last week, I asked U.S. Securities and Exchange Commission Chair Gary Gensler, who has been in government since 1997, whether partisan politics had made the job of officials like him harder. A conservative-leaning U.S. appeals court had

struck down one of his signature

initiatives that morning.

"I believe in this constitutional system that we have. It's messy," Gensler said. "It's democracy."

Nevertheless, the messiness is testing some of the underpinnings of the dollar's global appeal.

Attacks on the U.S. legal system have increased after the Trump verdict in a New York court. Florida Governor Ron DeSantis, for example, called it a "kangaroo court" on the social media platform X, saying "the verdict represents the culmination of a legal process that has been bent to the political will of the actors involved."

A major investor based in Asia said potential threats to U.S. institutions were also worrying. Any debasing of the Federal Reserve's authority -- as

Trump allies are reportedly contemplating

-- would affect the dollar’s credibility, the investor said, adding that such a development could see a double-digit depreciation of the currency.

Trump's campaign for his Republican presidential bid has played down such reports of what conservative groups might be planning.

THICKET OF SANCTIONS

A senior New York-based financial services executive who was traveling in Asia said he is hearing from clients who think the U.S. and Western financial policy is "undermining the dollar and the Western financial system more broadly."

He pointed to an "ever expanding thicket of sanctions" as one reason.

And the West is pushing the envelope further. The financial executive said the discussion that the West

might seize some $300 billion of sovereign Russian assets

that were blocked over Ukraine undermined the United States' safe haven status. "The West crossed a Rubicon there," the executive said.

An October 2021 Treasury Department review of sanctions found such designations had increased to 9,421 by that year from 912 in 2000. It noted at the time that "American adversaries — and some allies — are already reducing" their use of the dollar.

An Asia-based investor said he was watching another court case closely to test the strength of the rule of law: ByteDance's

challenge

of a U.S. ban on TikTok. He is watching for the evidence that the U.S. government would produce to back up claims of the app being a national security threat.

If no proof is publicly offered, then it would "feel that the checks and balance, the independence of the legal system, may not be there -- at least in this case," the investor said.

But then he added that even that may not turn him away from the United States. It's still more independent and better than many other places, he said.

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Reporting by Paritosh Bansal; Editing by Anna Driver

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Paritosh oversees the work of more than 100 journalists across the globe who write about finance and markets, including banking, financial technology, stocks, bonds, forex, corporate finance, white collar crime and environmental, social and governance (ESG) investing. He also writes a column, In the Market. With some 25 years in the profession and degrees in economics, journalism and physics, Paritosh has reported and edited the news file across the spectrum, from business and economics to politics and general news.

Item 1 of 2 Traders are pictured at their desks in front of the German share price index DAX board at the Frankfurt stock exchange on December 23, 2014. REUTERS/Remote/Pawel Kopczynski/file photo

[1/2]Traders are pictured at their desks in front of the German share price index DAX board at the Frankfurt stock exchange on December 23, 2014. REUTERS/Remote/Pawel Kopczynski/file photo Purchase Licensing Rights, opens new tab

LONDON, June 10 (Reuters) - A selloff in Europe set the tone for global markets on Monday as French President Emmanuel Macron's decision to call a

snap election

weighed on everything from the euro to banking stocks and government bonds.

Asia shares apart from Japan fell and U.S. stock futures pointed to a weak open on Wall Street, with an event-packed week ahead including the release of U.S. inflation data as well as Federal Reserve and Bank of Japan meetings.

For now, it's the prospect of

fresh political uncertainty

in the euro zone's second-biggest economy weighing on sentiment after far-right gains in European Parliament elections on Sunday prompted a bruised Macron to call a snap national election.

The euro fell to a one-month low against the dollar , European stocks slipped 0.6%

(.STOXX), opens new tab

, euro zone bank stocks tumbled 2%

(.SX7E), opens new tab

while government bond yields in France and Italy jumped.

"The market moves are all about what we are seeing in a European context - and news from France has caused a risk premium around European assets," said BlueBay Asset Management chief investment officer Mark Dowding.

"It could swing a bit further but we need to remind ourselves this is a parliamentary election not a presidential election in France."

French bank Societe Generale

(SOGN.PA), opens new tab

was last down more than 7% and BNP Paribas

(BNPP.PA), opens new tab

almost 5% as investors worried their funding costs may increase if French sovereign borrowing becomes more expensive amid higher spending, bankers said.

France's 10-year government bond yield jumped almost 10 basis points to 3.21% , while Italian borrowing costs also rose.

A BIG WEEK

Trading was thinned in Asia with Australia, China, Hong Kong and Taiwan observing public holidays.

MSCI's broadest index of Asia-Pacific shares outside Japan

(.MIAPJ0000PUS), opens new tab

slipped 0.4%, global shares were down 0.2%

(.MIWD00000PUS), opens new tab

and U.S. equity futures were also broadly lower , .

The global risk rally came to a halt after Friday's nonfarm payrolls report showed the U.S. economy created

far more jobs

than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labour market.

Futures now show roughly 36 basis points (bps) worth of U.S. rate cuts priced in this year, down from 50 bps last week. The odds for an easing cycle beginning

in September

have also lengthened.

The Fed's next

policy decision

comes on Wednesday, with U.S. inflation figures for May due just before that.

"With inflation still firmly above the 2% target, the Fed has more work to do to tame these forces and will not be in a position to deliver a rate cut when its committee meets next week," said David Arnaud, a senior Fund Manager, fixed income, at Canada Life Asset Management.

He said that with recent data pointing to a cooling of the economy, the Fed should be able to subtly adjust its message around upcoming rate cuts with a quarter point cut in the final three months of the year still likely.

U.S. Treasury yields, which move inversely to prices, rose on Monday, reflecting the higher-for-longer U.S. rate expectations.

The two-year yield and benchmark 10-year yield each ticked up over two bps to around 4.89% and 4.46%, respectively.

Against the dollar, the yen dipped to 156.81. The dollar index , which measures the greenback against a basket of six other major currencies, rose 0.3% to 105.34.

The Bank of Japan (BOJ) holds a two-day monetary policy meeting this week and could offer fresh guidance on how it plans to scale back its massive bond purchases.

In commodities, oil prices edged up, aided by hopes of rising fuel demand this summer, though gains were capped by the stronger dollar.

Brent crude futures gained 15 cents to $79.77 a barrel, while U.S. West Texas Intermediate crude futures added 12 cents to $75.62 per barrel.

Spot gold rose 0.25% to around $2,298 an ounce.

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Additional reporting by Rae Wee in Singapore, Mathieu Rosemain in Paris and Nell Mackenzie in London; Editing by Kirsten Donovan and Hugh Lawson

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Senior correspondent on the London markets team covering European sovereign bond markets and big macro and financial themes.

Euro tumbles after Macron calls snap French election | Reuters

LONDON/SINGAPORE, June 10 (Reuters) - The euro fell sharply on Monday, hit by political uncertainty after gains by the far right in voting for the

European Parliament

on Sunday prompted a bruised French President Emmanuel Macron to call a snap national election.

The uncertainty in France adds one more element to what will be a busy week for markets with crucial U.S. inflation data due on Wednesday, the same day as a Federal Reserve policy meeting, and then a Bank of Japan meeting rounding off the week.

The euro dropped 0.6% on the dollar to $1.0733 , its lowest since May 9. It also fell 0.4% on sterling to a near two-year low of 84.53 pence , and was last down 0.6% on the Swiss franc at a seven-week low of 0.9626 francs.

"The election results over the weekend from the EU largely showed a pick up in support for the right wing parties, generally what was expected, but the surprise element is that Macron has reacted by calling a snap election, so that makes the market more nervous," said Lee Hardman, senior currency analyst at MUFG.

"That's reinforced the sell off in the euro that we saw at the end of last week, and the other factor on top of that is the U.S. payrolls report was very strong, which increases the risk of a hawkish Fed policy signal when they meet on Wednesday."

The Federal Reserve will conclude its two-day policy meeting on Wednesday. Data on Friday showed non-farm payrolls increased by

272,000 jobs last month

, well above expectations in a Reuters poll for 185,000.

Markets are now pricing in 36 basis points (bps) of Fed rate cuts this year compared to nearly 50 bps - i.e. two 25 bp cuts - before the jobs data.

U.S. consumer inflation data will be another factor in the Fed's decision making. While no policy shift is expected at the meeting, the Fed will issue the latest batch of 'dot plots' policymakers' projections of the path of interest rates.

At the last such release in March, the median projection was for three 25-bp rate cuts this year. Investors will be watching to see by how much that is revised down.

The paring back of expectations for rate cuts has been supporting the dollar for much of 2024, with the Japanese yen suffering particularly.

The dollar was last up 0.1% on the Japanese currency at 156.85 yen , having jumped 0.7% on Friday after the payrolls print. With sterling down 0.14% at $1.2705 , the dollar index - which tracks the unit against six main peers - was up 0.22% at 105.29 , a one month high.

Japan will also be in focus this week, as the Bank of Japan is due to hold its two-day monetary policy meeting on Thursday and Friday, with the central bank widely expected to maintain short-term interest rates in a 0-0.1% range.

Reuters reported last week that BOJ policymakers are brainstorming ways to slow its bond buying and may offer fresh guidance.

Speculation is building in the market that the BOJ may tweak its bond buying arrangements, and if the central bank fails to meet these bets, the yen could come under further pressure.

"Without any hawkish surprise, JPY may be sold initially following the policy announcement, similar to what we have seen after the past meetings," analysts at Nomura said in a note.

"Moreover, in the case of dovish surprises, for example, if the BOJ avoids decreasing its JGB purchases or decreases its (Japanese government bond) purchases only very slightly, there is a risk that USD/JPY could overshoot to possible intervention territory again, like we saw in April."

Japanese officials spent around 9.8 trillion yen on

currency intervention

to support the currency in April and May.

($1 = 156.9 yen)

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Reporting by Alun John in London and Ankur Banerjee in Singapore Editing by Emelia Sithole-Matarise and Mark Potter

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Oil rises on hopes of summer fuel demand | Reuters

- U.S. jobs data dampens hope for near-term interest rate cuts

- Goldman Sachs forecasts Brent rise to $86 in third quarter

- Other analysts expect inventory draws to support prices

LONDON, June 10 (Reuters) - Oil prices rose on Monday, buoyed by hopes of rising fuel demand this summer, though gains were capped by a strengthening of the dollar on receding expectations of imminent cuts to U.S. interest rates.

Goldman Sachs analysts expect Brent to rise to $86 a barrel in third quarter, saying in a report that solid summer transport demand will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).

Brent crude futures gained 53 cents, or 0.7%, to $80.15 a barrel by 1320 GMT. U.S. West Texas Intermediate crude futures were up 57 cents or 0.8% at $76.10.

"The increase in prices started as the U.S. wakes up and kicks off the new week. Investors on the other side of the Atlantic clearly dismiss the Euro weakness and the resultant dollar strength due to French snap elections," said Tamas Varga of oil broker PVM.

"There is a growing conviction that demand will be buoyant as the summer driving season approaches leading to considerable stock draws".

Oil last week posted a third straight weekly loss on concerns that a plan to unwind some production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, from October will add to rising supply.

Despite the OPEC+ cuts, oil inventories have risen. U.S.

crude stocks rose

in the latest week, as did gasoline stocks. Energy consultancy FGE also expects oil to rally, with prices reaching the mid-$80s into the third quarter.

"We continue to expect the market to firm up," FGE said. "But it will likely need a convincing signal of tightening from preliminary inventory data."

A strong dollar weighed on the market, with the currency rallying after Friday's U.S. jobs data prompted investors to trim expectations for interest rates.

The euro, meanwhile, fell after French President Emmanuel Macron called a snap parliamentary election.

A stronger U.S. currency makes dollar-denominated commodities such as oil more expensive for holders of other currencies.

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Reporting by Alex Lawler and Noah Browning Additional reporting by Florence Tan; editing by David Goodman and Jason Neely

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- Q1 GDP -1.8% annualised vs initial -2.0%

- Capex helps upward revision to GDP

- Rebound seen this quarter but risks remain

TOKYO, June 10 (Reuters) - Japan's economy contracted less than initially reported in January-March on upward revisions to capital spending and inventory data, lending modest support to the central bank's plans to raise interest rates again this year.

Analysts expect the Japanese economy to have bottomed out in the first three months of the year, although a stubbornly weak yen and disruptions at major automaker plants continue to cloud the outlook for the current quarter.

Still, "the revised GDP results made it easier for the Bank of Japan (BOJ) to feel encouraged about future rate hikes as it can assess capital investment is picking up even by a little bit," said Kohei Okazaki, senior economist at Nomura Securities.

Japan's GDP shrank a revised 1.8% annualised in the first quarter from the previous three months, Cabinet Office data showed on Monday, a smaller decline that economists' median forecast for a 1.9% contraction and a 2.0% decline in the preliminary estimate.

The revised figure translates into a quarter-on-quarter contraction of 0.5% in price-adjusted terms, unchanged from the initial reading issued last month.

Reuters Graphics

People enjoy drinks and food at an izakaya pub restaurant at the Ameyoko shopping district, in Tokyo, Japan February 15, 2024. REUTERS/Issei Kato/file photo Purchase Licensing Rights, opens new tab

RATE HIKES

The revised GDP data comes on speculation the BOJ may discuss cuts in its Japanese government bond (JGB) purchases at its policy review this week as part of efforts to unwind monetary stimulus to curb yen weakening.

Investors are looking for clues on the timing of further rate hikes by the central bank, which raised rates in March for the first time since 2007 in a landmark shift away from ultra-loose monetary policy.

"We can say capital spending picked up in the latter half of the fiscal year-end in March 2024...current capex conditions are a relief but we must be cautious about the outlook," Okazaki said.

"We can also maintain the view that consumption is on track for recovery due to hefty pay raise agreed at annual labour talks and income tax cuts that kicked in from June."

Private consumption, which accounts for more than half of the Japanese economy, fell 0.7% in the first quarter, unchanged from the preliminary estimate as rising living costs squeezed household finances. It was a fourth straight quarter of decline.

External demand, or exports minus imports, shaved 0.4 of a percentage point off overall GDP, while domestic demand knocked off 0.1 point, the data showed.

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Reporting by Tetsushi Kajimoto and Satoshi Sugiyama; Editing by Sam Holmes

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HONG KONG/BEIJING, June 10 (Reuters) - China's efforts to clear massive inventory by turning unsold homes into affordable housing are unlikely to help cash-strapped developers due to the programme's limited size and potentially low prices, analysts and developers say.

As part of a support package for the crisis-hit property sector, Beijing announced last month a

plan

for a 300 billion yuan ($41 billion) lending facility, which could result in 500 billion worth of bank financing for local state-owned enterprises (SOEs) to purchase completed and unsold homes.

Chinese banks are expected to extend cheaper loans to SOEs via the facility, backed by the central bank, to help them buy the homes from developers at "reasonable prices" to turn into

affordable housing

.

Some private developers, however, see very few, if any, of their projects being selected as the lending facility is inadequate and the scheme is only expected to launch in bigger cities where affordable housing is available. Price offers from SOEs are also likely to be low, they say.

The cautious attitude of developers could be a challenge for Beijing, as waves of support measures over the past two years fail to revive the sector, which at its peak accounted for a quarter of GDP and remains a major drag on the economy.

Xintangzhen, a town in Guangzhou, issued a notice on May 30, the first local government to do so after the support package, to purchase "suitable housing stock" for resettlement housing.

The local government would buy the homes at cost price, reported China Real Estate Business, a media outlet managed by the housing authority, citing the notice.

A project co-owned by state-owned Jinmao

(0817.HK), opens new tab

and major developer Vanke

(000002.SZ), opens new tab

had applied, the news report added.

Some developers said buying at costs, which means a 20-30% discount to market price, was better than expected.

A senior executive at a private developer in default said his firm would be interested to apply if other cities make similar offers as Xintangzhen, but he expects offers to be low and insufficient to cover construction loans.

"If it's not even enough to cover the development loan, how do we repay the loan? The lending bank would not agree either," said a senior official at a Shanghai-based developer, who declined to be identified due to the sensitivity of the matter.

Analysts at Citi and Bank of America have, however, said discounts of 50% in prices are needed to ensure modest returns for the SOEs, as affordable homes typically sell at 10-50% discounts to private homes.

Even if developers are able to profit from selling completed apartments to the SOEs, local governments may require proceeds be used to finish existing projects rather than to repay debt.

"This will not help us as a listed company, or our offshore debt repayment," said an executive at another developer in credit default.

Gavekal Dragonomics estimates that at average market prices, 500 billion yuan in purchases would pay for 12% of housing inventories, or 20% if bought at a discount.

S&P said that converting existing inventory into social housing would also increase transactions at the low-end and bring down overall prices.

China's housing ministry, central bank, the top banking regulator and local housing authority in Guangzhou did not respond to requests for comment. Jinmao did not respond to a request for comment and Vanke declined to comment.

EXECUTION RISK

"Only a handful of distressed developers will benefit," said S&P Global Ratings credit analyst Esther Liu. "(Completing construction) is the problem the distressed developers are facing. They don't have a lot of completed inventory."

While developers await clarity on SOE demand and price offers, some bankers say the affordable housing scheme could lead to a deterioration in asset quality as SOEs would struggle to generate sufficient profits to repay bank loans.

Banks can borrow from the 300 billion re-lending facility at 1.75% interest to finance 60% of the loans they offer to SOEs.

In aggregate, analysts estimate, that SOEs would have to pay around 2.5% interest for these loans, similar to average rental yields in China.

"This is good for the property sector but bad for the SOEs and the banks, because essentially you're shifting some risk to them," said the first executive, who declined to be named as he is not authorised to speak to the media.

To be sure, banks and local governments are risk averse.

The central bank in February last year rolled out a 100 billion yuan re-lending programme for local governments in eight cities to purchase home inventories - only 2 billion of which has been utilised as of end-March 2024.

"We see high execution risk given banks and local SOEs have to fully bear the credit and investment risks," said Zerlina Zeng, senior credit analyst at CreditSights.

The central government's support though has drawn more visitors to top-tier cities following the latest stimulus package that includes lowering down payment and removal of mortgage rate floors, analysts and developers say.

"The central government has stepped up (support); the turning point is the important change here," said Bank of America head of Greater China property research Karl Choi.

($1 = 7.2455 Chinese yuan)

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Reporting by Clare Jim in Hong Kong and Ziyi Tang in Beijing; Editing by Sumeet Chatterjee and Jacqueline Wong

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Global Market Headlines

- Sterling hits 22-month high against bruised euro

- Morning Bid: Europe jolted by Macron's snap election call

- Futures slip on rate-cut jitters ahead of inflation data, Fed meeting

- Starliner flight is one big step for Boeing's space capsule, but many hurdles remain

- Cognizant to acquire Belcan for $1.3 billion

- AI is sole focus at Apple's WWDC 2024

- Tesla turns to Musk's small shareholder fans to back $56 billion payday

- Europe's STOXX 600 falls as French stocks roiled by political uncertainty

- EU climate plan faces tougher road after election

- Nokia CEO makes world's first 'immersive' phone call

- ECB can sit out the summer before contemplating next rate cut, Kazimir says

- Euro zone investor morale rises more than expected in June

- Japan's service sector mood hits nearly 2-year low in May

- In the Market: How US is daring the world to find a dollar alternative

- Morning Bid: Rates and politics cast a shadow over markets

- Japan government to call for flexible policy amid price uncertainty, draft blueprint shows

- Japan's Q1 GDP fell less than first reported on revised capex

- Euro and French markets roiled by shock Macron election call

- Saudi Aramco shares trade higher after share offering

- US job gains surge past expectations, wage growth quickens

Sterling hits 22-month high against bruised euro | Reuters

LONDON, June 10 (Reuters) - The pound hit its highest in nearly two years against the euro on Monday, though it dropped against the dollar, as the common currency tumbled after French President Emmanuel Macron called a snap election after being trounced in an EU vote by the far right.

The euro dropped to as low as 84.53 pence, its lowest since August 2022, breaking out of its recent range against the pound, and also falling against the dollar along with declines in

other French and euro zone assets

.

It was last down 0.37% at 84.59 pence.

Centre, liberal and Socialist parties were set to retain a majority after the European Parliament elections, but eurosceptic nationalists made the biggest gains, raising questions about the ability of major powers to drive policy in the bloc.

Making a risky gamble to reestablish authority, Macron called a parliamentary election with a first round on June 30.

"Expect to hear much made of the diverging political scenes, where the forthcoming UK general election is expected to present the UK with a very large Labour majority, whereas the French election promises to deliver a parliament diametrically opposed to the presidency," said Chris Turner, ING's global head of markets in a note.

"We probably cannot rule out EUR/GBP edging a little lower this week - perhaps to 0.8400 ... But we think this sterling rally does not last and probably reverses next week when we hear from the Bank of England next Thursday - likely preparing the market for an August rate cut," Turner added.

British wage data for April, due Tuesday, is the main data point of this week, heading into that BoE meeting. Markets have seen a change in policy at that meeting as very unlikely since

April's sticky services inflation

.

Also in the mix, an industry survey, published Monday, indicated

Britain's recruitment market

is poised for a recovery.

But the pound dropped 0.2% against the dollar on Monday, to $1.2698, continuing to fall after a 0.5% drop Friday as hotter than expected U.S. jobs data caused markets to push back bets on the first Federal Reserve interest rate cut late into 2024.

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Morning Bid: Europe jolted by Macron's snap election call | Reuters

A look at the day ahead in U.S. and global markets by Samuel Indyk

The expected rightward shift in the European Parliament after a

four-day election

has still managed to jolt European markets as gains for the far-right in France prompted French President Emmanuel Macron to call a

snap parliamentary election

.

French bonds and

stocks

were sold off while the euro dropped as political uncertainty had investors heading for the exits.

French banks were some of the hardest hit, with BNP Paribas

(BNPP.PA), opens new tab

, Credit Agricole

(CAGR.PA), opens new tab

and Societe Generale

(SOGN.PA), opens new tab

all tumbling between 4.5%-7.4%.

It's a big negative shift after what had been looking like a more positive outlook for Europe.

The

European Central Bank

last week began lowering borrowing costs after its steepest ever tightening cycle, inflation has been drifting back towards target and surveys have indicated

growth may have bottomed

.

In contrast, the Federal Reserve looks like it could refrain from cutting

interest rates

until the fourth quarter, growth appears to be shaky - albeit after more robust growth at the start of the year - and inflation looks stickier.

So as global investors had been warming to European markets, the election results and heightened political uncertainty may bring about a shift in sentiment.

At least for now, that's evident. France's main CAC 40 stock index

(.FCHI), opens new tab

was down 1.9%, dragging other European markets lower. Germany's DAX, Britain's FTSE 100, Spain's IBEX and Italy's FTSE MIB were all off between 0.4%-1%.

Yet U.S. futures were relatively unperturbed. E-mini S&P futures are down around a quarter of one percent, while futures on the Nasdaq are lower by a similar amount.

Reuters Graphics

French bonds are similarly as unloved as the equity market.

The spread between France and Germany's 10-year yields, a gauge of risk premium investors seek to hold French bonds over German paper, widened over 6 basis points.

The euro was down 0.4% against the dollar to its lowest level in a month.

The U.S. day looks quieter but with U.S. CPI figures and the conclusion of the Fed's June meeting on Wednesday, the week is not expected to stay that way for long.

Markets are pricing with near certainty that the Fed holds rates this week while a July cut has been almost completely ruled out too. September is now just a 50/50 shot.

A shift in tone from the Fed this week or softer CPI figures could once again have markets betting on more than one rate cut this year.

Key developments that should provide more direction to U.S. markets later on Monday:

* U.S. employment trends data

* U.S. to sell 3- and 6-month bills, 3-year notes

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Reporting by Samuel Indyk; Editing by Toby Chopra

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

SNAPSHOT Wall Street slips as investors prepare for inflation data, Fed meeting | Reuters

June 10 (Reuters) - U.S. stocks indexes edged lower on Monday as investors grew cautious ahead of key inflation data and a Federal Reserve meeting scheduled for this week, looking for hints on the central bank's policy-easing stance this year.

The Dow Jones Industrial Average

(.DJI), opens new tab

fell 14.09 points, or 0.04%, at the open to 38,784.90.

The S&P 500

(.SPX), opens new tab

opened lower by 5.77 points, or 0.11%, at 5,341.22, while the Nasdaq Composite

(.IXIC), opens new tab

dropped 49.68 points, or 0.29%, to 17,083.45 at the opening bell.

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Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Pooja Desai

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Starliner flight is one big step for Boeing's space capsule, but many hurdles remain | Reuters

Item 1 of 2 A United Launch Alliance Atlas V rocket carrying two astronauts aboard Boeing's Starliner-1 Crew Flight Test (CFT), is launched on a mission to the International Space Station, in Cape Canaveral, Florida, U.S. June 5, 2024. REUTERS/Joe Skipper/File Photo

[1/2]A United Launch Alliance Atlas V rocket carrying two astronauts aboard Boeing's Starliner-1 Crew Flight Test (CFT), is launched on a mission to the International Space Station, in Cape Canaveral, Florida, U.S. June 5, 2024. REUTERS/Joe Skipper/File Photo Purchase Licensing Rights, opens new tab

WASHINGTON, June 10 (Reuters) - Boeing's Starliner spacecraft scored a crucial achievement last week with the

delivery of two astronauts

to the International Space Station, but

problems encountered

along its journey in space and more hurdles that lie ahead make the aerospace giant's goal toward routine missions a distant prospect.

The CST-100 Starliner capsule's first crewed docking with two astronauts to the International Space Station on Thursday marked a long-sought safety demonstration for two audiences: NASA, which wants a second U.S. spacecraft for rides to orbit, and the nascent market for private astronaut missions that is currently dominated by Elon Musk's SpaceX and its Crew Dragon capsule.

But before Boeing can chip away at

SpaceX's grip

on government and private orbital human spaceflight, its Starliner has several more test objectives to reach.

"It's a critical step, because if they can't successfully transport human beings to space, and safely return them, then they haven't proven what they need to do to conduct any missions," said Patricia Sanders, who until February was the longtime chair of NASA's Aerospace Safety Advisory Panel.

The crew -

veteran astronauts

and test pilots Butch Wilmore and Suni Williams - could return to Earth as soon as June 14 or stay as long as 45 days, NASA officials said.

During Starliner's 24-hour trek to reach the space station orbiting some 240 miles (386 km) above, the gumdrop-shaped spacecraft

sprang four helium leaks

and had five onboard thrusters go dead, delaying its ISS docking.

"Starliner made us work a little harder to get docked," NASA's commercial crew chief Steve Stich told a news conference Thursday night.

But some achievements include Wilmore taking manual control and testing steering, overall mission safety and the craft autonomously docked at the station. Over the next several days, Starliner will aim to show it can undock, maneuver more, then safely return to Earth.

Still, the helium leaks and propulsion failures, while no danger to astronauts, NASA officials said, are a nagging concern.

Boeing first found a leak of helium - used to add pressure to the thruster's propellants - while Starliner was on the ground last month, and NASA officials deemed it low-risk for flight. NASA officials said the thruster failures appeared similar to those found on Starliner's 2022 uncrewed test to the ISS.

"We don't quite understand why they're happening," Stich said.

Boeing has said it plans to redesign valves on Starliner's propulsion system after the company and NASA identified a flaw in 2022. And the company is receiving $5.5 million from NASA to study potentially redesigning Starliner's batteries, according to federal contract records.

"If they had something that required a design change that was going to be expensive and time-consuming, it may impact their business decision for going forward," Sanders said.

Starliner development challenges already have cost Boeing roughly $1.5 billion.

Starliner redesigns could drag out if Boeing has to involve its supply chain. In 2022, Boeing and its propulsion system supplier, L3 Harris'

(LHX.N), opens new tab

Aerojet Rocketdyne,

feuded for months

over which company was responsible for defects in Starliner's propulsion system valves and who would pay for the components' redesign, Reuters reported that year.

The company said it might implement that design change on a later flight, while a temporary workaround is in place.

Musk has boasted

SpaceX as having an edge

in being more vertically integrated.

A novel valve issue on SpaceX's Crew Dragon in 2019 caused one of its spacecraft to explode during an uncrewed ground test in 2019, prompting SpaceX to redesign the capsule's abort propulsion system. The redesigned system flew its first crew roughly a year later. And the company in 2021 redesigned Crew Dragon's toilet in less than two months.

"Fixing a design flaw or even something of concern like a battery is much, much easier in a vertically integrated company," said Abhi Tripathi, former SpaceX Crew Dragon mission director who was involved in the spacecraft's design changes.

It is not yet clear to NASA officials if the issues that occurred during Starliner's first crewed mission would warrant redesigns. NASA and Boeing will spend months reviewing mission data and examining the flight problems to determine if Starliner can be certified for routine flights.

"It's not a success until they safely return, and until we understand the implications of any anomalies that occurred during the mission," Sanders said.

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Reporting by Joey Roulette; editing by Chris Sanders, Peter Henderson and Josie Kao

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Cognizant to acquire Belcan for $1.3 billion | Reuters

June 10 (Reuters) - Information technology services provider Cognizant Technologies

(CTSH.O), opens new tab

said on Monday it has agreed to acquire digital engineering firm Belcan for nearly $1.3 billion in cash and stock.

The deal would expand Teaneck, New Jersey-based Cognizant's footprint in the aerospace, defense, space and automotive sectors. Cincinnati-based Belcan, which has been owned by private equity firm AE Industrial Partners since 2015, employs 10,000 people across 60 locations globally. Some of its clients include Boeing

(BA.N), opens new tab

, General Motors

(GM.N), opens new tab

, Rolls-Royce

(RR.L), opens new tab

, the U.S. space agency NASA and the U.S. Navy.

"I'm excited about the fact that Belcan operates in a sector (aerospace and defense) which is actually growing faster than the sector we are operating in, which is IT services. So, it gives us an opportunity to evolve on that growth," Cognizant CEO Ravi Kumar said in an interview with Reuters.

"The capabilities that Belcan has - which is engineering, and which is in aerospace - can actually be cross-pollinated into the Cognizant strength area, which is primarily industrial manufacturing and automotive. So, it's a cross-pollination of services on both sides and the leverage of distribution networks on both sides," Kumar added. " ... That's the synergy we see."

Cognizant said that as part of the deal, Belcan would continue to be led by its CEO Lance Kwasniewski and operate as a unit of Cognizant.

Cognizant, which has a market value of $33 billion, is looking to strengthen its offerings in specialized areas as it braces for a slowdown in spending from clients. It has cut its

annual revenue forecast

in the range of $18.9 billion to $19.7 billion, below prior expectations of $19.0 billion to $19.8 billion.

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Reporting by Milana Vinn in New York; Editing by Will Dunham

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Milana Vinn reports on technology, media, and telecom (TMT) mergers and acquisitions. Her content usually appears in the markets and deals sections of the website. Milana previously worked at GLG and PE Hub, where she spent several years covering TMT deals in private equity. She graduated from CUNY Graduate School of Journalism with Masters in Business Journalism.

- Apple to showcase AI integration at developer conference

- Revamped Siri, potential OpenAI partnership among highlights

- Apple aims to allay investor doubts in AI race with Microsoft

June 10 (Reuters) - Apple

(AAPL.O), opens new tab

is expected to showcase how it is integrating artificial intelligence across its software suite, including a revamped Siri voice assistant and a possible tie-up with ChatGPT owner OpenAI, at its annual developer conference on Monday.

More is at stake at the Apple Worldwide Developers Conference (WWDC 2024) than in previous such events, as the iPhone maker seeks to reassure investors that it has not lost the AI battle to Microsoft

(MSFT.O), opens new tab

even though it may have forfeited a few rounds.

Apple will have to show the vast majority of its more than 1 billion users - most of whom are not tech aficionados - why they would want the new breed of AI that has swept Silicon Valley, analysts said.

"Apple will put on a show," said Ryan Reith, analyst at market research firm IDC. "If they nail the landing, the potential is to get the consumer actually interested in AI because so far it has been mostly about enterprise."

Apple has been using AI behind the scenes for years to power features on its devices, such as the ability of its watches to detect crashes and falls. But it has been

reluctant to tout

how this technology boosts functionality in its devices, as Microsoft has done with the help of its early bet on OpenAI.

Microsoft overtook Apple as the world's biggest company by market capitalization in January, and Apple's shares have trailed those of other Big Tech companies this year. AI chip giant Nvidia

(NVDA.O), opens new tab briefly overtook Apple last week

as the world's second-most valuable company, underscoring for some investors a shift in power in the tech world.

"Apple's early reticence toward AI was entirely on brand. The company has always been famously obsessed with what its offerings did for its customers rather than how it did it," said Forrester analyst Dipanjan Chatterjee.

"But then the AI silence got deafening. All that will change on June 10," he said.

Apple uses the developer conference at its Cupertino, California, headquarters each year to showcase updates to its own apps and operating systems as well as to show developers new tools they will be able to use in their apps.

Microsoft, Nvidia challenge Apple's market dominance in AI era Microsoft, Nvidia challenge Apple's market dominance in AI era

SIRI MAKEOVER

Apple is expected to enable Siri to essentially control many apps on a user's behalf. This has proven tricky as Siri needs to understand the user's exact intentions and also how the app works.

For example, if a user asks Siri to delete an email, Siri needs to understand which email the user wants to delete and how that function works on, say, Microsoft Outlook versus Gmail.

Apple tried to make Siri smarter in 2018 with tools that allowed developers to code into their apps ways for Siri to have more control, but few showed interest.

Now, Apple is expected to revamp Siri's underlying software with generative AI. Media have reported that Apple and OpenAI struck a deal to integrate the ChatGPT maker's technology into Apple's next iPhone operating system, iOS 18.

Some Apple investors are confident that the AI new features will boost sales of new iPhones at a time when the company is grappling with strong competition in China and slower growth in the U.S.

"This should translate into a strong hardware refresh cycle for Apple," in 2025, said Dan Eye, chief investment officer at Fort Pitt Capital Group, which holds Apple shares. Eye expects Apple to limit some AI features on older models to entice people to buy newer phones.

Reuters Graphics

CHIPS FOR AI

Earlier this month, Apple unveiled a new AI-focused chip in its latest iPad Pro models and analysts expect the company to offer details to developers on how they can use the chip's capabilities to support all the new AI computing.

The company may also begin to talk about its own cloud-computing capabilities amid reports that Apple was planning to use its own chips inside data centers for the first time.

Apple recently hired Sumit Gupta, a former Google and IBM

(IBM.N), opens new tab

executive who worked on AI data center development at both firms.

By using its own chips for cloud services, Apple can roll out advanced AI features that devices cannot handle alone, without requiring expensive processors from Nvidia. The approach also retains many of Apple's privacy and security features that are baked in to the design of its in-house chips.

The developer conference runs until Friday.

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Reporting by Stephen Nellis in San Francisco and Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Matthew Lewis

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June 10 (Reuters) - With major Tesla shareholders appearing divided over whether to endorse Elon Musk's $56 billion pay package, the company also is looking for support from retail investors who make up an unusually high percentage of the electric carmaker's ownership base.

Small investors tend to favor management, but they often don't bother to vote, experts said.

The company's June 13 annual meeting is shaping up as a referendum on Musk’s leadership, following a Delaware court's ruling

striking down

the hefty pay package. The company has asked investors to vote to reaffirm it and Musk stands to control more than 20% of the company if he gets it. A ‘no’ vote would be a rebuke with unknown consequences.

Tesla also proposes reincorporating in Texas instead of Delaware and re-electing two directors, including Musk's brother, Kimbal.

While there are a dozen items up for a vote, Tesla is focused on the pay vote and the move to Texas in an ongoing outreach campaign to small shareholders that includes a

website, opens new tab

, engagement with online influencers, and

factory tours

for a few of those who vote.

Big investors have sent mixed signals. T. Rowe Price

(TROW.O), opens new tab

has said the package showed "

strong alignment

" with investor interests. But the California Public Employees' Retirement System meanwhile has said it will likely

oppose Musk's pay

as not commensurate with Tesla's performance, and Norway's

sovereign wealth fund

came out against the pay package on Saturday.

Although small investors have an array of opinions, experts in corporate vote campaigns say the size and CEO-friendly nature of many individual investors at Tesla make them an obvious target.

"The man ends up 10x-ing my investment and he's given nothing? It doesn't seem right or fair," said Andrew Theyken Bench, a lawyer in Allentown, Pennsylvania with fewer than 5,000 Tesla shares, who voted by proxy with management on all items at the meeting, including Musk's pay.

In a post on his social media platform X on Saturday

Musk wrote, opens new tab

: "So far, roughly 90% of retail shareholders who have voted have voted in favor of both resolutions," apparently including the one on his pay.

Bruce Goldfarb, president of Okapi Partners, a proxy solicitor not involved in this vote, said 90% support from retail investors would be "about normal" since the category generally favors management. But such investors usually don't vote, posing a challenge for Tesla.

"Retail shareholders are wildly apathetic even if they’re supportive," Goldfarb said.

Mom-and-pop investors only voted about 30% of their shares in 2023, according to vote-processing company Broadridge, compared to 80% for institutional investors.

The theme of fairness to Musk is the heart of Tesla's campaign. Chair Robyn Denholm described the vote as being about "fairness, respect and the future of Tesla." She also warned Musk has limited time and a variety of interests.

"We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners. But that requires reciprocal respect,” she wrote in a June 5 letter.

A Tesla representative declined to comment.

LEADING THE PACK

Data and research firm S&P Global Market Intelligence found that as of June 5, about 43% of Tesla's common stock is held by the "public and other" category of shareholders that includes retail investors and others outside of the main categories of institutional investors and company insiders.

That is the most of any of the 15 largest companies in the S&P 500.

Reuters Graphics

Musk's own stake in the company is around 13%. Among top outside investors, Vanguard has 7.2% of the shares and BlackRock

(BLK.N), opens new tab

has 5.9%, according to Tesla's proxy. Neither would comment about their voting intentions.

GUT ASSESSMENT: 50% CHANCE

Both major proxy advisers,

Institutional Shareholder Services

and

Glass Lewis

, have recommended investors vote against ratification of the pay package, calling it excessive.

That's a bad sign for Tesla. Among Russell 3000 companies from 2010 to 2020 only 66% of "say on pay" resolutions passed when both proxy advisers recommended votes against them, compared with 99% when both supported the pay, said University of Utah finance professor Chong Shu.

Omar Qazi, an X.com user with 475,300 followers who posts using the handle @WholeMarsBlog and often gets public replies from Musk on the platform, said his "gut assessment" was there is only a 50% chance that a majority of Tesla investors back the re-ratification of Musk's pay.

"Many support Musk and see the importance of compensating him but many are also upset about a variety of factors: politics, slowing sales, stock price etc," Qazi said by direct message on X.

Shares at Tesla closed Friday at $177.48, well below the $248.48 where they ended trading in 2023, as the company faces growing competition and questions about its plans for new models.

A DEAL'S A DEAL

Nonetheless Musk still enjoys support online from influential users. In addition to Qazi these include Alexandra Merz, who posts as @TeslaBoomerMama on X.com and has had several posts

reposted by Musk, opens new tab

to call attention to voting.

Those posts urged non-U.S. banks and brokerages to allow Telsa investors to vote, something the companies' systems did not previously allow. Several subsequently did so including Sweden's Nordnet

(SAVE.ST), opens new tab

.

"I've been invested in other companies before and I've never seen the amount of effort by an informal community to get out the vote like there is on this one," said Troy Dillon, a retired U.S. Air Force officer in Florida and Tesla shareholder.

As for the pay package, "The deal was the deal," Dillon said. He is voting for it.

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Reporting by Ross Kerber; Additional reporting by Abhirup Roy, Hyunjoo Jin, Louise Rasmussen and Gwladys Fouche; Editing by Peter Henderson and Anna Driver

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Ross Kerber is U.S. Sustainable Business Correspondent for Reuters News, a beat he created to cover investors’ growing concern for environmental, social and governance (ESG) issues, and the response from executives and policymakers. Ross joined Reuters in 2009 after a decade at The Boston Globe and has written on topics including proxy voting by the largest asset managers, the corporate response to social movements like Black Lives Matter, and the backlash to ESG efforts by conservatives. He writes the weekly Reuters Sustainable Finance Newsletter.

Europe's STOXX 600 falls as French stocks roiled by political uncertainty | Reuters

- French stocks at three-month lows

- Fed policy outcome due later this week

- Aviva dips after JPM downgrade

June 10 (Reuters) - European stocks dropped on Monday after French President Emmanuel Macron called a snap election following a heavy loss in the European Union vote to the far-right, rattling investors already worried about the interest rate outlook.

France's blue-chip CAC 40 index

(.FCHI), opens new tab

dropped 1.8% to touch a more than three-month low, with lenders, including BNP Paribas

(BNPP.PA), opens new tab

, Societe Generale

(SOGN.PA), opens new tab

and Credit Agricole

(CAGR.PA), opens new tab

, falling in the range of 4.3% and 7%.

The CAC 40 looked on course for its biggest percentage daily drop since July 2023.

French

bond prices

also fell , pushing yields to their highest in two weeks, after Eurosceptic nationalists

made gains

in European Parliament elections on Sunday, prompting a bruised Macron to call a snap national election.

"What we've seen before when there were other kinds of political gambles, not least for the Brexit referendum in the UK, is that you never necessarily could be sure which way the electorate will sway," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Given that there have been shocks in the past, there are some concerns that this gamble may not pay off for Macron, Streeter said.

Macron called a parliamentary election with the first round on June 30. If the far-right National Rally party wins a majority, Macron would be left without a say in domestic affairs.

The pan-European STOXX 600 index

(.STOXX), opens new tab

fell 0.6%, with other regional markets, including Germany's DAX

(.GDAXI), opens new tab

and Spain's IBEX

(.IBEX), opens new tab

down 0.7% and 0.6%, respectively.

Equity markets came under pressure on Friday after a stronger-than-expected U.S. jobs report fanned worries that the Federal Reserve would not cut interest rates anytime soon.

Traders are currently pricing in rate cuts of 37 basis points (bps) from the Fed by the end of this year, as per LSEG's rate probabilities tool, with a 45% chance of a first cut in November.

The European Central Bank

lowered its key rate by 25 bps from a record high to 3.75% at its policy meeting last week, but traders scaled back bets of two more rate cuts this year after it gave little hint of further moves.

ECB policymaker Peter Kazimir

said

in a blog post that the central bank should sit out the summer before contemplating another rate cut as inflation is far from defeated and price pressures could resurface.

Among single stocks, UK insurer Aviva

(AV.L), opens new tab

slid 1.5% after JPMorgan downgraded the stock to "neutral" from "overweight".

Finnish chemicals company Kemira

(KEMIRA.HE), opens new tab

climbed 4% after it raised its full-year earnings outlook, pointing to continued recovery in end markets.

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Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Sohini Goswami

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- Harder to pass new green laws, but most existing ones to stay

- New EU parliament may try to weaken certain green measures

- EU's core climate change targets won't be undone

- Political focus seen shifting to security, industry

BRUSSELS, June 10 (Reuters) - A more rightward-leaning European Parliament will make it harder to pass ambitious EU climate policies, but the majority of Europe's current world-leading green policies are likely to stay put, lawmakers, officials and analysts said.

Provisional results in the European Parliament election on Sunday night showed centrist parties

holding a majority

, but gains for right-wing and far-right parties sceptical of the EU's "Green Deal" package of environmental policies, and heavy losses for Green parties.

"I don't think that we'll be rolling back on (climate) policies. But I do think that it will be more complicated to get new policies off the ground," Bas Eickhout, head of the European Parliament's Greens lawmaker group, told Reuters.

EU climate measures over the next five years will depend on the incoming European Commission, which is responsible for proposing EU laws. But the newly-elected European Parliament will get a say on every new green policy.

Sunday's election result signals tougher maths to approve new EU climate measures.

"All new policies will be harder to pass. But backsliding is very unlikely," Krzysztof Bolesta, Poland's secretary of state for climate, told Reuters.

"It is possible that new ambition will be delayed, mostly for populistic reasons," agreed Julian Popov, who until April was EU member Bulgaria's environment minister.

That could have consequences for an upcoming 2040 EU climate target, needed to steer the EU towards its 2050 net zero emissions target. The EU Commission has suggested the 2040 goal should be an ambitious 90% emissions cut, but it needs approval from both EU countries and the Parliament.

The upcoming European Commission and Parliament will also face tough decisions on whether to introduce new policies to push industries towards that 2040 target.

That includes farming, a sector whose emissions have barely fallen since 2005. But after months of protests across Europe by angry farmers, there is little political appetite to target the sector with new rules, especially if the cost of complying with them would drive up food prices for citizens already dealing with the biggest jump in living costs in a generation.

Shares in renewable energy companies were knocked lower by concerns the election results could slow the green energy transition.

Wind turbine makers, Vestas

(VWS.CO), opens new tab

and Nordex

(NDXG.DE), opens new tab

, were down more than 3% on Monday. Orsted

(ORSTED.CO), opens new tab

was down 0.5%.

Reuters Graphics

NO BIG U-TURN

While new climate measures might face a tougher ride, a full-scale reversal of the dozens of EU climate policies passed in the last five years would be legally difficult.

Bas Eickhout, lead candidate for the European Greens, reacts to the announcement of the first provisional results for the European Parliament elections, at the European Parliament building, in Brussels, Belgium, June 10, 2024. REUTERS/Piroschka van de Wouw Purchase Licensing Rights, opens new tab

Those policies - which include renewable energy targets and a strengthened carbon pricing regime on power and industry - are fixed into EU law and already being rolled-out across the bloc's 27 member states.

Many are already working. EU

emissions

are down by nearly a third from 1990 levels, and Europe is installing wind and solar energy capacity at

record speed

.

Still, the election campaign saw mounting calls from the right to scrap some Green Deal policies - with a prime target the EU's 2035 ban on new petrol and diesel cars. That policy has a 2026 review clause, on which the Parliament will get a say.

"It was an ideological folly, which absolutely must be corrected," Italian Prime Minister Giorgia Meloni told online magazine Open last week.

Three EU diplomats singled out the 2035 car policy as one that European Commission President Ursula von der Leyen will face significant pressure to weaken, including from some lawmakers in her centre-right European People's Party who want it scrapped. Von der Leyen needs support from a majority of lawmakers in the new European Parliament to win a second term.

Reuters Graphics

But broad climate policy rollbacks are unlikely, officials and analysts said. That's partly because the EU's existing climate measures add up to deliver its 2030 climate target - to cut net greenhouse gas emissions 55% from 1990 levels - which national governments and lawmakers both approved into EU law.

"There might well be changes in individual pieces of legislation, but what will be important to watch is how this adds up," said Mats Engström, senior fellow at the European Council on Foreign Relations think-tank.

DON'T CALL IT A 'GREEN' DEAL

Contrary to the last EU election in 2019, when millions of young climate protesters took to Europe's streets, this year's campaign saw climate change

usurped by issues

including immigration, economic woes and struggling European industries.

Meeting the EU's 2030 climate target will require investments of 1 trillion euros per year, a jump of around 356 billion per year compared with 2010-2020, according to the European Investment Bank.

Investing in local industries was a campaign pledge across the political spectrum, as competition sharpens with the U.S. and China to produce green tech like low-carbon steel and electric cars.

Some analysts said this focus would see the EU pass more funds and policies to support climate-friendly projects - but with the focus on helping industry, rather than being "green" and "clean".

"If it's about scaling up manufacturing of green technologies here in Europe, then that may be done in the name of 'industrial competitiveness' and not for the climate," said Linda Kalcher, Executive Director at think-tank Strategic Perspectives.

"It might be that we see the rhetoric shifting, but the action on the ground being the same," Kalcher said.

(This story has been corrected to fix the spelling of the Italian prime minister's name in paragraph 17)

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Reporting by Kate Abnett; additional reporting by Giselda Vagnoni, Julia Payne; Editing by Toby Chopra

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Kate Abnett covers EU climate and energy policy in Brussels, reporting on Europe’s green transition and how climate change is affecting people and ecosystems across the EU. Other areas of coverage include international climate diplomacy. Before joining Reuters, Kate covered emissions and energy markets for Argus Media in London. She is part of the teams whose reporting on Europe’s energy crisis won two Reuters journalist of the year awards in 2022.

Nokia CEO makes world's first 'immersive' phone call | Reuters

Item 1 of 2 A screen displays the company logo for Nokia Corporation on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 24, 2023. REUTERS/Brendan McDermid/file photo

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STOCKHOLM, June 10 (Reuters) - Nokia

(NOKIA.HE), opens new tab

CEO Pekka Lundmark made a phone call using a new technology called "immersive audio and video" that improves the quality of a call with three-dimensional sound, making interactions more lifelike, the company said on Monday.

"We have demonstrated the future of voice calls," said Lundmark, who was also present in the room when the first 2G call was

made, opens new tab

in 1991.

Current smartphone calls are monophonic which compresses audio elements together and sound flatter and less detailed, but the new technology will bring 3D audio where a caller will hear everything as if they were there with the other person.

"It is the biggest leap forward in the live voice calling experience since the introduction of monophonic telephony audio used in smartphones and PCs today," said Jenni Lukander, president of Nokia Technologies.

The call was held with Stefan Lindström, Finland's Ambassador of Digitalisation and New Technologies.

"This is now becoming standardised ... so the network providers, chipset manufacturers, handset manufacturers can begin to implement it in their products," Lukander said in an interview.

Nokia made the call using a regular smartphone over a public 5G network.

Apart from person to person immersive calls, this can be used in conference calls where voices of participants can be separated based on their spatial locations, said Jyri Huopaniemi, head of audio research at Nokia Technologies.

A vast majority of smartphones have at least two microphones with which this technology can be implemented by transmitting in real time the spatial characteristics of a call, the executives said.

The technology is part of the upcoming 5G Advanced standard and Nokia aims to get licensing opportunities with the technology which would likely take a few years to be available widely.

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Reporting by Supantha Mukherjee in Stockholm, Editing by Louise Heavens

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Supantha leads the European Technology and Telecoms coverage, with a special focus on emerging technologies such as AI and 5G. He has been a journalist for about 18 years. He joined Reuters in 2006 and has covered a variety of beats ranging from financial sector to technology. He is based in Stockholm, Sweden.

ECB can sit out the summer before contemplating next rate cut, Kazimir says | Reuters

FRANKFURT, June 10 (Reuters) - The European Central Bank should sit out the summer before contemplating another interest rate cut as inflation is far from defeated and price pressures could resurface, ECB policymaker Peter Kazimir said in a blog post on Monday.

The ECB

cut rates

from a record high on Thursday but made no commitment about any future move and markets keep dialling back their rate cut expectations, anticipating little more than just one more cut this year.

"We can afford to enjoy the summer without hurrying into the decision," Kazimir, an outspoken conservative said. "By autumn, we'll have a lot of new information and data about the economy's performance, the labour market situation, and economic outlook.

"September will be a pivotal month," Kazimir said.

Although the ECB said the July meeting would be open,

policymakers speaking

on background have said that another cut then is unlikely.

Part of the caution is due to fears that inflation could still rise again, particularly after recent wage data showed continued big increases in earnings after years of real declines for incomes.

"There's still a non-negligible risk of resurfacing inflationary pressures linked to global events or rushed rate cuts," Kazimir said. "The economic situation in the eurozone remains fragile, and the 'inflation beast' isn't beaten yet."

The ECB expects inflation to remain choppy for the rest of the year with some ups and downs before it resumes a downward path next year, falling back to 2% only at the end of 2025.

"This decline is going to be bumpy, but we're heading toward the target," Kazimir added.

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Euro zone investor morale rises more than expected in June | Reuters

BERLIN, June 10 (Reuters) - Investor morale in the euro zone rose for the eighth consecutive month in June, but economic recovery in the bloc is proceeding with difficulty, a survey showed on Monday.

Sentix's index for the euro zone rose to 0.3 points for June from -3.6 in May. Analysts polled by Reuters had expected it to rise to -1.8 this month.

Importantly, the index on expectations saw a rise, increasing from 7.8 in May to 10.0 in June, "providing some encouragement that the trend may continue in the coming weeks", Sentix said.

"Germany's economy would have to send out a signal to generate more momentum. However, this signal has yet to materialize," it said.

The barometer plunged into negative territory in the wake of Russia's invasion of Ukraine last February.

The sluggish improvement since then "is certainly one of the main arguments for the ECB to be able to cut interest rates further", Sentix said, adding that its inflation barometer also indicates an unfavourable inflation environment.

Germany's economy, Europe's largest, saw some improvement in June, with the index on the current situation rising to -26.3 from -33.5 in May.

"The stabilization of the German economy is only making moderate progress," Sentix said.

The poll of 1,276 investors was conducted between June 6-8, Sentix said.

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Reporting by Friederike Heine; Editing by Rachel More

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Japan's service sector mood hits nearly 2-year low in May | Reuters

TOKYO, June 10 (Reuters) - Japan's service sector sentiment worsened in May to levels unseen in nearly two years, government data showed on Monday, as rising fuel and food costs from a weak yen dragged on household spending.

The data highlights the fragile nature of consumption, making it harder for the Bank of Japan to justify further interest rate hikes.

An index measuring sentiment among service-sector firms like taxi drivers and restaurants stood at 45.7 in May, down 1.7 point from the previous month and hitting the lowest level since August 2022, the survey showed.

Moreover a gauge of firms' sentiment on the economic outlook also fell 2.2 points to 46.3, worsening for the third straight month and marking the lowest level since July 2022.

The "economy watchers" survey is closely watched by markets as a leading indicator of household spending and the broader economy, due to the polled firms' proximity to consumers.

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Reporting by Leika Kihara and Kentaro Sugiyama Editing by Shri Navaratnam

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June 10 (Reuters) - The United States is merrily chipping away at the pillars that hold up the dollar as the world's reserve currency, with the latest blows coming from some powerful Americans questioning the rule of law following the conviction of Donald Trump.

In doing so, it is effectively daring the rest of the world to find an alternative - and so far, it appears to be winning.

The attacks on the legal system in the aftermath of former President

Trump’s conviction

follow other moves that are seen by some as the United States throwing down the gauntlet to the rest of the world.

The country has radically increased the use of sanctions as a punitive foreign policy tool. And it is adding on an

immense amount of debt

, leaving hapless foreigners who seek the safety and depth of its markets to fund its excesses.

Over the past three weeks, I have been asking financial services executives, global investors and other experts in Asia and the United States how long they think the Americans can keep at it without meaningful blowback. Several of the sources requested anonymity to speak candidly about the situation.

These conversations showed consternation is growing, both at home and abroad, about the consequences of U.S. hubris. But despite trying, no one so far has been able to find a credible alternative or expects one to emerge anytime soon, and they have partly themselves to blame.

In Asia, for example, people are asking with increasing urgency what's their '

America plus 1

', as they search for ways to reduce their U.S. exposure and boost non-dollar trade flows.

But attempts to build such systems are slow-going or haven't gotten traction. And rising authoritarianism, threats to individual and property rights and geopolitical tensions have meant that even if U.S. assets are less attractive than they were before, other options are worse.

A

recent survey

, for example, shows central bank reserve managers plan to increase their dollar holdings over the next 12-24 months as the rise in global geopolitical tensions and need for liquidity draw them to the currency.

"Perhaps ironically, the U.S. dollar's strength is, in part, due to its near-unchallenged safe-haven status," said Steve H. Hanke, a professor of applied economics at Johns Hopkins University, who served on former President Ronald Reagan's Council of Economic Advisers. "That said, most investors don't understand geopolitics and the dangers that lurk below the surface – until it's too late."

DOLLAR'S DOMINANCE

At its core, the dollar's dominant role in the world draws from the United States' democratic principles. It is supported by the massive size of its economy, the depth of its markets, and the strength of its institutions and the rule of law.

The belief in democracy runs deep. Last week, I asked U.S. Securities and Exchange Commission Chair Gary Gensler, who has been in government since 1997, whether partisan politics had made the job of officials like him harder. A conservative-leaning U.S. appeals court had

struck down one of his signature

initiatives that morning.

"I believe in this constitutional system that we have. It's messy," Gensler said. "It's democracy."

Nevertheless, the messiness is testing some of the underpinnings of the dollar's global appeal.

Attacks on the U.S. legal system have increased after the Trump verdict in a New York court. Florida Governor Ron DeSantis, for example, called it a "kangaroo court" on the social media platform X, saying "the verdict represents the culmination of a legal process that has been bent to the political will of the actors involved."

A major investor based in Asia said potential threats to U.S. institutions were also worrying. Any debasing of the Federal Reserve's authority -- as

Trump allies are reportedly contemplating

-- would affect the dollar’s credibility, the investor said, adding that such a development could see a double-digit depreciation of the currency.

Trump's campaign for his Republican presidential bid has played down such reports of what conservative groups might be planning.

THICKET OF SANCTIONS

A senior New York-based financial services executive who was traveling in Asia said he is hearing from clients who think the U.S. and Western financial policy is "undermining the dollar and the Western financial system more broadly."

He pointed to an "ever expanding thicket of sanctions" as one reason.

And the West is pushing the envelope further. The financial executive said the discussion that the West

might seize some $300 billion of sovereign Russian assets

that were blocked over Ukraine undermined the United States' safe haven status. "The West crossed a Rubicon there," the executive said.

An October 2021 Treasury Department review of sanctions found such designations had increased to 9,421 by that year from 912 in 2000. It noted at the time that "American adversaries — and some allies — are already reducing" their use of the dollar.

An Asia-based investor said he was watching another court case closely to test the strength of the rule of law: ByteDance's

challenge

of a U.S. ban on TikTok. He is watching for the evidence that the U.S. government would produce to back up claims of the app being a national security threat.

If no proof is publicly offered, then it would "feel that the checks and balance, the independence of the legal system, may not be there -- at least in this case," the investor said.

But then he added that even that may not turn him away from the United States. It's still more independent and better than many other places, he said.

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Reporting by Paritosh Bansal; Editing by Anna Driver

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Paritosh oversees the work of more than 100 journalists across the globe who write about finance and markets, including banking, financial technology, stocks, bonds, forex, corporate finance, white collar crime and environmental, social and governance (ESG) investing. He also writes a column, In the Market. With some 25 years in the profession and degrees in economics, journalism and physics, Paritosh has reported and edited the news file across the spectrum, from business and economics to politics and general news.

A look at the day ahead in European and global markets from Rae Wee

Investors in Europe will begin the week mired in uncertainty over the global

interest rate

outlook and the

region's political landscape

.

French President Emmanuel Macron

rolled the dice

on his political future on Sunday, calling snap legislative elections for later this month after he was trounced in the European Union vote by Marine Le Pen's far-right party.

His

shock announcement

came as the European Parliament took a shift

to the right

after a four-day election that concluded on Sunday, with more eurosceptic nationalists and fewer mainstream liberals and Greens.

Reuters Graphics

MARKET NERVES

Markets took the news negatively and reacted by knocking the euro to a

one-month low

, while EUROSTOXX 50 equity futures and French bond futures also clocked losses.

While the common currency and euro area assets have been largely cushioned by diminished euro-scepticism compared with elections in the 2010s and early 2020s, the latest developments could serve as a

wake-up call

.

The focus for investors when broader European markets open later on Monday will likely be Italy's 10-year government bond yield gap over benchmark German paper - often used as a barometer of risk appetite in the region.

RATES ANGST

In the broader market, traders also continued to reel from the effects of a blowout

U.S. jobs

report, ahead of the Federal Reserve's June policy meeting this week.

The

rate cut rally

which drove world shares higher last week quickly ground to a halt and left Asian stocks struggling on Monday, though trading was thinned with holidays in Australia, China, Hong Kong and Taiwan.

While it's almost a given that Fed policymakers will

dial back

on their projections for three rate cuts this year when they announce their rate decision on Wednesday, the question is by how much.

Futures point to about 36 basis points worth of easing priced in for this year, and chances for a pre-election rate cut remains a coin toss.

The Fed aside, the Bank of Japan also meets this week, and expectations are for the central bank to announce a tapering of its

massive bond purchases

.

That could offer some reprieve for the yen , which was still struggling to strengthen past the 157 per dollar level against a resurgent greenback on Monday.

Key developments that could influence markets on Monday:

- Euro zone Sentix index (June)

- Reopening of 3-month, 6-month and 11-month French government debt auctions

- Reopening of 3-month and 9-month German government debt auctions

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By Rae Wee; Editing by Christopher Cushing

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Japan government to call for flexible policy amid price uncertainty, draft blueprint shows | Reuters

TOKYO, June 10 (Reuters) - Japan's government will highlight the need to work closely with the central bank and guide policy "flexibly" in the wake of soft consumption and uncertainty over the inflation outlook, a draft of its annual economic blueprint seen by Reuters showed.

"Monetary policy has entered a new stage," which required the government and the Bank of Japan to "continue working closely and guide policy flexibly in accordance to economic and price developments," according to the draft.

By keeping inflation stably around the BOJ's 2% target, policymakers will seek to create an environment where wages rise faster than inflation on a sustained basis, the draft said.

The government draft will be presented to ruling party lawmakers for deliberations, before being finalised at a Cabinet meeting on June 21.

In the draft, the government said consumption "lacked momentum" with the outlook on prices unclear due in part to the effect of recent yen declines.

It also flagged lingering overseas risks such as the fallout from monetary tightening by central banks across the globe, and worries about soft Chinese growth.

Japan is facing a "critical moment" in shifting away from a deflation-prone economy that prioritised cost cuts, towards one where higher productivity allows more companies to keep hiking prices and wages, the draft said.

The government will submit legislation to next year's parliament to facilitate smoother pass-through of costs in industries like construction, transportation and agriculture, the draft said.

A weak yen and subsequent rise in households' living costs have hurt Prime Minister Fumio Kishida's approval ratings, prodding the administration to highlight its efforts to generate higher wage growth.

The BOJ, for its part, ended eight years of negative interest rates in March, and has signalled that it would hike rates further if it becomes more convinced that inflation will durably hit 2%.

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Reporting by Takaya Yamaguchi, Writing by Leika Kihara Editing by Shri Navaratnam

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- Q1 GDP -1.8% annualised vs initial -2.0%

- Capex helps upward revision to GDP

- Rebound seen this quarter but risks remain

TOKYO, June 10 (Reuters) - Japan's economy contracted less than initially reported in January-March on upward revisions to capital spending and inventory data, lending modest support to the central bank's plans to raise interest rates again this year.

Analysts expect the Japanese economy to have bottomed out in the first three months of the year, although a stubbornly weak yen and disruptions at major automaker plants continue to cloud the outlook for the current quarter.

Still, "the revised GDP results made it easier for the Bank of Japan (BOJ) to feel encouraged about future rate hikes as it can assess capital investment is picking up even by a little bit," said Kohei Okazaki, senior economist at Nomura Securities.

Japan's GDP shrank a revised 1.8% annualised in the first quarter from the previous three months, Cabinet Office data showed on Monday, a smaller decline that economists' median forecast for a 1.9% contraction and a 2.0% decline in the preliminary estimate.

The revised figure translates into a quarter-on-quarter contraction of 0.5% in price-adjusted terms, unchanged from the initial reading issued last month.

Reuters Graphics

People enjoy drinks and food at an izakaya pub restaurant at the Ameyoko shopping district, in Tokyo, Japan February 15, 2024. REUTERS/Issei Kato/file photo Purchase Licensing Rights, opens new tab

RATE HIKES

The revised GDP data comes on speculation the BOJ may discuss cuts in its Japanese government bond (JGB) purchases at its policy review this week as part of efforts to unwind monetary stimulus to curb yen weakening.

Investors are looking for clues on the timing of further rate hikes by the central bank, which raised rates in March for the first time since 2007 in a landmark shift away from ultra-loose monetary policy.

"We can say capital spending picked up in the latter half of the fiscal year-end in March 2024...current capex conditions are a relief but we must be cautious about the outlook," Okazaki said.

"We can also maintain the view that consumption is on track for recovery due to hefty pay raise agreed at annual labour talks and income tax cuts that kicked in from June."

Private consumption, which accounts for more than half of the Japanese economy, fell 0.7% in the first quarter, unchanged from the preliminary estimate as rising living costs squeezed household finances. It was a fourth straight quarter of decline.

External demand, or exports minus imports, shaved 0.4 of a percentage point off overall GDP, while domestic demand knocked off 0.1 point, the data showed.

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Reporting by Tetsushi Kajimoto and Satoshi Sugiyama; Editing by Sam Holmes

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- Euro falls to lowest in a month

- Eurosceptic nationalists gain in EU election

- French President Macron risks losing domestic control

- French banks slide; government borrowing costs hit 2024 high

LONDON/SINGAPORE, June 10 (Reuters) - The euro fell while French stocks and bonds tumbled on Monday, following President Emmanuel Macron's decision to

call

a snap parliamentary election after being trounced in a European Union vote by the far right.

The euro fell by as much as 0.6% to a one-month low of $1.0733 and hit a 21-month trough against sterling of 84.49 pence .

French blue-chip stocks

(.FCHI), opens new tab

dropped 1.6%, led by steep losses in the likes of lenders such as BNP Paribas

(BNPP.PA), opens new tab

and Societe Generale

(SOGN.PA), opens new tab

, making the CAC 40

(.FCHI), opens new tab

the worst-performing index in Europe. Europe's benchmark STOXX 600

(.STOXX), opens new tab

fell 0.5%.

French government bond prices also fell , pushing 10-year borrowing costs to their highest this year, around 3.20%.

Centre, liberal and Socialist parties were set to retain a majority after the European Parliament elections, but eurosceptic nationalists made

the biggest gains

, raising questions about the ability of major powers to drive policy in the bloc.

Making a risky gamble to reestablish authority, Macron called a parliamentary election with a first round on June 30.

If the far-right National Rally party wins a majority, Macron would be left without a say in domestic affairs.

"That is probably somewhat bad news for markets," said Berenberg chief economist Holger Schmieding.

"It introduces an unexpected element of uncertainty."

Britain holds a general election on July 4 and crucial U.S. elections take place in November, while markets have lately turned fragile as U.S. rate cut expectations have dimmed.

Kathleen Brooks, research director at trading platform XTB, said in a note the "shock factor" from Macron's decision to call a snap election would weigh on European markets on Monday, but who prevailed in the actual vote might carry more weight.

"The question for traders of the euro and European stock markets is just how radical will Marine Le Pen and Jordan Bardella be if they do well in the French parliamentary elections?" she said, referring to two far-right leaders in France.

Item 1 of 2 A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard/File Photo

[1/2]A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard/File Photo Purchase Licensing Rights, opens new tab

WAKE-UP CALL?

While the euro and euro area assets have been largely cushioned by diminished euroscepticism compared with elections in the 2010s and early 2020s, the results and surprise reaction from France could be a wake-up call.

The premium bond investors demand to hold French government debt, rather than benchmark German bonds , touched its highest in six weeks, widening by 7 basis points (bps) to 55 bps.

The gap between German and Italian debt, which investors see as a measure of risk appetite in the broader region, also widened to nearly 140 bps , the most since late April.

"Obviously, the snap election is a new source of uncertainty, which should have some negative impact on economic and market confidence, at least in France," said Jan von Gerich, chief market analyst at Nordea.

But he noted that EU election results do not always translate into domestic ones, due to different voting systems and as EU elections tend to attract a larger protest vote.

That said, shares in French banks were battered, with Societe Generale falling almost 8%, while BNP Paribas was down 5% as investors worried their funding costs may increase if French sovereign borrowing becomes more expensive amid higher spending, bankers said.

Analysts also noted that a big win for the far right in parliamentary elections could pave the way for a tax on bank profits - another reason why shares in French lenders were hit so hard on Monday.

The cost of insuring the debt of both banks against default rose to around the highest in a month, according to data from S&P Global Market Intelligence.

The European Central Bank last week delivered its first rate cut in five years and the currency is down almost 2.5% on the dollar this year, mostly driven by the relative outlooks for interest rate cuts in the euro area and United States.

In France, where concerns about the country's high debt levels have grown this year, the implications of renewed political uncertainty for the economy could also be in focus.

Standard & Poor's last month

cut its rating

on France's sovereign debt, delivering a painful rebuke to the government's handling of the strained budget days before the EU election.

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Additional reporting by Mathieu Rosemain in Paris; Ankur Banerjee and Tom Westbrook in Singapore and Stephen Culp in New York; Editing by Shri Navaratnam, Mark Potter, Kirsten Donovan and Emelia Sithole-Matarise

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Senior correspondent on the London markets team covering European sovereign bond markets and big macro and financial themes.

Saudi Aramco shares trade higher after share offering | Reuters

DUBAI, June 9 (Reuters) - Saudi Aramco's

(2222.SE), opens new tab

shares gained on Sunday, the first trading day after a secondary share offering expected to raise at least $11.2 billion.

The shares opened at 27.95 riyals a share, after closing the previous session on Thursday at 28.3 riyals, but climbed to 28.35 riyals by 0730 GMT. The secondary share sale's final price was set at 27.25 riyals, towards the lower end of the given price range.

Saudi Arabia placed over half of the Aramco share sale with foreign investors, two people with knowledge of the matter told Reuters on Saturday. One of them said multiple orders came from the United States, Britain, Hong Kong and Japan.

The world's top oil exporter has been seeking to lure international investment to pour tens of billions of dollars into projects to diversify away from its reliance on oil. Yet foreign investment has repeatedly missed targets.

Saudi de facto ruler Crown Prince Mohammed bin Salman's Vision 2030 is funding endeavours as diverse as electric vehicles to building futuristic cities in the desert, mainly via the Public Investment Fund (PIF).

The $925 billion sovereign fund, after

scaling back

some of its flagship giga-projects, aims to sharpen its focus to drive forward the vision.

Proceeds from the share sale are likely to be funnelled to the PIF, sources and analysts have said, though funds could also help plug the kingdom's budget deficit which has risen as the oil price has weakened.

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June 7 (Reuters) - The U.S. economy created far more jobs than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labor market and reducing the likelihood the Federal Reserve will be able to start rate cuts in September.

The Labor Department's closely watched employment report on Friday also showed the unemployment rate ticked up to 4.0% from 3.9% in April, a symbolic threshold below which the jobless rate had previously held for 27 straight months.

The unexpectedly strong report made plain that while the labor market has softened around the edges in recent months, its still-solid performance is set to underpin economic growth and keep the Fed on the sidelines and taking its time in deciding when to begin lowering borrowing costs. The hotter-than-expected wage gains also raised the prospect that elevated inflation may prove stickier than hoped although the impact from the rise in the unemployment rate could temper that.

Financial markets

slashed the odds

of a September rate cut, reducing the probability to about 53% from about 70% before the report, based on rate futures contracts, and now see roughly an even chance of two rate cuts by the end of 2024, versus about a 68% chance seen before the report.

"So much for slowing. The headline payrolls number is eye popping.... The Fed will take this to mean that they can still focus squarely on inflation without worrying much about growth," said Brian Jacobsen, chief economist at Annex Wealth Management.

The yield on the 2-year Treasury note, which is sensitive to Fed policy expectations, shot up by the most in two months. Yields across other maturities rose sharply as well. The report put stocks on the defensive after a rally led by the AI sector that had carried major indexes to record highs this week. The dollar strengthened broadly.

Nonfarm payrolls increased by 272,000 jobs last month, the Labor Department's Bureau of Labor Statistics said. Revisions showed 15,000 fewer jobs created in March and April combined than previously reported. Economists polled by Reuters had forecast payrolls advancing by 185,000. Estimates ranged from 120,000 to 258,000. May's employment gains were higher than the 232,000 monthly average for the past year.

Nonfarm payrolls

CONFLICTING SIGNALS

Hiring was widespread across the economy, with a measure of its diversity at its highest level since January last year. The healthcare sector added 68,000 jobs, spread across ambulatory healthcare services, hospitals, nursing and residential care facilities. It continued to lead employment gains as companies seek to boost staffing levels after losing workers during the pandemic.

Reuters Graphics

Government payrolls increased by 43,000 positions. Employment in the leisure and hospitality sector rose by 42,000 jobs, with slightly more than half that total coming from employment in food services and drinking places.

A “Help Wanted” sign hangs in restaurant window in Medford, Massachusetts, U.S., January 25, 2023. REUTERS/Brian Snyder/File Photo Purchase Licensing Rights, opens new tab

Professional and business services hired 32,000 more workers, driven by management, scientific and technical consulting services and architectural and engineering-related services. Social assistance and retail hiring also trended up last month. There were small job losses at department stores and home furnishings retailers.

The U.S. central bank is expected to leave its benchmark overnight interest rate unchanged at its meeting next week in the current 5.25%-5.50% range, where it has been since last July.

Average hourly earnings rose 0.4% after having slowed to a 0.2% rate in April. Wages increased 4.1% in the 12 months through May following an upwardly revised 4.0% annual rise the prior month. Wage growth in a 3.0%-3.5% range is seen as consistent with the Fed's 2% inflation target. The average workweek was unchanged at 34.3 hours.

"Accelerating pay growth could be a sign of inflationary pressures ready to rebound if the Fed takes their foot off the brake. On the other hand, higher unemployment could signal weaker wage growth ahead, softer consumer demand, and less pricing power for businesses, which would cool inflation," said Bill Adams, chief economist at Comerica Bank.

Inflation gauges

The U.S. central bank is closely monitoring labor market conditions and economic growth to ensure it doesn't keep rates too high for too long and overcool the economy as it tries to return inflation back to its 2% target. At 4.0%, the jobless rate in May was at the level the Fed in March predicted it would reach by the end of this year.

Overall economic output in the first quarter grew at the slowest rate in nearly two years and other data so far in the current quarter, aside from monthly payrolls growth and inflation, on balance has been weaker than expected.

Data earlier this week showed job openings declined in April and the number of available jobs per job-seeker reached its

lowest level

since June 2021.

Friday's data showed the labor force participation rate fell to 62.5% in May from 62.7% in April, reversing this year's progress and driven by fewer workers in the 20-24 age range. But participation by the prime-age population, defined as those aged between 25 and 54, rose to its highest level in 22 years.

Some economists questioned the divergence between the strong job gains and the rise in the unemployment rate. The two figures are derived from separate surveys within the report. The employment measure, contained in the Household Survey, has fallen in five of last eight months. That survey showed 250,000 individuals left the labor force altogether last month.

Unemployment and labor market participation

"The employer and household surveys should tell a similar story, but it’s too early to tell whether the recent divergence is a sign of deeper cracks appearing in the foundation of the labor economy or a temporary anomaly," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

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USA News

- US Democrats deploying funds to boost down-ballot candidates in non-battleground states

- Hunter Biden to decide whether to testify in gun trial

- Trump to sit for virtual interview with probation official Monday, New York Times reports

- Biden administration ready for court challenges to border policy, Mayorkas says

- Trump tells sweltering rally in Nevada he won't tax tips

- Migrant arrests drop at US-Mexico border as Biden asylum ban rolls out

- Apollo 8 astronaut William Anders, who took 'Earthrise' photo, dead in plane crash

- New York lawmakers pass measure to protect youths on social media

- Pro-Palestinian protesters to surround White House; fencing put up

- Top law firms in US opioid lawsuits to get hundreds of millions in fees

- Sandy Hook families agree to Alex Jones' bankruptcy liquidation

- Some US lawmakers call for more scrutiny of news app NewsBreak over Chinese origins

- US Supreme Court justices disclose Bali hotel stay, Beyoncé tickets, book deals

- COVID shots should target JN.1 variant in fall 2024 campaign, US FDA says

- Exclusive: US House committee grills Carney, Schapiro in push against climate coalitions

- Hunter Biden's daughter testifies at his criminal gun trial

- As Trump narrows VP search, his short list is nearly all men

- Biden asks Americans to recommit to democracy in Normandy cliff speech

- Trump ally Bannon ordered to report to prison for defying Jan. 6 probe

- Trump rakes in $12 million at tech fundraiser in liberal San Francisco

US Democrats deploying funds to boost down-ballot candidates in non-battleground states | Reuters

June 10 (Reuters) - The national Democratic Party is deploying nearly $2 million to boost down-ballot candidates in 11 states where the presidential election is not expected to be competitive, targeting specific races from the U.S. Senate to state legislative contests in

November's elections

.

The Democratic National Committee said the investments will go to state parties in nearly a dozen traditionally Democratic and Republican states such as Washington and Texas, where down-ballot candidates are unlikely to benefit from campaign visits or advertising by Democratic President

Joe Biden

and Republican presidential nominee

Donald Trump

.

In Republican-dominated Indiana and Kansas, the funds are aimed at breaking Republican supermajorities in the state legislatures, according to a DNC announcement scheduled for Monday and seen by Reuters. In Democratic-leaning Maryland, the DNC will provide $250,000 to hire campaign staff and organizers to help Democratic U.S. Senate nominee Angela Alsobrooks in a race considered must-win for the Democrats to retain control of the Senate.

Many of the grants are earmarked for specific state-level needs. In Minnesota, for instance, the DNC is providing funds to hire two staffers dedicated to voters who rent apartments, who can be difficult for campaigns to reach. In Nebraska, the home of a highly competitive U.S. House of Representatives contest, a $40,000 grant will pay for a rural organizer, while in South Dakota, the party will spend $70,000 to help register Native Americans to vote.

Democrats have outraised Republicans for most of the 2023-24 election cycle, and Biden's campaign entered May with a significant cash edge. However, Trump and the Republican National Committee said last week

they had raised

a whopping $141 million in May, nearly doubling the prior month's total after a flood of donations following Trump's

felony conviction

.

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Reporting by Joseph Ax in Princeton, New Jersey, Editing by Matthew Lewis

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Hunter Biden will not testify in gun trial, lawyer says | Reuters

Item 1 of 4 Hunter Biden, son of U.S. President Joe Biden, and his wife Melissa Cohen Biden arrive at the federal court for his trial on criminal gun charges, in Wilmington, Delaware, U.S., June 10, 2024. REUTERS/Hannah Beier

[1/4]Hunter Biden, son of U.S. President Joe Biden, and his wife Melissa Cohen Biden arrive at the federal court for his trial on criminal gun charges, in Wilmington, Delaware, U.S., June 10, 2024. REUTERS/Hannah Beier Purchase Licensing Rights, opens new tab

June 10 (Reuters) - U.S. President Joe Biden’s son Hunter Biden will not testify when his criminal trial resumes on charges he hid his drug use from the government in 2018 to illegally buy a gun, according to CNN.

Abbe Lowell, Hunter Biden's lawyer, indicated in court on Monday that his client will not testify, allowing the judge to give the jury an instruction that they should not hold it against Biden that he did not testify in the case.

The instruction will be given later today.

Prosecutors in the first criminal trial of a U.S. president’s child rested their case on Friday after a week of testimony that offered an intimate view of the younger Biden’s years of struggle with alcohol and crack cocaine abuse, which prosecutors say legally precluded him from buying a gun.

Hunter Biden, 54, has pleaded not guilty to felony charges both of lying about his addiction when he filled out a government screening document for the Colt Cobra revolver and of illegally possessing the weapon for 11 days.

The trial in U.S. District Court in Wilmington, Delaware, follows another historic first - the May 30 criminal conviction of Donald Trump, the first U.S. president to be found guilty of a felony. Trump is the Republican challenger to Joe Biden, a Democrat, in a Nov. 5 presidential election.

Trump and some of his Republican allies in Congress have alleged the case and three other criminal prosecutions are politically motivated attempts to prevent him from regaining power.

Congressional Democrats cite the Hunter Biden prosecution as evidence that Joe Biden is not using the justice system for political or personal ends.

Last week, Hunter Biden’s ex-wife, former girlfriend and sister-in-law testified for the prosecution about his drug use, telling jurors that they often found drugs and paraphernalia in his possession and were concerned at times about his spiraling addiction.

Hunter Biden told the judge overseeing the case at a 2023 hearing that he has been sober since 2019.

Biden’s lawyer Abbe Lowell told jurors during his opening statement that his client did not intend to deceive because he had been clean when he bought the gun and did not consider himself a drug user at the time.

The defense called three witnesses on Friday, including the gun shop owner and an employee and Hunter Biden’s daughter Naomi, who said her father appeared to be doing well when she saw him during the weeks before and after he bought the gun.

The sentencing guidelines for the charges against Biden are 15 to 21 months, but legal experts say defendants in cases similar to his often get shorter sentences and are less likely to be incarcerated if they abide by the terms of their pretrial release.

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Reporting by Jack Queen; Editing by Howard Goller and Nick Zieminski

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Legal correspondent specializing in politically charged cases.

Tom Hals is an award-winning reporter with 25 years of experience working in Asia, Europe and the United States. Since 2009 he has covered legal issues and high-stakes court battles, ranging from challenges to pandemic policies to Elon Musk's campaign to end his deal for Twitter.

Trump to sit for virtual interview with probation official Monday, New York Times reports | Reuters

WASHINGTON, June 9 (Reuters) - Former President Donald Trump will have a virtual interview with a New York City Probation Department official on Monday following his conviction of 34 felony counts of falsifying documents, the New York Times reported Sunday.

The mandatory interview comes as that department prepares a sentencing recommendation for the judge. Trump is scheduled to be sentenced on July 11, and faces a maximum sentence of four years, though those convicted often receive shorter sentences.

Trump was

found guilty

on May 30, making him the first U.S. president to be convicted of a crime. The jury found him guilty of falsifying documents to cover up a payment to silence a porn star ahead of the 2016 election after two days of deliberation. He has said he will appeal the verdict.

Trump campaign officials declined to comment on the interview Sunday.

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Reporting by Pete Schroeder and Nathan Layne; Editing by Diane Craft

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Biden administration ready for court challenges to border policy, Mayorkas says | Reuters

WASHINGTON, June 9 (Reuters) - President Joe Biden's administration is prepared to defend in court the sweeping asylum policy put into place at the U.S.-Mexico border last week, Homeland Security Secretary Alejandro Mayorkas told ABC's "This Week" on Sunday.

Biden

signed an executive order

on Tuesday that generally bars migrants who illegally cross the southern border from claiming asylum and allows authorities to quickly deport or send migrants back to Mexico if the daily number of crossings exceeds 2,500. The asylum ban has exceptions for unaccompanied minors, people who face serious medical or safety threats, and victims of trafficking.

Mayorkas on Sunday said the administration was ready to defend the policy against an expected American Civil Liberties Union (ACLU) lawsuit.

"I respectfully disagree with the ACLU," Mayorkas said. "We stand by the legality of what we have done. We stand by the value proposition. It's not only a matter of securing the border, we have a humanitarian obligation to keep vulnerable people out of the hands of exploitative smugglers."

The ACLU confirmed on Sunday it plans to sue.

"It was illegal when Trump did it, and it is no less illegal now," ACLU Immigrants’ Rights Project Deputy Director Lee Gelernt said in a statement.

Biden took office in 2021 vowing to reverse some of Republican Donald Trump's restrictive policies but has grappled with record levels of migrants caught crossing the border illegally ahead of the Nov. 5 presidential election.

Mayorkas said initial indications showed the new policy was deterring some illegal immigration.

"It's early. The signs are positive," he said.

A U.S. border official told Reuters that

authorities arrested around 3,100 people

crossing illegally on Friday, down roughly 20% from the days before. The official requested anonymity to discuss preliminary figures.

Texas Governor Greg Abbott, who

installed razor wire fencing

along the Rio Grande and has seen a state law to enforce illegal crossings into his state

blocked by a judge

, told Fox News' "Sunday Morning Futures" he thinks the policy is backfiring.

"All that this new Biden policy is going to do is to actually attract and invite even more people to cross the border illegally," Abbott said.

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Reporting by Katharine Jackson; Editing by Scott Malone and Bill Berkrot

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LAS VEGAS, June 9 (Reuters) - Republican presidential candidate

Donald Trump

told a rally in Las Vegas on Sunday that he would seek to end taxation of income from tips, a direct appeal to service workers in the swing state of Nevada, which polls suggest is leaning his way ahead of

the Nov. 5 election

.

Trump also once again valorized his supporters convicted for their roles in the Jan. 6, 2021 attack on the U.S. Capitol, calling them "warriors" and suggesting a possible counter-investigation into the event if he were re-elected.

The pledge on tips, revealed at a sweltering outdoor rally in Las Vegas where temperatures reached 100 degrees, adds one more detail to a Trump tax plan that has included vague pledges of tax relief to middle-income workers and small businesses.

"So this is the first time I've said this, and for those hotel workers and people that get tips you're going to be very happy because when I get to office, we are going to not charge taxes on tips people (are) making," Trump told a crowd of several thousand people.

Trump said he would "do that right away, first thing in office," and noted in prepared remarks that he would seek legislation in Congress to make the change. "You do a great job of service, you take care of people and I think it's going to be something that really is deserved."

Trump has previously pledged to make permanent the Republican-passed individual tax cuts that he signed into law in 2017 but which expire at the end of 2025. Tax experts estimate that doing so would raise U.S. deficits by some $4 trillion over a decade compared to current forecasts.

As current law requires, tipped employees must report their tips as income. Eliminating this would add further to deficits without new revenues elsewhere.

Trump's Democratic opponent,

President Joe Biden

, has pledged to maintain Trump's tax cuts for households earning under $400,000 a year, but wants to substantially raise taxes on the wealthiest Americans and on large corporations.

The Las Vegas speech was Trump's first large-scale rally since a New York jury found him guilty on May 30 of falsifying documents to cover up a payment to a porn star on the eve of the 2016 election, making him the

first former U.S. president convicted

of a crime.

Trump also continued to hammer Biden on illegal immigration, predicting that Biden's move last week enacting a broad asylum ban on migrants caught illegally crossing the U.S.-Mexico border would not make a difference, even though the ban is similar to restrictions Trump tried to implement when he was president.

Item 1 of 5 Republican presidential candidate and former U.S. President Donald Trump speaks during a campaign event, in Las Vegas, Nevada. REUTERS/Brendan McDermid

[1/5]Republican presidential candidate and former U.S. President Donald Trump speaks during a campaign event, in Las Vegas, Nevada. REUTERS/Brendan McDermid Purchase Licensing Rights, opens new tab

"It's bullshit what he signed," Trump said of Biden's executive order, prompting a wave of chants by the crowd repeating the profanity.

For days, Las Vegas residents have been coping with unusually high temperatures, part of a heatwave scorching the U.S. Southwest. The Trump campaign set up misting stations while partially overcast skies and a breeze helped mitigate the heat, though a handful of people had to be taken away for treatment.

SWING STATES

Trump, who has repeatedly called people imprisoned for their roles in the Capitol attack "hostages" and said he may pardon them, on Sunday described them as "warriors" without blame.

"Those ‘J-six’ warriors - they were warriors - but they were really more than anything else, they’re victims of what happened. All they were doing is protesting a rigged election."

Nevada is one of six or seven swing states likely to determine the election. A Fox News survey conducted after the guilty verdict showed Trump ahead of Biden in Nevada by five percentage points, an advantage roughly in line with an average of polls compiled by poll tracking website FiveThirtyEight.

Rebecca Gill, a political science professor at the University of Nevada-Las Vegas, said she was skeptical that polls were fully capturing where voters will be in a few months, given that many are not yet paying attention to the race.

Gill said she did not think Trump's criminal conviction has fully sunk in with voters and could deter some moderate Republicans from backing him. In addition, a proposed amendment to enshrine access to abortion in the state constitution would, if it makes it onto the ballot, likely boost Democratic turnout.

"I think that (Nevada) is 100% still in play," Gill said.

Sunday's rally comes on the heels of a three-day fundraising push by Trump that included stops in San Francisco, Beverly Hills and Las Vegas, during which he raised $33.5 million from donors, according to senior campaign adviser Chris LaCivita.

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Reporting by Nathan Layne in Las Vegas and David Lawder in Washington, additional reporting by Brendan McDermid, Alexandra Ulmer, Brad Brooks and Douglas Gillison; Editing by Ross Colvin, Daniel Wallis, Bill Berkrot and Diane Craft

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Migrant arrests drop at US-Mexico border as Biden asylum ban rolls out | Reuters

WASHINGTON, June 8 (Reuters) - The number of migrants caught illegally crossing the U.S.-Mexico border dropped on Friday, a senior U.S. border official told Reuters, saying it signaled a restrictive new Biden administration policy was deterring some illegal immigration.

U.S. Border Patrol arrested around 3,100 people crossing illegally, down roughly 20% from the days before, the official said, requesting anonymity to discuss preliminary figures.

"It's still too early to say this is a definitive trend," the official said. "But I think it is indicative of some possible early success."

Immigration has emerged as a top issue for Americans in the months before Nov. 5 elections that will decide control of the White House and Congress. President Joe Biden, a Democrat seeking another term, faces Republican Donald Trump - an immigration hardliner - in a rematch of the 2020 contest.

Biden took office in 2021 pledging to reverse many of Trump's restrictive immigration policies but has

toughened his stance

in the face of record migrant arrests at the border.

Biden implemented a

sweeping policy

on Wednesday that generally bars migrants who illegally cross the U.S.-Mexico border from claiming asylum. The asylum ban has exceptions for unaccompanied minors, people who face serious medical or safety threats, and victims of trafficking.

The new policy aims to maximize the number of migrants placed in "expedited removal," a fast-track deportation process. Since Wednesday, more than 2,000 people per day were put in expedited removal, more than double the previous rate, the U.S. official said.

Questions still remain about whether border crossings will stay low enough to process people quickly and whether U.S. authorities have the capacity to meet their goals.

The American Civil Liberties Union has vowed to sue to halt the measure, which resembles Trump-era curbs on asylum.

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Reporting by Ted Hesson in Washington; Editing by Mica Rosenberg and Daniel Wallis

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Ted Hesson is an immigration reporter for Reuters, based in Washington, D.C. His work focuses on the policy and politics of immigration, asylum and border security. Prior to joining Reuters in 2019, Ted worked for the news outlet POLITICO, where he also covered immigration. His articles have appeared in POLITICO Magazine, The Atlantic and VICE News, among other publications. Ted holds a master's degree from the Columbia University Graduate School of Journalism and bachelor's degree from Boston College.

June 7 (Reuters) - Retired astronaut William Anders, who was one of the first three humans to orbit the moon, capturing the famed "Earthrise" photo during NASA's Apollo 8 mission in 1968, died on Friday in the crash of a small airplane in Washington state. He was 90.

NASA chief Bill Nelson paid tribute to Anders on social media with a post of the iconic image of Earth rising over the lunar horizon, saying the former Air Force pilot "offered to humanity among the deepest of gifts an astronaut can give."

The Heritage Flight Museum near Burlington, Washington, which he co-founded, confirmed that Anders was killed in an aircraft accident.

Anders was piloting the plane alone when it went down off the coast of Jones Island, part of the San Juan Islands archipelago north of Seattle, between Washington and Vancouver Island, British Columbia, The Seattle Times reported, citing his son, Greg.

According to television station KCPQ-TV, a Fox affiliate in Tacoma, Anders, a resident of San Juan County, was at the controls of a vintage Air Force single-engine T-34 Mentor that he owned.

Video footage showed on KCPQ showed a plane plunging from the skies in a steep dive before slamming into the water just offshore.

A U.S. Naval Academy graduate and Air Force pilot, Anders joined NASA in 1963 as a member of the third group of astronauts. He did not go into space until Dec. 21, 1968, when Apollo 8 lifted off on the first crewed mission to leave Earth orbit and travel 240,000 miles (386,000 km) to the moon.

Anders was the "rookie" on the crew, alongside Frank Borman, the mission commander, and James Lovell, who had flown with Borman on Gemini 7 in 1965 and later commanded the ill-fated Apollo 13.

Apollo 8, originally scheduled for 1969, was pushed forward because of concerns the Russians were accelerating their own plans for a trip around the moon by the end of 1968. That gave the crew only several months to train for the historic but highly risky mission.

Carried by a Saturn V rocket never before used on a crewed flight and tested only twice, the spacecraft faced the delicate and daunting task of entering and leaving lunar orbit safely. Failure meant crashing into the moon or being forever stranded in orbit.

DISCOVERING EARTH, FROM THE MOON

Recalling the mission 40 years later, Anders acknowledged that although confident of success, he thought "there was a one-third chance" the crew "didn't come back."

Trepidation turned to triumph when Apollo 8 reached the moon on Christmas Eve and during its 10 orbits captivated a worldwide television audience of more than a billion people by transmitting the first pictures of the lunar surface just miles below.

A key part of the mission was photographing the moon, but "after about the third revolution, the moon was clearly kind of a boring place. There was nothing but holes and holes upon holes," Anders said at a symposium in 2009.

The astronauts' focus shifted abruptly when the Earth began rising over the lunar surface. "Me, Lovell and Borman suddenly said at once: 'Look at that' - this gorgeous, colorful, beautiful planet of ours coming up over the ugly lunar horizon," Anders told Forbes magazine in 2015.

Using a long lens and color film, Anders ended up snapping the photograph now known as "Earthrise." The image, vividly capturing both the Earth's beauty and fragility in the vastness of space, is considered one of history's most influential photographs, widely credited with helping inspire the environmental movement.

"Here we came all the way to the moon to discover Earth," Anders later said.

'YOU SAVED 1968'

He also played a key role in another indelible episode from that Christmas Eve mission - leading off as the crew read from the Book of Genesis while Apollo 8 transmitted images of the lunar surface to Earth.

The three astronauts were greeted as national heroes when they splashed down three days later in the Pacific Ocean and were feted as Time magazine's "Men of the Year."

Their mission paved the way to the first moon landing by Apollo 11 seven months later, assuring U.S. victory in the Cold War "space race" with the Soviets. But it was also hailed for lifting national spirits at the end of one of America's most traumatic years, in which Americans were shaken by the war in Vietnam, and riots and assassinations at home.

"You saved 1968," read one thank-you note to the crew.

William Alison Anders was born on Oct. 17, 1933, in Hong Kong, which was then under British rule. The son of a U.S. Navy lieutenant, his family relocated to Annapolis, Maryland, shortly after his birth but later returned to China, where Anders fled to the Philippines with his mother after the Japanese assault on Nanking.

He earned an electrical engineering degree from the Naval Academy in Annapolis, and served in Air Force interceptor squadrons monitoring Soviet challenges of U.S. air defenses.

After Apollo 8, Anders never flew in space again but served on the National Aeronautics and Space Council. In 1975, he was appointed by President Gerald Ford as first chairman of the Nuclear Regulatory Commission, and later as ambassador to Norway.

He also held various corporate positions at General Electric and Textron before serving as chairman and chief executive of General Dynamics in the early 1990s.

In his later years, he headed a philanthropic group for education and the environment. He and his wife, Valerie, whom he married in 1955, raised six children.

In the decades after Apollo 8, Anders joined Lovell, now 96, and Borman, who died last year at age 95, at anniversary celebrations of the mission.

As discussion grew of sending astronauts back to the moon and even to Mars, Anders voiced hope "that when we finally figure out how to go to Mars, we could do it not as Americans beating the Chinese or some silly thing like that but we could do it as humans going from our home planet to the next planet."

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New York lawmakers pass measure to protect youths on social media | Reuters

NEW YORK, June 7 (Reuters) - New York state lawmakers on Friday passed legislation to bar social media platforms from exposing "addictive" algorithmic content to users under age 18 without parental consent, becoming the latest of several states moving to limit online risks to children.

A companion bill to restrict online sites from collecting and selling the personal data of underage users also gained final legislative approval in the New York Assembly on Friday, a day after both measures cleared the state Senate.

Governor Kathy Hochul is expected to sign both into law.

She hailed the two measures as a "historic step forward in our efforts to address the youth mental health crisis and create a safer digital environment for young people."

Social media companies such as Meta Platforms

(META.O), opens new tab

, whose platforms include Facebook and Instagram, could take a hit to their revenues.

Supporters of the legislation pointed to a recent Harvard University study that found the six largest social media platforms generated $11 billion from advertising to minors in 2022.

The bills' sponsors also cite studies linking higher rates of depression, anxiety, sleep disorders and other mental health woes to what they define as excessive social media use by adolescents.

The industry association NetChoice condemned the legislation, calling it in a statement an "assault on free speech and the open internet" by "forcing websites to censor all content unless visitors provide an ID to verify their age."

The organization said it had successfully challenged similar measures from three other states in court as unconstitutional.

A spokesperson for the governor said the law would not censor a site's content and said it provides for using one or more age-verification methods that retains a user's anonymity.

Meta, whose chairman and CEO Mark Zuckerberg co-founded Facebook, offered some support for the bill.

"While we don’t agree with every aspect of these bills, we welcome New York becoming the first state to pass legislation recognizing the responsibility of app stores," the company said in a statement.

Under the bill dubbed the SAFE (Stop Addictive Feeds Exploitation) for Kids Act, social media users under 18 must obtain parental consent to view "addictive" feeds. This is generally defined as content that comes from accounts they do not follow or subscribe to but is delivered by algorithms designed to keep them on a platform for as long as possible.

Instead, minors on social media may receive a chronological feed of content from accounts they already follow or from generally popular content, the way sponsors say social media feeds worked before the advent of "addictive" algorithms.

Young users can still search for specific topics of interest, connect with friends and join online groups, while non-addictive algorithms used for search functions or filtering unwanted or obscene content would still be permitted without a parent's consent.

According to a bill summary from the New York attorney general, the legislation would apply to platforms whose feeds consist largely of user-generated content and material recommended to users based on the data it collects from them.

The summary named Facebook, Instagram, TikTok, Twitter and Alphabet Inc's

(GOOGL.O), opens new tab

YouTube as among platforms that would likely be subject to the measure.

The companion bill, called the New York Child Data Protection Act, would bar all online sites from collecting, using, sharing or selling personal data of anyone under 18 unless they receive "informed consent," or unless collecting and sharing such data is strictly necessary to the site's purpose.

For users under the age of 13, informed consent would have to come from a parent.

Violators could be subject to civil damages or penalties of up to $5,000 per violation.

In March 2023,

Utah became the first U.S. state

to adopt laws regulating children's access to social media, followed by others, including Arkansas, Louisiana, Ohio, Texas and

Florida

.

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Reporting by Jonathan Allen in New York and Steve Gorman in Los Angeles; Editing by Leslie Adler

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Pro-Palestinian protesters to surround White House; fencing put up | Reuters

Item 1 of 2 People demonstrate during a pro-Palestinian rally in front of the White House, during the ongoing conflict between Israel and the Palestinian Islamist group Hamas, in Washington, U.S., May 28, 2024. REUTERS/Elizabeth Frantz/File Photo

[1/2]People demonstrate during a pro-Palestinian rally in front of the White House, during the ongoing conflict between Israel and the Palestinian Islamist group Hamas, in Washington, U.S., May 28, 2024. REUTERS/Elizabeth Frantz/File Photo Purchase Licensing Rights, opens new tab

WASHINGTON, June 7 (Reuters) - Pro-Palestinian activists demanding an end to the war in Gaza and to American support for Israel plan to surround the White House during a weekend protest, prompting additional security measures, including anti-scale fencing.

Advocacy and activist groups like CODEPINK and the Council on American Islamic Relations said on Friday that demonstrations were planned on Saturday, marking eight months of

Israel's war in Gaza

that has

killed tens of thousands

while causing a humanitarian crisis with

widespread hunger

and destruction.

The United States, Israel's key ally, has seen

months of pro-Palestinian protests

ranging from

marches in Washington

and vigils near the White House to the

blocking of bridges and roads

near train stations and

airports

in multiple cities and

encampments

on

many college campuses

.

At least eight officials

have quit

the administration of President Joe Biden citing their opposition to his policy. Protesters have also disrupted some of Biden's

reelection campaign events

. Biden is currently in France for an official visit.

"In preparation for the events this weekend in Washington, D.C., that have the potential for large crowds to gather, additional public safety measures have been put in place near the White House complex," a U.S. Secret Service spokesperson said.

Biden and the White House

have previously said

they support peaceful protests but not "chaos" and violence.

University protests have had occasional violence while police have

made arrests

on campuses to clear encampments. Anti-war activists encamped at the University of California, Los Angeles, were

violently attacked

by a mob weeks ago.

There has also been concern about a rise in

antisemitism

and

Islamophobia

amid the conflict.

The war began when Palestinian Islamist militant group Hamas attacked Israel

on Oct. 7

, killing 1,200 and taking 250 people hostage, according to Israeli tallies.

Israel's subsequent assault on Gaza has killed over 36,000, according to the local health ministry,

displaced nearly the entire 2.3 million population

there and led to genocide allegations that

Israel denies

. A renewed

ceasefire push

seemed stalled as of Friday.

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Reporting by Kanishka Singh in Washington; Editing by Leslie Adler

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Kanishka Singh is a breaking news reporter for Reuters in Washington DC, who primarily covers US politics and national affairs in his current role. His past breaking news coverage has spanned across a range of topics like the Black Lives Matter movement; the US elections; the 2021 Capitol riots and their follow up probes; the Brexit deal; US-China trade tensions; the NATO withdrawal from Afghanistan; the COVID-19 pandemic; and a 2019 Supreme Court verdict on a religious dispute site in his native India.

Top law firms in US opioid lawsuits to get hundreds of millions in fees | Reuters

June 7 (Reuters) - A court-appointed panel on Friday

recommended how to divvy up, opens new tab

a pool of $2.13 billion in legal fees from nationwide drug industry settlements over the U.S. opioid crisis, with top firms set to receive hundreds of millions of dollars.

The panel gave national firm Motley Rice the largest share, with 18.6% of the funds, or $396 million. Other firms with large shares include New York-based Simmons Hanly Conroy, with 11.4%, or $244 million; California-based Robbins Geller Rudman & Dowd, with 8.2%, or $174 million; and California-based Lieff Cabraser Heimann & Bernstein, with 5.65%, or $120 million.

The $2.13 billion fee pool comes out of settlements totaling more than $46 billion that drugmakers, distributors and pharmacies have reached to resolve lawsuit by local and Native American tribal governments accusing them of fueling an epidemic of opioid addiction.

The money was set aside as a so-called common benefit fund, to compensate law firms for work they did that benefited all of the plaintiffs in the litigation.

U.S. District Judge Dan Polster, who has overseen the sprawling opioid litigation since 2017, also

ruled Friday, opens new tab

that firms have until June 21 to appeal the panel's recommendations before they become final.

The fees stem from settlements with drugmakers Johnson & Johnson

(JNJ.N), opens new tab

, AbbVie

(ABBV.N), opens new tab

and Teva Pharmaceutical Industries

(TEVA.TA), opens new tab

; distributors Cencora

(COR.N), opens new tab

, McKesson

(MCK.N), opens new tab

and Cardinal Health

(CAH.N), opens new tab

; and pharmacies CVS

(CVS.N), opens new tab

, Walgreens Boots Alliance

(WBA.O), opens new tab

and Walmart

(WMT.N), opens new tab

.

They do not include a settlement of up to $6 billion with bankrupt OxyContin maker Purdue Pharma, which is funded by that company's Sackler family owners in exchange for a shield from future lawsuits. The U.S. Supreme Court

is currently weighing

whether that settlement is legal.

Opioid settlements, including both the nationwide deals and separate agreements negotiated by individual states, now total well over $50 billion. However, many state and local governments have yet to develop detailed plans for how they will spend the money to remedy the harms caused by opioids.

More than 800,000 people died of opioid overdoses from 1999 through 2023, according to data from the U.S. Centers for Disease Control and Prevention. Plaintiffs in the lawsuits say that drugmakers downplayed the drugs' risks, and distributors and pharmacies ignored red flags that they were being diverted into illegal channels.

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Reporting By Brendan Pierson in New York, Editing by Alexia Garamfalvi and David Gregorio

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Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.

Sandy Hook families agree to Alex Jones' bankruptcy liquidation | Reuters

NEW YORK, June 7 (Reuters) - Families of the Sandy Hook massacre victims claimed victory in Alex Jones' bankruptcy case on Friday, accepting the conspiracy theorist's proposal to sell his assets, including InfoWars, to partly pay legal judgments to them for his lies about the 2012 U.S. school shooting.

Jones, who

filed for U.S. bankruptcy

protection 17 months ago, has

given up

trying to reach a bankruptcy deal that would reduce the $1.5 billion that he owes to the relatives of 20 students and six staff members killed in the mass shooting at Sandy Hook Elementary School in Newtown, Connecticut.

Instead, Jones decided this week to proceed with a court-supervised liquidation of his assets.

Chris Mattei, an attorney for the Sandy Hook families, said on Friday that Jones' pivot to a Chapter 7 liquidation was a moment of "meaningful accountability" for his repeated lies, pushing the broadcaster to the "brink of justice."

"Alex Jones has hurt so many people," Mattei said. "The Connecticut families have fought for years to hold him responsible no matter the cost and at great personal peril."

Courts in Texas and Connecticut have ordered Jones to pay $1.5 billion to the Sandy Hook families after Jones claimed for years that the school killings were staged with actors as part of a government plot to seize Americans' guns. Jones has since acknowledged that the shootings occurred.

Bankruptcy can be used to wipe out debts and legal judgments, but the judge overseeing Jones' case ruled in October that most of the defamation verdicts

cannot be legally discharged

because they resulted from "willful and malicious injury" caused by Jones. Jones' decision to pursue a Chapter 7 liquidation doesn't alter that ruling.

Jones had asked the Sandy Hook families to vote for a bankruptcy settlement that would have paid them $55 million, but they unanimously rejected the deal and offered their own proposal for selling his assets.

The families said in a Friday court filing that they will back down from their plan and allow Jones to convert his case to a straightforward liquidation.

Jones has said that the defamation judgments are

far larger

than the total value of his assets.

While the liquidation will yield only a fraction of the money he owes the families, they objected to his proposal because it would have kept him in control of both InfoWars and his wealth for many years, while also capping the total amount that he would pay toward the defamation claims.

The court-supervised liquidation will allow the families to benefit from immediate asset sales, while keeping their claim on Jones' assets alive in the event he accrues wealth in the future.

On his InfoWars website, Jones said Tuesday on "The Alex Jones Show" that he expects to lose everything except for his home in bankruptcy, but he said he would find a way to continue broadcasting and would "work for free" rather than be "silenced" by the legal judgments.

Attorneys for Jones and the Sandy Hook families did not immediately respond to questions about how Jones would address the lingering legal debts after his assets are sold off in bankruptcy.

U.S. Bankruptcy Judge Christopher Lopez in Houston, Texas will consider Jones' request to convert his case to Chapter 7 liquidation at a June 14 court hearing.

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Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Cynthia Osterman

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Some US lawmakers call for more scrutiny of news app NewsBreak over Chinese origins | Reuters

WASHINGTON/LONDON, June 7 (Reuters) - Three U.S. lawmakers have called for more scrutiny of

NewsBreak, opens new tab

, a popular news aggregation app in the United States, after Reuters reported it has Chinese origins and has used artificial intelligence tools to produce erroneous stories.

The Reuters story

drew upon previously unreported court documents related to copyright infringement, cease-and-desist emails, and a 2022 company memo registering concerns about "AI-generated stories" to identify at least 40 instances in which NewsBreak's use of AI tools affected the communities it strives to serve.

“The only thing more terrifying than a company that deals in unchecked, artificially generated news, is one with deep ties to an adversarial foreign government," said Senator Mark Warner, a Democrat who chairs the Intelligence Committee.

"This is yet another example of the serious threat posed by technologies from countries of concern. It’s also a stark reminder that we need a holistic approach to addressing this threat – we simply cannot win the game of whack-a-mole with individual companies," he said.

The lawmakers expressed concerns about NewsBreak's current and historical links to Chinese investors, and the company's presence in China, where many of its engineers are based.

In response to a request from Reuters for comment about the lawmakers' statements, NewsBreak said it was an American company: "NewsBreak is a U.S. company and always has been. Any assertion to the contrary is not true," a spokesperson said.

NewsBreak launched in the U.S. in 2015

as a subsidiary of Yidian, opens new tab

, a Chinese news aggregation app. Both companies were founded by Jeff Zheng, the CEO of NewsBreak, and the companies

share a U.S. patent, opens new tab

registered in 2015 for an "Interest Engine" algorithm, which recommends news content based on a user's interests and location, Reuters reported.

Yidian in 2017

received praise, opens new tab

from ruling Communist Party officials in China for its efficiency in disseminating government propaganda. Reuters found no evidence that NewsBreak censored or produced news that was favourable to the Chinese government.

“This report brings to light serious questions about Newsbreak, its historical relationship with an entity that assisted the CCP, and to Chinese state-linked media," said Representative Raja Krishnamoorthi, the top Democrat on the House select committee on China, in a reference to Yidian and its former investor, state-linked media outlet Phoenix New Media.

Americans have the right to "full transparency" about any connections to the CCP from news distributors, Krishnamoorthi added, particularly with regards to the use of "opaque algorithms" and artificial intelligence tools to produce news.

Reuters reported the praise Yidian received from the Communist Party in 2017, but was unable to establish that NewsBreak has any current ties with the Party.

U.S. Representative Elise Stefanik, a Republican, said IDG Capital's backing of NewsBreak indicated the app "deserves increased scrutiny."

"We cannot allow our foreign adversaries access to American citizen's data to weaponize them against America’s interests," she said.

NewsBreak is a privately held start-up, whose primary backers are private equity firms San Francisco-based Francisco Partners and Beijing-based IDG Capital, Reuters reported. In February, IDG Capital was

added to a list

of dozens of Chinese companies the Pentagon said were allegedly working with Beijing's military.

IDG Capital has previously said it has no association with the Chinese military and does not belong on that list. It declined to comment on the lawmaker's reaction.

A spokesperson for Francisco Partners, which has previously declined to answer questions from Reuters on their investment in NewsBreak, described the story as "false and misleading," but declined to provide details beyond saying the description of them as a "primary backer" of NewsBreak was incorrect because their investment was less than 10%.

They did not provide documentation to prove the size of the holding. NewsBreak has told Reuters as recently as May 13 that Francisco Partners is NewsBreak's primary investor. NewsBreak did not respond to two requests late Friday asking for documentation supporting the assertion.

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Reporting by Alexandra Alper in Washington and James Pearson in London; Additional reporting by Karen Freifeld in New York; Editing by Anna Driver, Chris Sanders and Cynthia Osterman

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Reports on hacks, leaks and digital espionage in Europe. Ten years at Reuters with previous postings in Hanoi as Bureau Chief and Seoul as Korea Correspondent. Author of 'North Korea Confidential', a book about daily life in North Korea.

US Supreme Court justices disclose Bali hotel stay, Beyoncé tickets, book deals | Reuters

June 7 (Reuters) -

U.S. Supreme Court

justices reported receiving gifts including a stay in a Bali hotel and tickets to a Beyoncé concert, as well as nearly $1.6 million in book advances and royalties in annual financial disclosure forms for 2023 released on Friday.

Conservative Justice Clarence Thomas, who has come under criticism for failing to disclose gifts from businessman and Republican donor Harlan Crow, revised his 2019 form to acknowledge he accepted "food and lodging" at a Bali hotel and at a California club.

Liberal Justice Kentaji Brown Jackson said she received four concert tickets from music superstar Beyoncé Knowles-Carter valued at $3,711.84.

And conservative Justice Samuel Alito, under fire for reports that flags associated with

Donald Trump's

attempts to overturn his 2020 election defeat, got a 90-day extension on his filing.

The filings showed the justices' outside income, gifts and investment transactions last year. They are closely watched as the justices have faced increasing scrutiny over ethics following revelations that some of them failed to report luxury trips, including on private jets, and real estate transactions.

Thomas reported no trips in 2023 after disclosing trips to Dallas, Texas and New York's Adirondack Mountains in 2022. He

cited security concerns

after a leak of the court's 2022 decision to overturn the constitutional right to abortion to justify the need to travel privately.

The disclosures showed the lucrative nature of book publishing for members of the nation's highest judicial body. The advance for Jackson's memoir "

Lovely One, opens new tab

," set for release in September, was reported as $893,750.

In addition to the Beyoncé tickets, Jackson said she received artwork for her chambers worth $12,500.

Conservative Justice Brett Kavanaugh listed book "royalty income" from Javelin Group and Regnery Publishing for $340,000. News website Axios reported on Thursday that he is writing a memoir, expected to be published in 2025 or 2026. Conservative Justice Neil Gorsuch reported $250,000 in book royalties, as did liberal Justice Sonia Sotomayor for nearly $87,000.

The publishing proceeds supplement the justices' salaries. This year the eight associate justices will receive $298,500, with Chief Justice John Roberts getting $312,200.

Alito, a member of the court's 6-3 conservative majority, is embroiled in ethics controversy after

refusing to recuse himself

from two pending cases related to the 2020 election and the Jan. 6, 2021 attack on the U.S. Capitol.

Alito said the flags were flown at his homes by his wife and neither of them knew the flags were associated with Trump's "Stop the Steal" movement.

Under pressure from the drumbeat of criticism over ethical standards, the justices in November adopted their first

code of conduct

.

Critics and some congressional Democrats have said the ethics code does not go far enough to promote transparency, continuing to leave decisions to recuse from cases to the justices themselves and providing no mechanism of enforcement.

Democrats reiterated the

need for legislation

last month after Alito rejected their calls for recusal in the 2020 election cases.

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Reporting by Andrew Chung in New York; Editing by Scott Malone and Cynthia Osterman

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COVID shots should target JN.1 variant in fall 2024 campaign, US FDA says | Reuters

June 7 (Reuters) - The U.S. health regulator on Friday advised COVID-19 vaccine manufacturers that new shots for the fall 2024 campaign should target the JN.1 variant that was dominant earlier this year.

The Food and Drug Administration's advisory is in line with European and World Health Organization recommendations and comes after the agency's advisers on

Wednesday

overwhelmingly backed the targeting of the older JN.1 variant over the newer KP.2 strain.

The advisers recommended the older strain as it is the only strain which Novavax

(NVAX.O), opens new tab

- one of the vaccine makers - said it would be able to target with its shot.

Separately, another vaccine maker Moderna

(MRNA.O), opens new tab

said on Friday it has filed an application with the FDA for its COVID-19 shot targeting the JN.1 strain.

Pfizer and its partner BioNTech

(22UAy.DE), opens new tab

have said they will be ready to supply their updated vaccines immediately upon approval, while Moderna forecasts a timeline for August.

Novavax, which makes a more traditional protein-based shot, said it expects to be ready for commercial delivery of its JN.1 vaccine in the United States in September.

Shares of Novavax were down 9% in late morning trade, its second straight session of losses, while Moderna was down 2%. Pfizer was up 0.7%.

Uptake of COVID-19 vaccines, however, has been a concern. Only about 22.5% of adults in the United States received a COVID shot in the 2023-2024 vaccination season, according to

data, opens new tab

from the U.S. Centers for Disease Control and Prevention that was current through early May.

While JN.1 was the dominant strain in the US earlier this year – it is no longer as prevalent – estimated to account for 3.1% of cases over a two-week period ended June 8, according to CDC data

The KP.2 variant was estimated to account for about 22.5% of cases, with another variant KP.3 now becoming dominant at 25%.

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Reporting by Leroy Leo in Bengaluru; Editing by Tasim Zahid and Shailesh Kuber

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Item 1 of 2 Mark Carney, the UN Special Envoy on Climate Action and Finance, attends The Museum of American Finance Gala, at the Ziegfeld Ballroom in New York City, U.S., March 7, 2024. REUTERS/Jeenah Moon/ File Photo

[1/2]Mark Carney, the UN Special Envoy on Climate Action and Finance, attends The Museum of American Finance Gala, at the Ziegfeld Ballroom in New York City, U.S., March 7, 2024. REUTERS/Jeenah Moon/ File Photo Purchase Licensing Rights, opens new tab

June 7 (Reuters) - A U.S. lawmakers' committee conducted interviews with two Glasgow Financial Alliance for Net Zero (GFANZ) leaders, former central bank governor Mark Carney and former U.S. Securities and Exchange Commission Chair Mary Schapiro, in an escalation of their push against global coalitions to tackle climate change.

The House of Representatives' judiciary committee, which is controlled by Republicans led by its chairman Jim Jordan, set up the interviews earlier this year out of concern that GFANZ "appears to facilitate collusion that may violate U.S. antitrust law," according to letters to GFANZ staff reviewed by Reuters and people familiar with the matter.

Several Republican-controlled states have been already

targeting Wall Street firms

for entering into climate coalitions and marketing environmental, social and corporate governance (ESG)-focused investment products, fretting that these initiatives will harm jobs in the fossil fuel industry.

This latest mobilization of Republicans at a federal level, however, marks a new phase in their war on ESG. While legislation is unlikely as long as Democrats control the White House and the Senate, any bill they propose could offer hints at what a new administration led by Republican Donald Trump, should he prevail in the election in November, could try to implement.

The judiciary committee also asked to interview Michael Bloomberg, the majority owner of the eponymous financial data and news provider who helps fund GFANZ's secretariat, as well as GFANZ officials Patricia Hudson and Sara Simonds, according to the letters reviewed by Reuters. They have not yet made an appearance and Reuters could not learn if they plan to do so.

Carney, Schapiro, Bloomberg, Hudson and Simonds could not be reached for comment, and a GFANZ spokesperson declined to comment on their behalf as well as on behalf of the organization.

Spearheaded by Carney and backed by the United Nations, GFANZ was launched in 2021 for financial firms to liaise on efforts to curb greenhouse gas emissions. It now has more than 650 members, including banks, insurers, asset managers, financial service providers and investment consultants.

Schapiro and Carney were interviewed for several hours by the judiciary committee on Feb. 14 and April 17, respectively, the sources familiar with the matter said. Lawyers working for Republicans and Democrats on the committee asked the questions, and Schapiro and Carney were not required to take an oath, the sources added, requesting anonymity because the matter is not public.

In the interviews, Schapiro and Carney were asked about their communications with other Wall Street leaders, including BlackRock

(BLK.N), opens new tab

CEO Larry Fink, the sources said. A BlackRock spokesperson did not immediately respond to a request for comment.

The judiciary committee has scheduled a hearing on June 12 to further investigate collusion in ESG investing, according to a notice it has circulated. Investor groups focused on tackling climate change are expected to appear.

NO PRECEDENT

No antitrust lawsuit has so far been brought against any climate coalition of companies. Yet fear of being accused of colluding has driven some financial firms out of such coalitions or has pushed them to reduce their level of co-ordination.

In the most prominent of such cases, the Net Zero Insurance Alliance, a coalition of insurers backed by GFANZ, was dissolved earlier this year after many of its members fled fearing an antitrust crackdown in states in which they are regulated, such as Iowa. This grouping was replaced by the Forum for Insurance Transition to Net Zero, which

has looser membership requirements

.

Climate coalitions have also suffered from lack of enough action among their members. Prospects of bringing global emissions down to zero on a net basis, a target born out of a 200-country pact struck in Paris in 2015 to limit global warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above preindustrial times, have dwindled.

BlackRock, the world's largest asset manager, has been at the forefront of scrutiny in some Republican-run states over its ESG policies. Fink said last year BlackRock lost around $4 billion in assets under management as a result of controversy. He

has stopped using the term ESG

, arguing it has become too politicized.

(This story has been refiled to add the missing words, 'chair' and 'officials', in paragraph 1 and 5 respectively)

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Reporting by Isla Binnie in New York and Virginia Furness in London; Editing by Greg Roumeliotis and Stephen Coates

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Isla Binnie is Reuters's New York-based Sustainable Finance Correspondent, reporting on how the worlds of business and finance are affected by and respond to environmental, social and governance issues. Isla previously covered a broad range of business, politics and general news in Spain and Italy, where she also moderated events. She trained with Reuters in London and covered emerging markets debt for the International Financing Review (IFR).

Hunter Biden's daughter testifies at his criminal gun trial | Reuters

WILMINGTON, Delaware, June 7 (Reuters) - Hunter Biden's daughter testified in her father's defense on Friday that he seemed to respond well to drug treatment in the weeks before he bought a gun that prosecutors say he obtained illegally by failing to disclose his addiction.

Hunter Biden,

President Joe Biden's

son, has pleaded not guilty in federal court to felony charges that include lying about his addiction when he applied for the Colt Cobra revolver in 2018 and illegally possessing the weapon for 11 days.

His daughter Naomi Biden, 30, told the jury at his criminal trial she saw her father in California then and "He seemed really great."

On cross-examination, Naomi Biden was shown that she had been messaging and calling her father and unable to reach him.

"I can't take this," she texted her father several days after he purchased the gun. "I miss you so much and I just want to hang out."

Prosecutors introduced prior testimony and evidence that they said showed Hunter Biden was arranging to buy crack cocaine at the time.

Naomi Biden was the last witness on Friday.

The jury was dismissed until Monday when the defense will announce whether Hunter Biden, 54, will testify. Testifying can be risky for criminal defendants because it exposes them to cross-examination.

The jury in the 5-day-old first-ever criminal trial of a U.S. president's child heard witnesses including Hunter Biden's ex-wife, former girlfriend and sister-in-law testify about his use of crack cocaine.

His sister-in-law, Hallie Biden, on Thursday recounted finding the gun and throwing it away out of concern for the safety of Hunter Biden and her children.

Item 1 of 5 Naomi Biden departs the federal court during the trial of Hunter Biden, son of U.S. President Joe Biden, on criminal gun charges, in Wilmington, Delaware, U.S., June 7, 2024. REUTERS/Hannah Beier

[1/5]Naomi Biden departs the federal court during the trial of Hunter Biden, son of U.S. President Joe Biden, on criminal gun charges, in Wilmington, Delaware, U.S., June 7, 2024. REUTERS/Hannah Beier Purchase Licensing Rights, opens new tab

Prosecutors said that there was overwhelming evidence Hunter Biden was actively using crack in the weeks before and after he bought the gun and that he lied by answering "no" on a government screening document when asked if he was a drug user.

Defense attorney Abbe Lowell has said Biden did not intend to deceive because he did not consider himself an addict when he purchased the gun. Hunter Biden told the judge at a 2023 hearing that he had been sober since 2019.

Earlier on Friday, prosecutors rested their case and Hunter Biden's team asked the judge overseeing the case to acquit him. His lawyers said the evidence did not support a conviction.

U.S. District Judge Maryellen Noreika did not immediately rule on the request which is routinely filed by defendants and often denied.

In addition to Naomi Biden, Lowell called as witnesses an employee and the owner of the gun shop to try to cast doubts about the accuracy of the background check form at the center of the case.

The trial follows another historic first - last week's criminal conviction of

Donald Trump

, the first U.S. president to be found guilty of a felony. Trump is the Republican challenger to Joe Biden, a Democrat, in

the Nov. 5 election

.

Trump and some Republicans in Congress have accused Democrats of pursuing the case and three other criminal prosecutions to prevent Trump from regaining power in his rematch with the president.

Congressional Democrats have pointed to cases including the Hunter Biden prosecution as evidence that Joe Biden is not using the justice system for political or personal ends.

Joe Biden told ABC News on Thursday that

he would not pardon

his son if convicted.

The sentencing guidelines for the charges against Biden are 15 to 21 months, but legal experts say defendants in similar cases often get shorter sentences and are less likely to be incarcerated if they abide by the terms of their pretrial release.

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Reporting by Jack Queen and Tom Hals; Editing by Scott Malone, Bill Berkrot and Howard Goller

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Legal correspondent specializing in politically charged cases.

Tom Hals is an award-winning reporter with 25 years of experience working in Asia, Europe and the United States. Since 2009 he has covered legal issues and high-stakes court battles, ranging from challenges to pandemic policies to Elon Musk's campaign to end his deal for Twitter.

WASHINGTON, June 7 (Reuters) - When the topic of

Donald Trump

's potential running mate arose at a Manhattan fundraiser last week, the Republican presidential candidate gave high marks to contenders including North Dakota Governor Doug Burgum and U.S. Senator Tim Scott.

Some of the wealthy donors said Trump should select former primary rival Nikki Haley as his No. 2. Ties between the two had soured over her having challenged him, but she had served as his loyal U.N. ambassador for two years while he was president.

Trump, 77, largely dismissed the idea and suggested the group move on, said two donors familiar with the interaction.

Trump had previously expressed an interest in choosing a woman as his running mate for the

Nov. 5 election

, and some allies urged him to do so with an eye toward boosting his standing among female voters.

Trump's standing with that important voting bloc was further muddled by

his conviction last week

in a New York trial where he was accused of covering up a payment meant to influence the 2016 election by silencing a porn star who alleged they had sex while he was married - a liaison he denies.

His current VP short list, however, is nearly all men, according to nine people who have talked with Trump or his team in recent weeks, including donors, lobbyists and campaign operatives.

Ohio U.S. Senator J.D. Vance and Florida U.S. Senator Marco Rubio have emerged as leading contenders for the vice presidential nod, said the nine people, who requested anonymity to recount private conversations.

Several of those people said Burgum and South Carolina's Scott remain in contention, while U.S. Senator Tom Cotton of Arkansas and U.S. Representative Elise Stefanik of New York are dark horse contenders, two people said.

Trump's team has sent vetting materials to top contenders, according to three people with knowledge of the matter, a step first reported by NBC News. Rubio, Burgum and Stefanik are among those who received the materials, sources told Reuters.

Several sources emphasized the fluid nature of vice presidential deliberations, saying new names can quickly enter and exit the conversation.

Trump has said there is a "good chance" he will announce a running mate at the Republican National Convention in Milwaukee in mid-July. His campaign declined to share specifics on the search.

"Anyone claiming to know who or when President Trump will choose his VP is lying, unless the person is named Donald J. Trump," Trump senior adviser Brian Hughes said.

All of the potential vice presidential contenders declined to comment or did not respond to requests for comment.

ALL-MALE TICKET?

Throughout his term in office and during his 2024 campaign, Trump has proven significantly more popular among men than women, a gender gap many in his orbit are eager to close. In a comment to NBC last September, Trump said he liked the "concept" of a woman running mate.

"Women will determine the outcome of this election. The only real solution for Trump is a woman," said a source briefed on the deliberations, who lamented how few women were being seriously considered.

Two people who recently spoke to Trump said he wants to have personal chemistry and the ability to get along with his possible VP.

They said the former president believes a No. 2 pick is more likely to hurt a candidacy than substantially help it. As a result, they said, he is looking for a steady operator rather than a potentially risky choice that could end up hurting his chances of taking back the White House from

President Joe Biden

.

Biden, a Democrat, is running again with Vice President Kamala Harris, the first woman to serve in that role.

Trump's former vice president, Mike Pence, publicly broke with Trump over the then-president's role in the Jan. 6, 2021, riot at the U.S. Capitol and has said he

will not endorse

his former boss in the upcoming election.

Some of the women Trump had considered for the Republican ticket this time have made missteps that took them largely out of contention, according to the conversations with the nine people in contact with Trump or his advisers.

Kristi Noem, the governor of South Dakota, was widely criticized after she disclosed in an autobiography that she had

killed a dog

over obedience issues. Critics of Alabama U.S. Senator Katie Britt said her televised response to Biden's State of the Union address appeared over-rehearsed and tonally uneven.

Neither Noem nor Britt responded to requests for a comment.

While many campaign financiers have pushed Trump to select Haley, a more traditional conservative who has

longstanding ties

with the donor community, other advisers have pushed back publicly, including the president's eldest son, Donald Trump Jr., who one source said was partial to Vance.

Haley is one of the few high-profile Republicans to remain silent after Trump was found guilty last week. She was Trump's last rival in a

contentious Republican primary

but in May said she would

vote for him

in November.

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Reporting by Gram Slattery in Washington, Alexandra Ulmer in San Francisco and Nathan Layne in Wilton, Conn.; Additional reporting by Steve Holland and Tim Reid in Washington; Editing by Colleen Jenkins and Howard Goller

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Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

Alexandra covers the 2024 U.S. presidential race, with a focus on Republicans, donors and AI. Previously, she spent four years in Venezuela reporting on the humanitarian crisis and investigating corruption. She has also worked in India, Chile and Argentina. Alexandra was Reuters' Reporter of the Year and has won an Overseas Press Club award.

POINTE DU HOC, France, June 7 (Reuters) - Atop the cliff that U.S. Army Rangers scaled 80 years ago on D-Day, President

Joe Biden

on Friday compared the threats posed by Nazi Germany to those facing the world today by dictators and authoritarianism, and urged Americans to resist isolationism.

Biden's speech in Normandy, his second in as many days, sought to strengthen support for Ukraine, which is locked in a war with Russia and its

President Vladimir Putin

, and bolster democratic ideals at home. Biden said the Army Rangers who fought that day would want Americans to defend freedom.

"Does anyone doubt that they would want America to stand up against Putin’s aggression here in Europe today?" he asked.

Biden never mentioned his Republican rival in the Nov. 5

presidential election

,

Donald Trump

, but his speech criticized the former president's isolationist inclinations.

"The most natural instinct is to walk away, to be selfish, to force our will upon others, to seize power and never give up," Biden said, in an apparent dig at Trump. "American democracy asks the hardest of things: to believe that we're part of something bigger than ourselves."

Biden urged Americans to remember the Rangers whose dramatic heroism on D-Day helped make the invasion a success.

"As we gather here today, it’s not just to honor those who showed such remarkable bravery on that day, June 6, 1944," Biden said. "It’s to listen to the echo of their voices. To hear them... They’re not asking us to scale these cliffs, but they’re asking us to stay true to what America stands for."

On June 6, 1944, the elite Ranger troops scaled the 100-foot (30-meter) cliffs overlooking Omaha Beach under withering gunfire and seized German artillery pieces that could have fired on American troops coming ashore at Omaha and nearby Utah Beach.

By setting his speech at Pointe du Hoc, Biden echoed Republican predecessor Ronald Reagan, who marked D-Day's anniversary there 40 years before. Reagan said democracy was "worth dying for" and emphasized an American desire for peace in what turned out to be the waning years of the Cold War.

Biden's goal was to draw a "through line" from World War Two, connecting the Cold War, the establishment of the NATO military alliance and Russia's current war with Ukraine, White House national security adviser Jake Sullivan said.

Item 1 of 3 U.S. President Joe Biden delivers remarks at the World War II Pointe du Hoc Ranger Monument following the 80th anniversary of the 1944 D-Day landings in Cricqueville-en-Bessin, Normandy, France, June 7, 2024. REUTERS/Elizabeth Frantz

[1/3]U.S. President Joe Biden delivers remarks at the World War II Pointe du Hoc Ranger Monument following the 80th anniversary of the 1944 D-Day landings in Cricqueville-en-Bessin, Normandy, France, June 7, 2024. REUTERS/Elizabeth Frantz Purchase Licensing Rights, opens new tab

"We’re the fortunate heirs of a legacy of these heroes, those who scaled the cliffs at Pointe du Hoc. But we must also be the keepers of their mission," Biden said.

CONTRAST WITH TRUMP

The U.S. president is in the middle of a five-day trip to France,

a rare excursion abroad

during an election year in which he faces a tight race against Trump, a Republican who has threatened to use a second four-year term to punish political rivals, deport immigrants and upend global alliances.

Trump has

criticized the cost

of supporting Ukraine after Russia's invasion, proposed higher tariffs as part of an "America First" policy and

questioned

America's decades-long commitment to NATO, saying European members are not paying their fair share.

On Thursday, Biden

made an impassioned call

for the defense of freedom and urged Western powers to stand by Ukraine in its fight with Russia.

The D-Day anniversary on June 6 and surrounding events are part of Biden's presidential duties, not campaign events. But they gave him a chance to contrast himself with Trump.

Biden, at 81 the

oldest to serve

in the office, has sought to rebut concerns about his age by focusing on the potential impact Trump, 77, could have during a second term.

The Democratic incumbent has characterized Trump, whose supporters raided the U.S. Capitol after the Republican declined to accept his 2020 election loss, as a threat to U.S. democracy.

Meanwhile, hard-right parties are

gaining ground

in Europe, and Russia's President Putin said on Wednesday he could

deploy conventional missiles

within striking distance of the United States and its allies if they allowed Ukraine to strike deeper into Russia with long-range Western weapons.

"This will hit the core messages that Biden is wanting to highlight during his re-election campaign but also has real resonance still in Europe as well," said Max Bergmann, director of the Europe, Russia, and Eurasia Program at the Center for Strategic & International Studies.

Biden met with World War Two veterans in Normandy on Thursday and with

Ukrainian President Volodymyr Zelenskiy

on Friday.

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Reporting by Jeff Mason; Editing by Heather Timmons, Cynthia Osterman, Jonathan Oatis and Diane Craft

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Jeff Mason is a White House Correspondent for Reuters. He has covered the presidencies of Barack Obama, Donald Trump and Joe Biden and the presidential campaigns of Biden, Trump, Obama, Hillary Clinton and John McCain. He served as president of the White House Correspondents’ Association in 2016-2017, leading the press corps in advocating for press freedom in the early days of the Trump administration. His and the WHCA's work was recognized with Deutsche Welle's "Freedom of Speech Award." Jeff has asked pointed questions of domestic and foreign leaders, including Russian President Vladimir Putin and North Korea's Kim Jong Un. He is a winner of the WHCA's “Excellence in Presidential News Coverage Under Deadline Pressure" award and co-winner of the Association for Business Journalists' "Breaking News" award. Jeff began his career in Frankfurt, Germany as a business reporter before being posted to Brussels, Belgium, where he covered the European Union. Jeff appears regularly on television and radio and teaches political journalism at Georgetown University. He is a graduate of Northwestern University's Medill School of Journalism and a former Fulbright scholar.

Trump ally Bannon ordered to report to prison for defying Jan. 6 probe | Reuters

WASHINGTON, June 6 (Reuters) - Steve Bannon, a former top adviser to

Donald Trump

, must report to prison by July 1 to serve a four-month sentence for contempt of Congress, a federal judge said on Thursday.

The decision means Bannon, a right-wing media firebrand who maintains influence in Trump’s orbit, will likely be behind bars for a critical stretch of the U.S. presidential campaign as former President Trump faces Democratic

President Joe Biden

in

the Nov. 5 election

.

The order by U.S. District Judge Carl Nichols in Washington came after a federal appeals court last month rejected Bannon’s bid to overturn his conviction for spurning a subpoena from a congressional panel that investigated the Jan. 6, 2021, attack on the U.S. Capitol.

Bannon told reporters outside the courthouse he would ask the U.S. Supreme Court to intervene, casting his prosecution as politically motivated.

"All this is about one thing: shutting down the MAGA movement," Bannon said, referring to Trump's "Make America Great Again" campaign slogan.

Bannon was convicted in 2022 of two misdemeanor counts of contempt of Congress for refusing to turn over documents or testify to the Democratic-led House of Representatives committee.

Bannon will be the second former top official from Trump’s White House to go to prison for refusing to cooperate with the committee. Peter Navarro, a former trade adviser, is currently serving a four-month term.

Bannon was allowed to avoid serving the sentence during his appeal. Prosecutors moved to end that reprieve after a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit rebuffed Bannon’s challenge to his conviction.

Bannon’s lawyers urged Nichols to keep Bannon free, arguing he can still appeal to the full D.C. Circuit court or the

U.S. Supreme Court

. Bannon has argued that he was advised by his lawyer that he did not have to comply with the subpoena and therefore did not intend to commit a crime.

But Nichols said after the appeals court's ruling, there was no longer justification to keep Bannon free.

"I can no longer conclude that his appeal raises substantial questions of law" likely to overturn his conviction, Nichols said.

Bannon, who no longer worked in the White House at the time, was part of a group of Trump advisers who sought to derail formal certification of Biden's victory in the 2020 election.

The congressional panel said he may have had knowledge of events planned for Jan. 6, 2021, when a group of Trump supporters breached the Capitol in a failed bid to stop lawmakers from certifying the vote.

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Reporting by Andrew Goudsward; Editing by Scott Malone and Lisa Shumaker

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Trump rakes in $12 million at tech fundraiser in liberal San Francisco | Reuters

SAN FRANCISCO, June 6 (Reuters) - Republican presidential candidate

Donald Trump

raised $12 million on Thursday, two sources said, at an event hosted by two tech venture capitalists in San Francisco that drew Silicon Valley investors turned off by the Biden administration's policies.

Venture capitalists David Sacks and Chamath Palihapitiya, as well as Sacks' wife Jacqueline, held the reception and dinner with Trump at the Sacks' swanky mansion in the Pacific Heights neighborhood, according to an

invitation seen by Reuters

.

The gathering - where top tickets were $500,000 per couple - was sold out, a source with knowledge of the fundraiser told Reuters. It raised some $12 million, according to Republican National Committeewoman Harmeet Dhillon and another source.

While San Francisco is heavily liberal - Democrat Joe Biden won 85% of the city's vote in the 2020 election against then-President Trump - a growing number of high-profile local venture capitalists and crypto investors have thrown their support behind Trump ahead of his November

rematch against Biden

.

"President Trump is relaxed, happy, and cracking jokes about AI," Dhillon, a conservative lawyer, posted on X from the event.

Executives from crypto exchange Coinbase, crypto investor twins Tyler and Cameron Winklevoss and other crypto leaders were in attendance, Dhillon added. Trump talked about how Senator Elizabeth Warren, who has warned about crypto being used by scam investors and criminals, is "going after crypto," according to Dhillon.

Biden last week

vetoed

what he described as a Republican-led resolution that would "inappropriately constrain the SEC's ability to set forth appropriate guardrails and address future issues" relating to cryptocurrency assets.

Trevor Traina, a San Francisco-based tech executive and former Trump ambassador to Austria, said business regulations implemented during Biden's presidency had alienated some people in the tech industry.

"That might have been just the final domino," Traina said of Biden's veto.

The crypto industry is increasingly trying to

influence U.S. politicians

as it faces heightened scrutiny from regulators, especially since bankruptcies at major crypto firms in 2022 spooked investors, exposed fraud and misconduct, and left millions of investors out of pocket.

Sacks and Palihapitiya have talked publicly about their investments in crypto, especially in bitcoin. A representative for Sacks, who formally endorsed Trump earlier on Thursday, declined to comment. Palihapitiya did not respond to requests for comment.

Jacob Helberg, an adviser to data analytics provider Palantir and a Democrat until about 2021, said he recently donated around $1 million to Trump's campaign.

"In 2016, the number of people from Silicon Valley I knew who supported Trump was a sample of one, which was Peter," Helberg said, referring to Palantir co-founder and conservative venture capitalist Peter Thiel.

"Today I count them in the dozens, if not more than that. Over the course of the past six months, we've started to see the dam break," he said.

Helberg, who also helps raise money for Trump, cited factors including the economy, border security, and the Israel-Hamas conflict for the shifts in support, as well as what he called excessive regulation and perceptions of a politicized judiciary following Trump's conviction in a New York hush money case.

Trump's campaign raked in record amounts after the guilty verdict last week, and the San Francisco event will add to his coffers.

Undeterred by his conviction, major Republican donors have

rallied behind Trump

, pledging millions of dollars to support the first convicted felon running for U.S. president.

Senator J.D. Vance, a potential running mate for Trump who previously lived in San Francisco and worked in venture capital, was also on site. Vance helped organize the fundraiser and was a point of contact between Sacks and the Trump campaign, according to another source familiar with the discussions.

Sacks thanked Vance in his speech, according to the source, saying "this all started with J.D. Vance calling and asking if we could host an event for President Trump."

Reuters also saw another potential running mate for Trump, North Dakota Governor Doug Burgum, enter Sacks' home, a few blocks from where Trump supporters and opponents - including one anti-Trump protester wearing a hat that said 'felon' - were gathered.

San Francisco remains a fertile fundraising ground for Democrats. Vice President Kamala Harris was in the city for her own fundraiser on Wednesday, held at a music venue decorated with rainbow flags and other Pride Month themed decor, while over 100 Gaza ceasefire protesters chanted outside.

"Everything is at stake in this election," said Harris, who spoke about abortion rights and support for gay marriage but did not mention Trump by name.

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Reporting by Alexandra Ulmer; Additional reporting by Judith Langowski in San Francisco; Editing by Colleen Jenkins, Daniel Wallis and Sonali Paul

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Alexandra covers the 2024 U.S. presidential race, with a focus on Republicans, donors and AI. Previously, she spent four years in Venezuela reporting on the humanitarian crisis and investigating corruption. She has also worked in India, Chile and Argentina. Alexandra was Reuters' Reporter of the Year and has won an Overseas Press Club award.

China News

- Cuba woos Russians, Chinese to revive ailing tourist sector

- US needs Japan's help to boost military production, ambassador says

- Morning Bid: Europe jolted by Macron's snap election call

- Taiwan arrests Chinese man who took speedboat into Taipei harbour

- Pakistan PM congratulates India's Modi on taking oath as prime minister

- EU set to disclose tariff rates for Chinese electric vehicles

- European nations compete for Chinese EV factories, jobs even as EU weighs tariffs

- In the Market: How US is daring the world to find a dollar alternative

- New Zealand PM says China Premier Li Qiang to visit this week

- South Korea, US work on joint strategy over North nuclear threat

- French shock election news adds to unease in event-packed week

- Euro tumbles after Macron calls snap French election

- China's home de-stocking push to bring developers little cheer

- Explainer: From trade to climate, five takeaways from the EU election

- Morning Bid: Trimming risk exposure as BOJ, Fed loom

- US, Saudi Arabia close to finalizing draft security treaty, WSJ reports

- Battle for World Cup survival reaches endgame for Asian nations

- China says US provoking arms race in moves into South China Sea

- Exclusive: G7 plans to warn small Chinese banks over Russia ties, sources say

- Medial ligament injury sidelines Tuipulotu for at least six weeks

Cuba woos Russians, Chinese to revive ailing tourist sector | Reuters

Item 1 of 6 Tourists ride in a vintage car at the Revolution Square in Havana, Cuba, June 8, 2024. REUTERS/Yander Zamora

[1/6]Tourists ride in a vintage car at the Revolution Square in Havana, Cuba, June 8, 2024. REUTERS/Yander Zamora Purchase Licensing Rights, opens new tab

- Perks include direct flights, no visa for Chinese

- Professor doubts strategy will offset fewer Europeans

HAVANA, June 10 (Reuters) - Russian tourist Serguei Boyaryshnic wandered in awe among the pastel-colored buildings and cobblestone streets of Old Havana on a weekday morning, his family in tow.

"We had heard a lot about Cuba. Our countries have been friends for years," said the 36-year-old Moscow resident, who had joined a small tour group. "We love everything about it."

Cuba has recently begun offering perks to entice visitors like Boyaryshnic from allied countries such as Russia and China as it struggles to revive a stagnant tourism sector still struggling to recover from the pandemic.

That has meant more and sometimes direct flights from Russia and China, the elimination of visa requirements for Chinese visitors and Cuba's recent decision to accept Russia's Mir payment cards, one of only a handful of countries to join Moscow's alternative to Visa and Mastercard.

That strategy has paid early dividends.

More than 66,000 Russians visited the Caribbean island in the first three months of the year, state-run Cuban media reported, double that of the same period in 2023. The Russian visitors are one of Cuba's few tourism bright spots, however.

Stiff U.S. sanctions imposed by former president Donald Trump contributed to a sharp reduction in U.S. visitors and arrivals from many European countries have also dropped off this year, state data shows.

Cuba's bet on distant countries may not make up for the overall visitor decline, said Paolo Spadoni, an associate professor at Augusta University and expert on Cuban tourism. A trip from Beijing, with layovers, for example, can require 24 hours or more of travel.

"It's a long shot," said Spadoni. "(Chinese and Russian visitors) may provide some relief in the short term, but it's very unlikely that they will make up for the lost contingent of European and American visitors."

That means Cuba is unlikely to meet its goal of attracting 3.2 million visitors in 2024, Spadoni said. He estimates the island will receive between 2.6 million and 2.7 million tourists this year.

On a recent weekday morning, Old Havana - a U.N. World Heritage site and one of Latin America's most famed tourist hotspots - was eerily quiet.

Signs of an ailing industry are everywhere. Hotel lobbies and restaurants, once popular with foreigners, are all but barren. White-sand beaches see few international visitors. And at Havana's airport, taxi drivers complain they often wait all day for a single client.

For Migdalia Gonzalez, a 55-year-old street vendor in Old Havana, the situation couldn't be worse.

She has noticed more Russian and Chinese tourists than in years past, but neither were fans of the empanada pastries she sells.

"Tourist activity here has hit rock bottom," she said.

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Reporting by Nelson Acosta and Dave Sherwood, additional reporting by Anett Rios, Alien Fernandez and Rod Nickel

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US needs Japan's help to boost military production, ambassador says | Reuters

TOKYO, June 10 (Reuters) - The United States needs Japan's help to cope with strategic challenges in Europe and Asia that are straining its defence industries, the U.S. Ambassador to Japan said on Monday as the countries kicked off talks on military industrial cooperation.

"Our national security strategy calls for us to be able to handle one and a half theatres, that's a major war and another one to a stand off, and with both the Middle East, Ukraine, and keeping our deterrence credible in this region (East Asia) you can already see that we are in two plus," Rahm Emanuel told reporters.

On Sunday, Japan and the U.S. kicked off their first talks in Tokyo on forging deeper defence industry collaboration under the U.S.-Japan Forum on Defense Industrial Cooperation, Acquisition and Sustainment (DICAS) established

in April

by Japanese Prime Minister Fumio Kishida and U.S. President Joe Biden.

Discussions on Tuesday between U.S. Under Secretary of Defense for Acquisition and Sustainment William A. LaPlante and Masaki Fukasawa, the head of Japan’s Acquisition, Technology, and Logistics Agency, will focus on naval repairs in Japan that could help free up U.S. yards to build more warships.

"China has a major capacity we already know that will surpass us on new shipbuilding," Emanuel said.

Other potential cooperation between Japan and the U.S. includes aircraft repairs, missile production and military supply chain resilience, he added.

Japan and the U.S. already build a missile defence interceptor together and Tokyo has also agreed to supply Patriot PAC3 air-defence missiles to the U.S.

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Reporting by Tim Kelly Editing by Mark Potter

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Morning Bid: Europe jolted by Macron's snap election call | Reuters

A look at the day ahead in U.S. and global markets by Samuel Indyk

The expected rightward shift in the European Parliament after a

four-day election

has still managed to jolt European markets as gains for the far-right in France prompted French President Emmanuel Macron to call a

snap parliamentary election

.

French bonds and

stocks

were sold off while the euro dropped as political uncertainty had investors heading for the exits.

French banks were some of the hardest hit, with BNP Paribas

(BNPP.PA), opens new tab

, Credit Agricole

(CAGR.PA), opens new tab

and Societe Generale

(SOGN.PA), opens new tab

all tumbling between 4.5%-7.4%.

It's a big negative shift after what had been looking like a more positive outlook for Europe.

The

European Central Bank

last week began lowering borrowing costs after its steepest ever tightening cycle, inflation has been drifting back towards target and surveys have indicated

growth may have bottomed

.

In contrast, the Federal Reserve looks like it could refrain from cutting

interest rates

until the fourth quarter, growth appears to be shaky - albeit after more robust growth at the start of the year - and inflation looks stickier.

So as global investors had been warming to European markets, the election results and heightened political uncertainty may bring about a shift in sentiment.

At least for now, that's evident. France's main CAC 40 stock index

(.FCHI), opens new tab

was down 1.9%, dragging other European markets lower. Germany's DAX, Britain's FTSE 100, Spain's IBEX and Italy's FTSE MIB were all off between 0.4%-1%.

Yet U.S. futures were relatively unperturbed. E-mini S&P futures are down around a quarter of one percent, while futures on the Nasdaq are lower by a similar amount.

Reuters Graphics

French bonds are similarly as unloved as the equity market.

The spread between France and Germany's 10-year yields, a gauge of risk premium investors seek to hold French bonds over German paper, widened over 6 basis points.

The euro was down 0.4% against the dollar to its lowest level in a month.

The U.S. day looks quieter but with U.S. CPI figures and the conclusion of the Fed's June meeting on Wednesday, the week is not expected to stay that way for long.

Markets are pricing with near certainty that the Fed holds rates this week while a July cut has been almost completely ruled out too. September is now just a 50/50 shot.

A shift in tone from the Fed this week or softer CPI figures could once again have markets betting on more than one rate cut this year.

Key developments that should provide more direction to U.S. markets later on Monday:

* U.S. employment trends data

* U.S. to sell 3- and 6-month bills, 3-year notes

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Reporting by Samuel Indyk; Editing by Toby Chopra

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Taiwan arrests Chinese man who took speedboat into Taipei harbour | Reuters

TAIPEI, June 10 (Reuters) - Taiwan has arrested a Chinese man who sailed a speedboat into a harbour at the mouth of a river leading into Taipei for illegal entry, the Taiwanese coast guard said on Monday.

Taiwan keeps a close watch on its waters and air space, given tensions with China, which views the democratically governed island as its own territory, a claim Taipei rejects.

Taiwan's coast guard said a suspicious vessel was spotted on Sunday morning six nautical miles (11 km) off the coast of Tamsui in northern Taiwan. After entering the Tamsui River, which leads to downtown Taipei, the boat collided with other vessels at a ferry terminal.

A lone Chinese man on the vessel was arrested on suspicion of violating Taiwan's entry and exit laws, the coast guard said.

It did not say what his motive was.

China's Taiwan Affairs Office did not answer calls seeking comment on Monday, a holiday in both China and Taiwan.

In March, two Taiwanese fishermen strayed into Chinese waters near the Taiwan-controlled Kinmen islands, which sit next to China's coast. One, a Taiwanese military officer, remains in detention in China, while the other was released soon after.

During the height of the Cold War, people from both sides of the Taiwan Strait would, on occasion, cross to the other side seeking to defect by air or water, but such events are rare now.

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Reporting by Ben Blanchard Editing by Bernadette Baum

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Pakistan PM congratulates India's Modi on taking oath as prime minister | Reuters

ISLAMABAD, June 10 (Reuters) - Pakistan Prime Minister Shehbaz Sharif on Monday congratulated arch rival India's Narendra Modi on being sworn in as prime minister for a third term, in the first response by Islamabad to election results across the border.

"Felicitations to @narendramodi on taking oath as the Prime Minister of India," Sharif said in a

post, opens new tab

on X, a day after Modi was

sworn in

and nearly a week after election results were declared on June 4.

Modi secured a record-equalling third term but lost his outright majority and is dependent on regional parties for support in his first coalition government.

Nuclear-armed rivals and neighbours India and Pakistan have fought three wars, including two over control of the disputed Kashmir region in the Himalayas.

Ties between the two have been frozen since India ended the special status of Jammu and Kashmir state in 2019 and split it into two federally administered territories.

They came closer to yet another war when

India launched air strikes

inside Pakistan to target what it said was a militants' sanctuary.

New Delhi invited leaders of seven regional countries to Sunday's grand inauguration at the Rashtrapati Bhavan, or president's palace, in New Delhi but Sharif wasn't included.

"Thank you @cmshehbaz for your good wishes," responded Modi in a post on X.

Sharif's elder brother and former three time prime minister of Pakistan, Nawaz Sharif, also congratulated Modi. "Your party's success in recent elections reflects the confidence of the people in your leadership. Let us replace hate with hope and seize the opportunity to shape the destiny of the two billion people of South Asia," he said in a post on X.

The elder Sharif has always been a proponent of peace with India, which is said to be one of the reasons he fell out with the country's powerful military in his last tenure from 2013 to 2017.

Analysts don't see any chance of peace talks between the two sides anytime soon.

"Modi is not ready as yet," said author and defence analyst Ayesha Siddiqa. The two sides have some backdoor diplomatic initiatives, however, which may be a "a gentle start," she said.

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Reporting by Asif Shahzad; Writing by Shilpa Jamkhandikar; Editing by YP Rajesh and Ros Russell

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BRUSSELS, June 10 (Reuters) - The European Commission is this week expected to disclose the tariffs it plans to impose on Chinese electric vehicles (EVs) due to what it says are excessive subsidies, a move likely to prompt stern words and possible retaliation from Beijing.

Less than a month after Washington

quadrupled duties

for Chinese EVs to 100%, Brussels will set almost certainly far lower tariffs for imports from Chinese makers such as BYD

(002594.SZ), opens new tab

and Geely

(0175.HK), opens new tab

as well as western producers such as Tesla

(TSLA.O), opens new tab

that export cars from China to Europe.

The move comes as European automakers are being challenged by an influx of lower-cost EVs from Chinese rivals. Still, there is virtually no support for tariffs from the continent's auto industry.

German automakers in particular are heavily dependent on sales in China - and thus fear retribution from Beijing - and European auto firms also import their own Chinese-made vehicles.

But European Commission President Ursula von der Leyen has repeatedly said Europe needs to act to prevent China from

flooding

the bloc's market with subsidised EVs.

"If provoked, the reaction and repercussions could lead to a trade war which would be devastating for a region that is still heavily dependent on Chinese dominated supply chains in order to achieve its lofty climate goals," said Will Roberts, head of automotive research at Rho Motion.

China has

rebuked

the EU over the anti-subsidy investigation, urged cooperation and lobbied individual EU countries, but not fully spelt out what its response to tariffs would be.

Beijing has already launched an anti-dumping investigation into mostly French-made imports of

brandy

. It also passed a

law in April

to strengthen its ability to hit back should the United States or EU impose tariffs on exports of the world's No. 2 economy.

The EU's pre-disclosure notice comes a few weeks before the July 4 deadline for imposing provisional measures. They could though apply retroactively for the prior 90 days.

Interested parties will be given three working days to comment on the accuracy of the Commission's calculations.

The investigation will continue until late October, when a decision on whether to impose definitive duties, typically for five years, will be taken. Proposed duties would apply unless EU governments overwhelmingly oppose them.

That leaves time for a

potential deal

to be struck between Brussels and Beijing. Chinese executives hope such talks will soften the blow.

Analysts expect tariffs of between 10% and 25%.

Every additional 10% on top of the existing 10% levy would cost EU importers of Chinese EVs about $1 billion, based on 2023 trade data, another blow for a sector struggling with slowing demand and falling prices at home.

That cost will grow this year as Chinese EV makers expand exports to Europe.

Imports of China-made EVs have been dominated by western carmakers Tesla, Renault's

(RENA.PA), opens new tab

Dacia and BMW

(BMWG.DE), opens new tab

but the Commission has forecast that Chinese brands' share of EVs sold in the EU has risen to 8% from below 1% in 2019 and could reach 15% in 2025. It says prices are typically 20% below those of EU-made models.

Chinese models exported to Europe include BYD's Atto 3, SAIC's MG and Geely's Volvo.

Reuters Graphics

GERMANY WARNING

Top executives at BMW

(BMWG.DE), opens new tab

, Mercedes

(MBGn.DE), opens new tab

and Volkswagen

(VOWG_p.DE), opens new tab

have warned against imposing import duties on vehicles from China, where HSBC estimates the German carmakers generate 20-23% of their global profits.

Among EU governments,

France

says Europe needs to defend itself against China's subsidised production, while

German Chancellor

Olaf Scholz has said he is not convinced of the need for tariffs.

Meanwhile the market is evolving as European automakers team up Chinese counterparts to bring EVs to market more cheaply and quickly.

Chinese EV makers and suppliers are also

starting

to invest in

European production

, which would avoid tariffs.

Executives at Europe's legacy carmakers told Reuters recently that stiffer tariffs might

temporarily

shrink or eliminate the cost advantage Chinese automakers gain from their supply chains.

But it will not prevent the reckoning that China's lower cost EVs will force on them.

Stellantis

(STLAM.MI), opens new tab

CEO Carlos Tavares said carmakers "don't have much time" to adjust their businesses and depended on the removal of "regulatory chaos and the bureaucracies that we have in our backyard".

Reuters Graphics

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Reporting by Philip Blenkinsop; Additional reporting by Nick Carey; Editing by Josephine Mason and Kirsten Donovan

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- As EU probes China auto subsidies, European nations offer their own incentives to land factories

- China EV giants BYD, Chery consider second plants in Europe

- State-owned SAIC has location shortlist for two plants in the region

European governments may be wary of budget Chinese electric vehicles flooding their markets but they're also fiercely competing for a share of the manufacturing investment and jobs the new competitors bring.

While the European Union investigates China's auto subsidies and considers tariffs on imports, national governments across the bloc are dangling their own incentives to attract Chinese automakers looking to build European factories.

Manufacturing costs for Chinese EV makers including BYD

(002594.SZ), opens new tab

, Chery Automobile (CHERY.UL) and state-owned SAIC Motor are much lower at home but they are nonetheless keen to set up in Europe to build their brands and save on shipping and potential tariffs, said Gianluca Di Loreto, a partner at consultancy firm Bain & Company.

"Chinese automakers know their cars must be perceived as European if they want to bear interest among European customers," he said. "This means producing in Europe."

The EU tariff decision is

expected this week

. On one hand, import taxes could help European automakers better compete with their Chinese counterparts, but they may also spur on Chinese automakers which are

already investing heavily

, and for the long-term, in Europe.

Sales of Chinese-brand cars comprised 4% of the European market last year and are forecast to hit 7% by 2028, according to consulting firm AlixPartners.

Hungary, which produced around 500,000 vehicles in 2023, secured the first European-factory investment by a Chinese automaker, announced last year by EV giant BYD which is also considering

a second European plant

in 2025.

Budapest is also negotiating with Great Wall Motor

(601633.SS), opens new tab

for its first European plant, local media have reported, with the country offering cash for jobs creation, tax breaks and relaxed regulation in targeted zones to attract foreign investment.

Hungary has spent more than $1 billion in recent years to support new battery plants of South Korean groups SK On and Samsung SDI

(006400.KS), opens new tab

and Chinese battery giant CATL's

(300750.SZ), opens new tab

planned factory.

Representatives of BYD, Great Wall and Hungary did not respond to requests for comment.

China's Leapmotor

(9863.HK), opens new tab

will use existing capacity of Franco-Italian partner Stellantis

(STLAM.MI), opens new tab

, with Reuters reporting the pair have chosen the

Tychy plant

in Poland as a manufacturing base.

Poland has a number of programmes currently supporting more than $10 billion of investments, the country's development and technology ministry told Reuters, including one favouring the transition to a net-zero economy and another offering corporate income tax relief, of as much as 50% in high-unemployment regions.

Reuters Graphics

SPAIN, ITALY CHASE EV FACTORIES

Spain, Europe's second largest car-making country after Germany, has secured

investment from Chery

, which will start production in the fourth quarter at a former Nissan facility in Barcelona with a local partner.

Chery is expected to benefit from Spain's 3.7 billion-euro programme launched in 2020 to attract electric-vehicle and battery plants.

China's Envision Group has already received 300 million euros in incentives under the scheme for a 2.5 billion battery plant creating 3,000 jobs. Spain might also host Stellantis' planned

fourth gigafactory

in Europe, with CATL.

Chery plans a second, larger facility in Europe, a source with knowledge of the company's plans told Reuters, and has held talks with governments including Rome, which is keen to attract a second automaker to rival Fiat-maker Stellantis.

Italy can tap its national automotive fund, worth 6 billion euros between 2025-2030, for incentives for both car buyers and manufacturers. China's Dongfeng

(0489.HK), opens new tab

is among several other automakers that have held investment

discussions with Rome

.

Italy's industry ministry declined to comment. Dongfeng and Chery did not respond to requests for comment.

SAIC, owner of the venerable MG brand, aims to build two Europe plants, two sources familiar with the matter told Reuters.

The first, based at an existing facility, could be announced as early as July and would employ a kit-assembly technique, targeting annual production of up to 50,000 vehicles, one of the sources said. SAIC's second European plant would be built from scratch and produce up to 200,000 vehicles annually, the source added.

Germany, Italy, Spain and Hungary were on SAIC's location shortlist, the source said.

SAIC did not respond to a request for comment.

Reuters Graphics

CONTROLLING COSTS IN EUROPE

In Europe, Chinese automakers face higher costs for everything from labour to energy to regulatory compliance.

But costs for exporting made-in-China cars can add up quickly and threaten already narrow margins.

Bain & Company's Di Loreto said a 15,000-euro car produced in China requires shipping-and-logistics costs of between 500 and 3,000 euros.

Chinese automakers may find labour costs in Northern Europe too high for competitive production, Di Loreto said, whereas further south, Italy or Spain offer a balance of lower labour costs and relatively high manufacturing standards - particularly important for premium vehicles.

For lower-cost vehicles, Di Loreto said, attractive locations include Eastern Europe and Turkey, which currently produces around 1.5 million cars annually, mostly for the EU, and has

held talks

with BYD, Chery, SAIC and Great Wall.

Turkey's customs union with the EU and free trade deals with non-EU countries guarantee tariff-free vehicle and component exports.

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June 10 (Reuters) - The United States is merrily chipping away at the pillars that hold up the dollar as the world's reserve currency, with the latest blows coming from some powerful Americans questioning the rule of law following the conviction of Donald Trump.

In doing so, it is effectively daring the rest of the world to find an alternative - and so far, it appears to be winning.

The attacks on the legal system in the aftermath of former President

Trump’s conviction

follow other moves that are seen by some as the United States throwing down the gauntlet to the rest of the world.

The country has radically increased the use of sanctions as a punitive foreign policy tool. And it is adding on an

immense amount of debt

, leaving hapless foreigners who seek the safety and depth of its markets to fund its excesses.

Over the past three weeks, I have been asking financial services executives, global investors and other experts in Asia and the United States how long they think the Americans can keep at it without meaningful blowback. Several of the sources requested anonymity to speak candidly about the situation.

These conversations showed consternation is growing, both at home and abroad, about the consequences of U.S. hubris. But despite trying, no one so far has been able to find a credible alternative or expects one to emerge anytime soon, and they have partly themselves to blame.

In Asia, for example, people are asking with increasing urgency what's their '

America plus 1

', as they search for ways to reduce their U.S. exposure and boost non-dollar trade flows.

But attempts to build such systems are slow-going or haven't gotten traction. And rising authoritarianism, threats to individual and property rights and geopolitical tensions have meant that even if U.S. assets are less attractive than they were before, other options are worse.

A

recent survey

, for example, shows central bank reserve managers plan to increase their dollar holdings over the next 12-24 months as the rise in global geopolitical tensions and need for liquidity draw them to the currency.

"Perhaps ironically, the U.S. dollar's strength is, in part, due to its near-unchallenged safe-haven status," said Steve H. Hanke, a professor of applied economics at Johns Hopkins University, who served on former President Ronald Reagan's Council of Economic Advisers. "That said, most investors don't understand geopolitics and the dangers that lurk below the surface – until it's too late."

DOLLAR'S DOMINANCE

At its core, the dollar's dominant role in the world draws from the United States' democratic principles. It is supported by the massive size of its economy, the depth of its markets, and the strength of its institutions and the rule of law.

The belief in democracy runs deep. Last week, I asked U.S. Securities and Exchange Commission Chair Gary Gensler, who has been in government since 1997, whether partisan politics had made the job of officials like him harder. A conservative-leaning U.S. appeals court had

struck down one of his signature

initiatives that morning.

"I believe in this constitutional system that we have. It's messy," Gensler said. "It's democracy."

Nevertheless, the messiness is testing some of the underpinnings of the dollar's global appeal.

Attacks on the U.S. legal system have increased after the Trump verdict in a New York court. Florida Governor Ron DeSantis, for example, called it a "kangaroo court" on the social media platform X, saying "the verdict represents the culmination of a legal process that has been bent to the political will of the actors involved."

A major investor based in Asia said potential threats to U.S. institutions were also worrying. Any debasing of the Federal Reserve's authority -- as

Trump allies are reportedly contemplating

-- would affect the dollar’s credibility, the investor said, adding that such a development could see a double-digit depreciation of the currency.

Trump's campaign for his Republican presidential bid has played down such reports of what conservative groups might be planning.

THICKET OF SANCTIONS

A senior New York-based financial services executive who was traveling in Asia said he is hearing from clients who think the U.S. and Western financial policy is "undermining the dollar and the Western financial system more broadly."

He pointed to an "ever expanding thicket of sanctions" as one reason.

And the West is pushing the envelope further. The financial executive said the discussion that the West

might seize some $300 billion of sovereign Russian assets

that were blocked over Ukraine undermined the United States' safe haven status. "The West crossed a Rubicon there," the executive said.

An October 2021 Treasury Department review of sanctions found such designations had increased to 9,421 by that year from 912 in 2000. It noted at the time that "American adversaries — and some allies — are already reducing" their use of the dollar.

An Asia-based investor said he was watching another court case closely to test the strength of the rule of law: ByteDance's

challenge

of a U.S. ban on TikTok. He is watching for the evidence that the U.S. government would produce to back up claims of the app being a national security threat.

If no proof is publicly offered, then it would "feel that the checks and balance, the independence of the legal system, may not be there -- at least in this case," the investor said.

But then he added that even that may not turn him away from the United States. It's still more independent and better than many other places, he said.

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Reporting by Paritosh Bansal; Editing by Anna Driver

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Paritosh oversees the work of more than 100 journalists across the globe who write about finance and markets, including banking, financial technology, stocks, bonds, forex, corporate finance, white collar crime and environmental, social and governance (ESG) investing. He also writes a column, In the Market. With some 25 years in the profession and degrees in economics, journalism and physics, Paritosh has reported and edited the news file across the spectrum, from business and economics to politics and general news.

New Zealand PM says China Premier Li Qiang to visit this week | Reuters

WELLINGTON, June 10 (Reuters) - New Zealand Prime Minister Christopher Luxon said on Monday that China's Premier Li Qiang would visit the country this week, in the first trip to the nation in seven years by a Chinese premier.

Luxon said in a statement that he looked forward to warmly welcoming Premier Li in New Zealand and that the visit would be a valuable opportunity for exchanges on areas of cooperation between the two countries.

“The challenging global outlook makes it vital that we are sharing perspectives and engaging China on key issues that matter to New Zealand,” Luxon said.

This is the second high-profile visit from a high-ranking Chinese official to New Zealand this year, with China’s Foreign Minister Wang Yi visiting in late March.

New Zealand has long been seen as a moderate or absent voice on China in the Five Eyes intelligence-sharing alliance, which includes the United States, but in recent years

has spoken up

about what it considers to be concerning actions by China.

During Yi’s March visit, ministers

discussed

trade, business and security in the Pacific, as well as "areas of difference" including human rights and the situation in Xinjiang, Hong Kong and Tibet, according to a statement after the visit.

China is New Zealand's top trading partner. Statistics New Zealand reported two-way goods and services trade was nearly NZ$38 billion ($23.2 billion) in the year that ended in March 2024.

Luxon said on Monday that he is confident that trade with China would continue to grow, supporting the government’s goal to double the value of exports in the next decade.

The government has not yet released dates for Li’s visit.

Luxon also said he would travel to Japan with a business delegation from June 16-20.

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South Korea, US work on joint strategy over North nuclear threat | Reuters

SEOUL, June 10 (Reuters) - Senior South Korean and U.S. defence officials met in Seoul on Monday to work on new guidelines to coordinate their response to any nuclear threat from North Korea, officials said.

The guidelines laid out the principles and procedures for maintaining and enhancing a "credible and effective" nuclear deterrence policy and posture, according to a joint statement from the allies' third closed-doors talks on the issue.

The Nuclear Consultative Group meeting came amid signs North Korea is racing to develop its nuclear arms and

delivery systems

.

Some South Korean

politicians

, including senior members of President Yoon Suk Yeol's party, have called for Seoul to develop its own nuclear weapons rather than just rely on the U.S. nuclear umbrella, a step Washington opposes.

Monday's meeting followed up on last year's

summit

, when the United States promised to give South Korea more insight into its nuclear planning for any conflict with the North.

Vipin Narang, acting U.S. assistant secretary of defence for space policy who co-chaired the talks, said the guidelines set up an architecture for how the allies integrate conventional and nuclear capabilities which will be ultimately provided to each country's leadership in a crisis.

"The guidelines cover the principles and procedures for consultations, particularly in a DPRK nuclear crisis and inform alliance operational concepts and exercises," Narang told a news conference, using the acronym of North Korea's official name, the Democratic People's Republic of Korea.

Cho Chang-rae, South Korea's deputy defence minister for policy, said high-level officials from both countries will hold a simulated tabletop exercise before regular summertime drills, with a focus on the possibility of North Korea using a nuclear weapon.

The two Koreas are still technically at war after their 1950-53 conflict ended in an armistice, not a peace treaty.

In late May, North Korea's attempt to launch a military reconnaissance satellite

failed

after a newly developed rocket engine exploded in flight.

Seoul and Washington condemned the launch as a violation of U.N. Security Council sanctions banning Pyongyang's use of ballistic technology.

After their second meeting in December, both sides

warned

that any nuclear attack by North Korea against the United States or its allies will be met with a "swift, overwhelming and decisive response" and result in the end of Kim Jong Un's regime.

Their next meeting will be held in Washington near the end of the year, the joint statement said.

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LONDON, June 10 (Reuters) - A selloff in Europe set the tone for global markets on Monday as French President Emmanuel Macron's decision to call a

snap election

weighed on everything from the euro to banking stocks and government bonds.

Asia shares apart from Japan fell and U.S. stock futures pointed to a weak open on Wall Street, with an event-packed week ahead including the release of U.S. inflation data as well as Federal Reserve and Bank of Japan meetings.

For now, it's the prospect of

fresh political uncertainty

in the euro zone's second-biggest economy weighing on sentiment after far-right gains in European Parliament elections on Sunday prompted a bruised Macron to call a snap national election.

The euro fell to a one-month low against the dollar , European stocks slipped 0.6%

(.STOXX), opens new tab

, euro zone bank stocks tumbled 2%

(.SX7E), opens new tab

while government bond yields in France and Italy jumped.

"The market moves are all about what we are seeing in a European context - and news from France has caused a risk premium around European assets," said BlueBay Asset Management chief investment officer Mark Dowding.

"It could swing a bit further but we need to remind ourselves this is a parliamentary election not a presidential election in France."

French bank Societe Generale

(SOGN.PA), opens new tab

was last down more than 7% and BNP Paribas

(BNPP.PA), opens new tab

almost 5% as investors worried their funding costs may increase if French sovereign borrowing becomes more expensive amid higher spending, bankers said.

France's 10-year government bond yield jumped almost 10 basis points to 3.21% , while Italian borrowing costs also rose.

A BIG WEEK

Trading was thinned in Asia with Australia, China, Hong Kong and Taiwan observing public holidays.

MSCI's broadest index of Asia-Pacific shares outside Japan

(.MIAPJ0000PUS), opens new tab

slipped 0.4%, global shares were down 0.2%

(.MIWD00000PUS), opens new tab

and U.S. equity futures were also broadly lower , .

The global risk rally came to a halt after Friday's nonfarm payrolls report showed the U.S. economy created

far more jobs

than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labour market.

Futures now show roughly 36 basis points (bps) worth of U.S. rate cuts priced in this year, down from 50 bps last week. The odds for an easing cycle beginning

in September

have also lengthened.

The Fed's next

policy decision

comes on Wednesday, with U.S. inflation figures for May due just before that.

"With inflation still firmly above the 2% target, the Fed has more work to do to tame these forces and will not be in a position to deliver a rate cut when its committee meets next week," said David Arnaud, a senior Fund Manager, fixed income, at Canada Life Asset Management.

He said that with recent data pointing to a cooling of the economy, the Fed should be able to subtly adjust its message around upcoming rate cuts with a quarter point cut in the final three months of the year still likely.

U.S. Treasury yields, which move inversely to prices, rose on Monday, reflecting the higher-for-longer U.S. rate expectations.

The two-year yield and benchmark 10-year yield each ticked up over two bps to around 4.89% and 4.46%, respectively.

Against the dollar, the yen dipped to 156.81. The dollar index , which measures the greenback against a basket of six other major currencies, rose 0.3% to 105.34.

The Bank of Japan (BOJ) holds a two-day monetary policy meeting this week and could offer fresh guidance on how it plans to scale back its massive bond purchases.

In commodities, oil prices edged up, aided by hopes of rising fuel demand this summer, though gains were capped by the stronger dollar.

Brent crude futures gained 15 cents to $79.77 a barrel, while U.S. West Texas Intermediate crude futures added 12 cents to $75.62 per barrel.

Spot gold rose 0.25% to around $2,298 an ounce.

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Senior correspondent on the London markets team covering European sovereign bond markets and big macro and financial themes.

Euro tumbles after Macron calls snap French election | Reuters

LONDON/SINGAPORE, June 10 (Reuters) - The euro fell sharply on Monday, hit by political uncertainty after gains by the far right in voting for the

European Parliament

on Sunday prompted a bruised French President Emmanuel Macron to call a snap national election.

The uncertainty in France adds one more element to what will be a busy week for markets with crucial U.S. inflation data due on Wednesday, the same day as a Federal Reserve policy meeting, and then a Bank of Japan meeting rounding off the week.

The euro dropped 0.6% on the dollar to $1.0733 , its lowest since May 9. It also fell 0.4% on sterling to a near two-year low of 84.53 pence , and was last down 0.6% on the Swiss franc at a seven-week low of 0.9626 francs.

"The election results over the weekend from the EU largely showed a pick up in support for the right wing parties, generally what was expected, but the surprise element is that Macron has reacted by calling a snap election, so that makes the market more nervous," said Lee Hardman, senior currency analyst at MUFG.

"That's reinforced the sell off in the euro that we saw at the end of last week, and the other factor on top of that is the U.S. payrolls report was very strong, which increases the risk of a hawkish Fed policy signal when they meet on Wednesday."

The Federal Reserve will conclude its two-day policy meeting on Wednesday. Data on Friday showed non-farm payrolls increased by

272,000 jobs last month

, well above expectations in a Reuters poll for 185,000.

Markets are now pricing in 36 basis points (bps) of Fed rate cuts this year compared to nearly 50 bps - i.e. two 25 bp cuts - before the jobs data.

U.S. consumer inflation data will be another factor in the Fed's decision making. While no policy shift is expected at the meeting, the Fed will issue the latest batch of 'dot plots' policymakers' projections of the path of interest rates.

At the last such release in March, the median projection was for three 25-bp rate cuts this year. Investors will be watching to see by how much that is revised down.

The paring back of expectations for rate cuts has been supporting the dollar for much of 2024, with the Japanese yen suffering particularly.

The dollar was last up 0.1% on the Japanese currency at 156.85 yen , having jumped 0.7% on Friday after the payrolls print. With sterling down 0.14% at $1.2705 , the dollar index - which tracks the unit against six main peers - was up 0.22% at 105.29 , a one month high.

Japan will also be in focus this week, as the Bank of Japan is due to hold its two-day monetary policy meeting on Thursday and Friday, with the central bank widely expected to maintain short-term interest rates in a 0-0.1% range.

Reuters reported last week that BOJ policymakers are brainstorming ways to slow its bond buying and may offer fresh guidance.

Speculation is building in the market that the BOJ may tweak its bond buying arrangements, and if the central bank fails to meet these bets, the yen could come under further pressure.

"Without any hawkish surprise, JPY may be sold initially following the policy announcement, similar to what we have seen after the past meetings," analysts at Nomura said in a note.

"Moreover, in the case of dovish surprises, for example, if the BOJ avoids decreasing its JGB purchases or decreases its (Japanese government bond) purchases only very slightly, there is a risk that USD/JPY could overshoot to possible intervention territory again, like we saw in April."

Japanese officials spent around 9.8 trillion yen on

currency intervention

to support the currency in April and May.

($1 = 156.9 yen)

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HONG KONG/BEIJING, June 10 (Reuters) - China's efforts to clear massive inventory by turning unsold homes into affordable housing are unlikely to help cash-strapped developers due to the programme's limited size and potentially low prices, analysts and developers say.

As part of a support package for the crisis-hit property sector, Beijing announced last month a

plan

for a 300 billion yuan ($41 billion) lending facility, which could result in 500 billion worth of bank financing for local state-owned enterprises (SOEs) to purchase completed and unsold homes.

Chinese banks are expected to extend cheaper loans to SOEs via the facility, backed by the central bank, to help them buy the homes from developers at "reasonable prices" to turn into

affordable housing

.

Some private developers, however, see very few, if any, of their projects being selected as the lending facility is inadequate and the scheme is only expected to launch in bigger cities where affordable housing is available. Price offers from SOEs are also likely to be low, they say.

The cautious attitude of developers could be a challenge for Beijing, as waves of support measures over the past two years fail to revive the sector, which at its peak accounted for a quarter of GDP and remains a major drag on the economy.

Xintangzhen, a town in Guangzhou, issued a notice on May 30, the first local government to do so after the support package, to purchase "suitable housing stock" for resettlement housing.

The local government would buy the homes at cost price, reported China Real Estate Business, a media outlet managed by the housing authority, citing the notice.

A project co-owned by state-owned Jinmao

(0817.HK), opens new tab

and major developer Vanke

(000002.SZ), opens new tab

had applied, the news report added.

Some developers said buying at costs, which means a 20-30% discount to market price, was better than expected.

A senior executive at a private developer in default said his firm would be interested to apply if other cities make similar offers as Xintangzhen, but he expects offers to be low and insufficient to cover construction loans.

"If it's not even enough to cover the development loan, how do we repay the loan? The lending bank would not agree either," said a senior official at a Shanghai-based developer, who declined to be identified due to the sensitivity of the matter.

Analysts at Citi and Bank of America have, however, said discounts of 50% in prices are needed to ensure modest returns for the SOEs, as affordable homes typically sell at 10-50% discounts to private homes.

Even if developers are able to profit from selling completed apartments to the SOEs, local governments may require proceeds be used to finish existing projects rather than to repay debt.

"This will not help us as a listed company, or our offshore debt repayment," said an executive at another developer in credit default.

Gavekal Dragonomics estimates that at average market prices, 500 billion yuan in purchases would pay for 12% of housing inventories, or 20% if bought at a discount.

S&P said that converting existing inventory into social housing would also increase transactions at the low-end and bring down overall prices.

China's housing ministry, central bank, the top banking regulator and local housing authority in Guangzhou did not respond to requests for comment. Jinmao did not respond to a request for comment and Vanke declined to comment.

EXECUTION RISK

"Only a handful of distressed developers will benefit," said S&P Global Ratings credit analyst Esther Liu. "(Completing construction) is the problem the distressed developers are facing. They don't have a lot of completed inventory."

While developers await clarity on SOE demand and price offers, some bankers say the affordable housing scheme could lead to a deterioration in asset quality as SOEs would struggle to generate sufficient profits to repay bank loans.

Banks can borrow from the 300 billion re-lending facility at 1.75% interest to finance 60% of the loans they offer to SOEs.

In aggregate, analysts estimate, that SOEs would have to pay around 2.5% interest for these loans, similar to average rental yields in China.

"This is good for the property sector but bad for the SOEs and the banks, because essentially you're shifting some risk to them," said the first executive, who declined to be named as he is not authorised to speak to the media.

To be sure, banks and local governments are risk averse.

The central bank in February last year rolled out a 100 billion yuan re-lending programme for local governments in eight cities to purchase home inventories - only 2 billion of which has been utilised as of end-March 2024.

"We see high execution risk given banks and local SOEs have to fully bear the credit and investment risks," said Zerlina Zeng, senior credit analyst at CreditSights.

The central government's support though has drawn more visitors to top-tier cities following the latest stimulus package that includes lowering down payment and removal of mortgage rate floors, analysts and developers say.

"The central government has stepped up (support); the turning point is the important change here," said Bank of America head of Greater China property research Karl Choi.

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BRUSSELS, June 10 (Reuters) - The European Parliament took a shift to the right after a four-day election concluded on Sunday, with

more eurosceptic nationalists

and fewer mainstream liberals and Greens.

The parliament's most important role is

reviewing and approving new legislation

and it generally comes up with amendments on which it and EU governments need to agree before EU regulations or directives can enter force.

The

EU assembly

will also need to approve the next president of the European Commission - most likely incumbent Ursula von der Leyen for a second term - and their 26 other commissioners.

The rightward shift could have a bearing on a series of important policy areas in the next five-year term.

CLIMATE

The next five years will be crucial for determining whether Europe achieves its 2030 climate change targets.

The EU spent the last five years passing a bumper package of clean energy and CO2-cutting laws to hit its 2030 targets, and those policies will be hard to undo.

But a more climate-sceptical EU Parliament could attempt to add loopholes to weaken those laws, since many are due to be reviewed in the next few years - including the bloc's 2035 phase-out of the sale of new combustion engine cars, which faced criticism during the EU election campaign, including from lawmakers in von der Leyen's centre-right political group.

The European Parliament will also negotiate with EU countries a new, legally binding target to cut emissions by 2040. That goal will set the course for a future wave of policies to curb emissions in the 2030s in every sector, from farming, to manufacturing, to transport.

DEFENCE, UKRAINE

Foreign and defence policy are primarily the domain of the EU's member countries, not the European Parliament. So the election result should not have any immediate impact on EU support for Ukraine or military matters.

However, the Parliament will have a role to play in plans to encourage pan-European cooperation between countries and companies on defence projects and to get governments to buy more European military kit. The European Commission's Defence Industrial Programme, which aims to realise those goals, needs the consent of both EU governments and the European Parliament.

Gains for parties that oppose greater European integration may make these ambitions more difficult to achieve. Similarly, for the Commission's plans to carry any real clout, they will need serious money from the next long-term EU budget, which must also be approved by the Parliament.

TRADE

The European Parliament's principle role in EU trade policy is in approving free trade agreements before they can enter force. It is not directly involved in trade defence, such as the imposition of tariffs.

The European Commission and some EU leaders argue that the bloc needs more trade agreements with reliable partners to make up for lost business with Russia and to reduce dependence on China.

A number of trade agreements are still waiting for approval, such as with Mexico and the South American bloc Mercosur, while the European Commission is also seeking to strike deals with the likes of Australia.

All those deals, and the Mercosur agreement in particular, have faced opposition and pushing them through parliament could be even more difficult with greater numbers of nationalist eurosceptics.

CHINA, U.S. RELATIONS

The European Commission argues that the EU needs to present a united stance towards major rivals such as China and the United States, particularly if former President Donald Trump returns to the White House.

It also says the European Union needs a clearer unified industrial strategy to remain a major industrial base for green and digital goods as rivals pump in massive subsidies.

Critics say the nationalist right-wing parties advocate a looser, more fragmented Europe that will be less able to rise to these challenges.

ENLARGEMENT, REFORM

The EU needs to reform its internal agriculture policy and the way it supports its members to equalise standards of living before it admits new countries, especially big ones such as Ukraine, because the current system of transfers is already seen as too costly.

To

admit new members

- Ukraine, Moldova and the Western Balkan countries - the EU will also need to change how it makes decisions, reducing the need for unanimity, which is proving increasingly difficult to achieve.

If such reforms are proposed in the next five years, the parliament will have a crucial role to play in shaping them and a stronger voice of the far-right, which opposes deeper EU integration, might have an important impact.

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Morning Bid: Trimming risk exposure as BOJ, Fed loom | Reuters

June 10 (Reuters) - A look at the day ahead in Asian markets.

Asian markets on Monday get their first chance to react to the global market fallout from Friday's U.S. employment report, which saw the biggest one-day rise in

Treasury yields and the dollar

in two months.

Traders also pared back Fed rate cut expectations - the probability of a pre-election rate cut is now no more than 50-50, and two full rate cuts are no longer priced in for this year.

This counters some of the dovish momentum that had been building earlier last week when the

Bank of Canada

and

European Central Bank

cut rates, and the dollar and Treasury yields touched two-month lows.

Indeed, the S&P 500, Nasdaq, and the MSCI World index all hit record highs last week before Friday's reversal, and Asian stocks still managed to rise nearly 3% for their fifth weekly rise out of the last seven.

But rising U.S. bond yields and an appreciating dollar does not bode well for investors' appetite for risk, so Friday's market moves could put Asian assets on the defensive at the open on Monday. Investors and traders in Asia may already be inclined to reduce risk exposure ahead of two major monetary policy decisions this week from the Federal Reserve and

Bank of Japan

.

Reuters Graphics

Sources familiar with the BOJ's thinking say policymakers are brainstorming ways to slow its bond buying and may offer fresh guidance this week, in what would be a first key step to reducing its almost $5 trillion balance sheet.

While details are not finalised, the central bank could trim monthly purchases or clarify plans to proceed with a slow but steady taper with a focus on preventing abrupt yield spikes, the four sources said.

Japanese trade and current account figures for April will be released on Monday, as will the final estimate of

first-quarter GDP

. A Reuters poll suggests there will be no change to the quarter-on-quarter contraction of 0.5%, but the annualised print will be nudged up to -1.9 from -2.0% on the back of stronger capex.

Industrial production figures from Malaysia and Indonesian consumer confidence complete a light economic calendar on Monday.

Meanwhile, in China-related news, U.S. officials expect G7 countries at this week's summit in Italy to send a tough new warning to

smaller Chinese banks

to stop assisting Russia in evading Western sanctions, according to two people familiar with the matter.

Media reports also suggest Volvo has started to shift production of Chinese-made electric vehicles to Belgium in anticipation that the European Union will crack down on Beijing-subsidised imports.

And Turkey said on Saturday it will impose a 40% additional tariff on imports of vehicles from China.

Reuters Graphics

Reuters Graphics

Here are key developments that could provide more direction to markets on Monday:

- Japan GDP (Q1, final estimate)

- Malaysia industrial production (April)

- Indonesia consumer confidence (May)

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Jamie McGeever has been a financial journalist since 1998, reporting from Brazil, Spain, New York, London, and now back in the U.S. again. Focus on economics, central banks, policymakers, and global markets - especially FX and fixed income. Follow me on Twitter: @ReutersJamie

US, Saudi Arabia close to finalizing draft security treaty, WSJ reports | Reuters

WASHINGTON, June 9 (Reuters) - The Biden administration is close to finalizing a treaty with Saudi Arabia that would commit the U.S. to help defend the Gulf nation as part of a deal aimed at encouraging diplomatic ties between Riyadh and Israel, the Wall Street Journal reported on Sunday, citing U.S. and Saudi officials.

The possible deal, widely

telegraphed

by U.S. and other officials for weeks, is part of a wider package that would include a U.S.-Saudi

civil nuclear pact

, steps toward the establishment of a Palestinian state and an end to the war in Gaza, where months of ceasefire efforts have failed to bring peace.

Approval of the treaty, which the WSJ said would be known as the Strategic Alliance Agreement, would require a two-thirds majority vote in the U.S. Senate, a threshold that would be difficult to achieve unless the treaty were tied to Israeli-Saudi normalization.

The draft treaty is modeled loosely on Washington's mutual security pact with Japan, the newspaper cited U.S. and Saudi officials as saying.

In exchange for the U.S. commitment to help defend Saudi Arabia if it were attacked, the draft treaty would grant Washington access to Saudi territory and airspace to protect U.S. interests and regional partners, the newspaper reported.

It is also intended to bind Riyadh closer to Washington by prohibiting China from building bases in the kingdom or pursuing security cooperation with Riyadh, the WSJ quoted officials as saying.

The White House, the U.S. State Department and the Saudi embassy in Washington did not immediately respond to requests for comment.

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Battle for World Cup survival reaches endgame for Asian nations | Reuters

JAKARTA, June 9 (Reuters) - Eleven nations will fight for the five remaining berths in the next phase of Asia's preliminaries for the 2026 World Cup on Tuesday, with China, India and Indonesia all yet to determine their fate.

Regular World Cup qualifiers Japan, South Korea, Australia, Saudi Arabia and Iran have already confirmed their progress, claiming spots among the 18 countries that will battle for the eight guaranteed berths at the finals in two years' time.

Asian Cup holders Qatar as well as continental runners-up Jordan have also advanced to a third round that will determine six of the spots available at the 48-team tournament in the United States, Mexico and Canada.

China, looking to qualify for the World Cup for the first time since their debut in 2002, remain in a strong position to progress after Behram Abduweli's late equaliser against Thailand on Thursday.

"For us the qualifying tournament isn't over yet," said coach Branko Ivankovic after the 1-1 draw in Shenyang. "We will go all out in the next match and try to qualify for the next round."

The Chinese face South Korea knowing a point will see off the challenge of the Thais, who need to defeat Singapore and hope to overhaul China's superior goal difference to claim second place in Group C.

India find themselves in a more precarious position ahead of their Group A meeting with Qatar as Igor Stimac leads his team into their first game since the retirement of captain Sunil Chhetri knowing they must win.

Third-placed Afghanistan are level on five points with the Indians and they travel to play Kuwait with both nations harbouring their own qualification dreams.

Indonesia host the Philippines looking for a win to see off Vietnam's challenge for second spot in Group F behind already-qualified Iraq while Syria face Japan hoping for a positive result as they attempt to hold off North Korea in Group B.

Kyrgyzstan, meanwhile, will confirm their progress to the third round ahead of Malaysia if they do not fall to a heavy defeat against Group D leaders Oman in Muscat.

The draw for the third round will take place in Kuala Lumpur on June 27, when the qualifiers will be placed into three groups of six.

The top two in each group will advance to the finals with the third and fourth place finishers moving onto a fourth round, where the winners of two further spots will be determined.

An intercontinental playoff also featuring teams from Africa, South America and Oceania could see a ninth Asian federation qualify for the tournament.

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Reporting by Michael Church, Editing by Toby Davis

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China says US provoking arms race in moves into South China Sea | Reuters

BEIJING, June 9 (Reuters) - The U.S. poses the largest security challenge in the South China Sea as its military deployment there is turning it into "the whirlpool of an arms race", Chinese Vice Foreign Minister Sun Weidong said in remarks published on Sunday.

Recent maritime run-ins between China and the Philippines, a U.S. treaty ally, have made the highly strategic South China Sea a potential flashpoint between Washington and Beijing.

"At present, the biggest security challenge in the South China Sea comes from outside the region," Sun said in comments published by his ministry, after attending a high-level meeting on East Asian cooperation in Laos.

Sun said U.S.-led forces were "promoting military deployment and actions in the South China Sea, inciting and intensifying maritime disputes and contradictions, and damaging the legitimate rights and interests of coastal countries".

A move by the United States to deploy medium-range missile systems in the area "is dragging the region into the whirlpool of an arms race, placing the entire Asia Pacific region under the shadow of geopolitical conflicts", Sun said.

China is committed to properly managing disputes with the parties in the South China Sea through dialogue, he added.

In April, the Philippines said during a meeting with U.S. allies that it was determined to assert its sovereign rights in the South China Sea, accusing China of escalating "its harassment" of the Philippines.

China claims almost the entire South China Sea, a conduit for more than $3 trillion in annual ship commerce, and has deployed hundreds of coast guard vessels as far as 1,000 km off its mainland to police what it says is its jurisdiction.

The Philippines and China have sparred repeatedly this past year near disputed features that fall within Manila's exclusive economic zone. China routinely accuses the Philippines of encroachment while Manila and its allies have condemned what they call aggression by Beijing.

The United States has said it stands with Manila.

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Reporting by Kevin Yao; editing by Mark Heinrich

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- No immediate bank sanctions planned

- G7 summit to focus on China-Russia trade impact on Ukraine conflict

- Russia trade business has moved to small Chinese banks

WASHINGTON, June 9 (Reuters) - U.S. officials expect the Group of Seven (G7) wealthy democracies to send a tough new warning next week to smaller Chinese banks to stop assisting Russia in evading Western sanctions, according to two people familiar with the matter.

Leaders gathering at the

June 13-15 summit

in Italy hosted by Prime Minister Giorgia Meloni are expected to focus heavily during their private meetings on the threat posed by burgeoning Chinese-Russian trade to the fight in Ukraine, and what to do about it.

Those conversations are likely to result in public statements on the issue involving Chinese banks, according to a U.S. official involved in planning the event and another person briefed on the issue.

The United States and its G7 partners - Britain, Canada France, Germany, Italy and Japan - are not expected to take any immediate punitive action against any banks during the summit, such as

restricting their access

to the SWIFT messaging system or cutting off access to the dollar. Their focus is said to be on smaller institutions, not the largest Chinese banks, one of the people said.

Negotiations were still ongoing about the exact format and content of the warning, according to the people, who declined to be named discussing ongoing diplomatic engagements. The plans to address the topic at the G7 were not previously reported.

The White House did not respond to a request for comment. The U.S. Treasury Department had no immediate comment, but Treasury officials have repeatedly warned financial institutions in Europe and China and elsewhere that they

face sanctions

for helping Russia skirt Western sanctions.

Daleep Singh, deputy national security adviser for international economics, told the Center for a New American Security this week that he expected G7 leaders to target China's support for a Russian economy now reoriented around the war.

"Our concern is that China is increasingly the factory of the Russian war machine. You can call it the arsenal of autocracy when you consider Russia's military ambitions threaten obviously the existence of Ukraine, but increasingly European security, NATO and transatlantic security," he said.

Singh and other top Biden administration officials say Washington and its partners are

prepared to use sanctions

and tighter export controls to reduce Russia's ability to circumvent Western sanctions, including with secondary sanctions that could be used against banks and other financial institutions.

Washington is poised to announce significant new sanctions next week on financial and nonfinancial targets, a source familiar with the plans said.

This year's G7 summit

is also expected to focus on leveraging profits generated by

Russian assets

frozen in the West for Ukraine's benefit.

RUSSIA BUSINESS MOVES TO CHINA'S SMALL BANKS

Washington has so far been reluctant to implement sanctions on major Chinese banks – long deemed by analysts a "nuclear" option – because of the huge ripple effects it could inflict on the global economy and U.S.-China relations.

Concern over the possibility of sanctions has already caused China's big banks

to throttle payments

for cross-border transactions involving Russians, or

pull back

from any involvement altogether, Reuters has reported.

That has

pushed Chinese companies

to small banks on the border and stoked the use of underground financing channels or banned cryptocurrency. Western officials are concerned that some Chinese financial institutions are still facilitating trade in goods with dual civilian and military applications.

Beijing has accused Washington of making baseless claims about what it says are normal trade exchanges with Moscow.

The Biden administration this year began probing which sanctions tools might be available to it to thwart Chinese banks, a U.S. official

previously told Reuters

, but had no imminent plans to take such steps. In December, President

Joe Biden

signed an executive order threatening sanctions on financial institutions that help Moscow skirt Western sanctions.

The U.S. has sanctioned smaller Chinese banks in the past, such as the Bank of Kunlun, over various issues, including working with Iranian institutions.

China and Russia have fostered more trade

in yuan

instead of the dollar in the wake of the Ukraine war, potentially shielding their economies from possible U.S. sanctions.

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Reporting by Trevor Hunnicutt in Washington and Lananh Nguyen in New York Additional reporting by Andrea Shalal and Nupur Anand Editing by Heather Timmons and Matthew Lewis

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Lananh Nguyen is the U.S. finance editor at Reuters in New York, leading coverage of U.S. banks. She joined Reuters in 2022 after reporting on Wall Street at The New York Times. Lananh spent more than a decade at Bloomberg News in New York and London, where she wrote extensively about banking and financial markets, and she previously worked at Dow Jones Newswires/The Wall Street Journal. Lananh holds a B.A. in political science from Tufts University and an M.Sc. in finance and economic policy from the University of London.

Medial ligament injury sidelines Tuipulotu for at least six weeks | Reuters

June 9 (Reuters) - Auckland Blues captain Patrick Tuipulotu will miss the remainder of the Super Rugby Pacific season after suffering a knee injury in his side's quarter-final win over the Fijian Drua on Saturday.

The Blues confirmed Tuipulotu will be out of action for between six and seven weeks after damaging the medial ligament in his right knee during the 36-5 victory.

Auckland will face the ACT Brumbies in the semi-finals at Eden Park on Friday with the final to be played on June 22.

Tuipulotu will also miss the start of the All Blacks' season, which begins on July 6 with the first of three home tests against England in Dunedin.

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Reporting by Michael Church, Editing by Kim Coghill

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Table of Contents

Reuters

World News

Hamas official urges US to pressure Israel to end Gaza war

France faces 'consequential' vote as far-right rout prompts Macron gamble

Putin to visit North Korea, Vietnam in coming weeks, Vedomosti newspaper says

Economy, migration, war top voters' concerns in EU election - survey

Iraq's Mosul springs back to life 10 years after it fell to ISIS

Blinken set to travel to Egypt, Israel for Gaza ceasefire push

New Zealand PM says China Premier Li Qiang to visit this week

South Korea, US to hold new round of nuclear planning talks in Seoul

Australia PM condemns graffiti attack on US consulate in Sydney

North Korea leader's sister warns of new response against South Korean loudspeakers, leaflets

Italy's PM Meloni comes out on top in EU vote, strengthening her hand

Benny Gantz, man in the middle squeezed out by Israel's Netanyahu

Macron calls shock French elections after far-right rout

Israel's centrist minister Benny Gantz quits Netanyahu government

Far-right advances in EU election, France calls snap national vote

Breaking News

Super Mario could give weak EU a shot in the arm

Suburban sprawl gives insurers the blues

Spanish bank M&A lies in lap of interest-rate gods

Japan has ways to avoid a sovereign debt crunch

Five reasons financial disasters are hard to avoid

UK building plans will fail to get off the ground

Wall Street is contorting to replace China trade

Immigration benefits outweigh US border troubles

再送 コラム：ロシアの新世代オリガルヒ、ウクライナ戦争機に台頭

PwC Evergrande hit will ricochet around China Inc

Investors are hunting securitization’s oddballs: podcast

Breakingviews: Modi 3.0 offers limited opportunities for the West

Breakingviews: Blackstone music deal can spare just a cent

Breakingviews: India's leader faces a reckoning with its poor

Change is coming to Britain’s macroeconomic policy

Korea’s music industry has more than a BTS problem

Breakingviews: Trump’s rich backers normalize criminal behavior

AI will power up buyout barons’ green-energy spree

Capital One scales banking’s Mount Improbable

Business News

Morning Bid: Europe jolted by Macron's snap election call

Futures slip on rate-cut jitters ahead of inflation data, Fed meeting

Starliner flight is one big step for Boeing's space capsule, but many hurdles remain

AI is sole focus at Apple's WWDC 2024

The 'good' and 'bad' news inside the US jobs report

Fed's new economic projections may come with a dose of maybe, maybe not

Tesla turns to Musk's small shareholder fans to back $56 billion payday

Aston Martin to raise UK workers' annual pay by 4%

Exclusive: BP tightens workplace relationships policy after Looney dismissal

FACTBOX US energy sector consolidation extends into 2024

Japan's service sector mood hits nearly 2-year low in May

European nations compete for Chinese EV factories, jobs even as EU weighs tariffs

Australia's Nine Entertainment says Peter Costello steps down as chairman

In the Market: How US is daring the world to find a dollar alternative

French shock election news adds to unease in event-packed week

Euro slides to one-month low after Macron calls snap French election

Oil nudges higher on hopes of summer fuel demand

Japan's Q1 GDP fell less than first reported on revised capex

China's home de-stocking push to bring developers little cheer

Global Market Headlines

Sterling hits 22-month high against bruised euro

Morning Bid: Europe jolted by Macron's snap election call

Futures slip on rate-cut jitters ahead of inflation data, Fed meeting

Starliner flight is one big step for Boeing's space capsule, but many hurdles remain

Cognizant to acquire Belcan for $1.3 billion

AI is sole focus at Apple's WWDC 2024

Tesla turns to Musk's small shareholder fans to back $56 billion payday

Europe's STOXX 600 falls as French stocks roiled by political uncertainty

EU climate plan faces tougher road after election

Nokia CEO makes world's first 'immersive' phone call

ECB can sit out the summer before contemplating next rate cut, Kazimir says

Euro zone investor morale rises more than expected in June

Japan's service sector mood hits nearly 2-year low in May

In the Market: How US is daring the world to find a dollar alternative

Morning Bid: Rates and politics cast a shadow over markets

Japan government to call for flexible policy amid price uncertainty, draft blueprint shows

Japan's Q1 GDP fell less than first reported on revised capex

Euro and French markets roiled by shock Macron election call

Saudi Aramco shares trade higher after share offering

US job gains surge past expectations, wage growth quickens

USA News

US Democrats deploying funds to boost down-ballot candidates in non-battleground states

Hunter Biden to decide whether to testify in gun trial

Trump to sit for virtual interview with probation official Monday, New York Times reports

Biden administration ready for court challenges to border policy, Mayorkas says

Trump tells sweltering rally in Nevada he won't tax tips

Migrant arrests drop at US-Mexico border as Biden asylum ban rolls out

Apollo 8 astronaut William Anders, who took 'Earthrise' photo, dead in plane crash

New York lawmakers pass measure to protect youths on social media

Pro-Palestinian protesters to surround White House; fencing put up

Top law firms in US opioid lawsuits to get hundreds of millions in fees

Sandy Hook families agree to Alex Jones' bankruptcy liquidation

Some US lawmakers call for more scrutiny of news app NewsBreak over Chinese origins

US Supreme Court justices disclose Bali hotel stay, Beyoncé tickets, book deals

COVID shots should target JN.1 variant in fall 2024 campaign, US FDA says

Exclusive: US House committee grills Carney, Schapiro in push against climate coalitions

Hunter Biden's daughter testifies at his criminal gun trial

As Trump narrows VP search, his short list is nearly all men

Biden asks Americans to recommit to democracy in Normandy cliff speech

Trump ally Bannon ordered to report to prison for defying Jan. 6 probe

Trump rakes in $12 million at tech fundraiser in liberal San Francisco

China News

Cuba woos Russians, Chinese to revive ailing tourist sector

US needs Japan's help to boost military production, ambassador says

Morning Bid: Europe jolted by Macron's snap election call

Taiwan arrests Chinese man who took speedboat into Taipei harbour

Pakistan PM congratulates India's Modi on taking oath as prime minister

EU set to disclose tariff rates for Chinese electric vehicles

European nations compete for Chinese EV factories, jobs even as EU weighs tariffs

In the Market: How US is daring the world to find a dollar alternative

New Zealand PM says China Premier Li Qiang to visit this week

South Korea, US work on joint strategy over North nuclear threat

French shock election news adds to unease in event-packed week

Euro tumbles after Macron calls snap French election

China's home de-stocking push to bring developers little cheer

Explainer: From trade to climate, five takeaways from the EU election

Morning Bid: Trimming risk exposure as BOJ, Fed loom

US, Saudi Arabia close to finalizing draft security treaty, WSJ reports

Battle for World Cup survival reaches endgame for Asian nations

China says US provoking arms race in moves into South China Sea

Exclusive: G7 plans to warn small Chinese banks over Russia ties, sources say

Medial ligament injury sidelines Tuipulotu for at least six weeks