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On May 25th, Japanese financial regulators are urging domestic listed companies to allocate more of their cash reserves to long-term business investments, rather than rewarding shareholders through share buybacks and increased dividends. Tatsufumi Shibat, a senior official at the Financial Services Agency, stated in an interview that, in addition to cash, executives should consider using cross-shareholdings and real estate assets to promote growth. He pointed out that regardless of where Japanese companies are on their growth curve, they tend to prioritize shareholder returns. "I dont think investors would make that demand of companies in a rapid growth phase," he said in the interview. Shifting the vast wealth held by businesses and households to fund future expansion is one of the core pillars of Prime Minister Sanae Takaichis efforts to revitalize the Japanese economy. She has long criticized the cash reserves on corporate balance sheets.On May 25th, US Secretary of State Marco Rubio, who was visiting India, told the media on the 24th that a draft agreement between the US and Iran had gained the support of several Middle Eastern countries. Rubio said that seven to eight countries in the region currently support the draft, and the US is prepared to continue pushing it forward. Rubio also stated that nuclear negotiations are highly specialized, and "its impossible to settle a nuclear matter in 72 hours by writing it on the back of a napkin," but President Trumps commitment to preventing Iran from acquiring nuclear weapons should not be questioned. Earlier that day, Trump posted on social media that negotiations with Iran were "going in an orderly and constructive manner," and that he had informed US representatives that there was no need to rush into an agreement with Iran.On May 25th, European Central Bank (ECB) President Christine Lagarde stated that the ECB is likely to raise its inflation outlook when policymakers meet next month. She said on Sunday that the March forecast of 2.6% inflation this year "may be revised," adding that the situation "has changed" since then. Her comments confirm recent signals from policymakers, including Governing Council member Demarco. Demarco, in an interview, suggested that the forecast, released shortly after the outbreak of the Iran-Iraq conflict, might have been overly optimistic. Lagarde declined to elaborate on whether such a revision would lead to a rate hike by the ECB on June 11th. "The current situation is so uncertain that we must examine all available data, assess how the economy will develop in the coming quarters, determine whether action is needed, and what the medium-term impact will be," she said. "Our target is 2% in the medium term."On May 25th, Kevin Hassett, US President Trumps chief economic advisor, stated that he believes the eventual drop in oil prices will create room for the Federal Reserve to cut interest rates. "We again expect that once an agreement is reached, energy prices will plummet," Hassett said. "When that happens, the Fed will have ample room to take the right action and lower interest rates." He emphasized his respect for the Feds independence and praised Kevin Warsh, who was sworn in as Fed chairman last Friday. While the surge in US fuel prices caused by Irans closure of the Strait of Hormuz poses a growing political risk to Trump and his Republicans in the November midterm elections, Hassett believes that accelerating inflation is primarily driven by energy prices. "If you look at the recent data reports, energy prices are absolutely worrying, but core prices have hardly changed," he said. "I think once we see energy prices fall, you might actually see negative inflation because of the drop in energy prices."European Central Bank President Christine Lagarde: The current situation is too uncertain to make a commitment on interest rates; inflation forecasts may be revised in June, at which time the ECB will assess the economic situation by taking all data into account.

Gold Dropped Over Recession Worries, But China's Optimism Boosted Copper

Skylar Williams

Jan 19, 2023 11:01

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On Thursday, gold prices partially recovered from a two-day losing streak amid escalating concerns about an impending recession and the direction of U.S. monetary policy, while copper prices stayed stable on the back of growing optimism regarding the Chinese economic recovery.


Wednesday's results on U.S. retail sales and industrial output for December were worse than anticipated, stoking fears of a larger economic downturn in the United States as the nation contends with restrictive monetary policy and relatively high inflation.


Even as pricing pressures lessen, the Federal Reserve's beige book expects modest economic expansion in the following months. In December, producer price inflation came in below expectations.


Despite this, other Fed members, such as Loretta Mester and James Bullard, have advocated for additional interest rate hikes, as inflation remained significantly above the yearly target of 2%. In addition, they projected that U.S. borrowing rates will likely peak at 5%, whereas the majority of members advocated a more gradual increase in rates.


Spot gold rose 0.2% to $1,907.60 per ounce at 19:16 EDT, while gold futures rose 0.1% to $1,909.15 per ounce (00:16 GMT). Having reached its highest level in eight months earlier this week, gold has lost roughly 0.6% during the past two trading days.


According to data from the United Kingdom and the Eurozone, inflation remained elevated in both nations, indicating that their respective central banks will likely continue to boost interest rates. This may also have a negative effect on the price of gold bullion.


In recent sessions, however, the price of the yellow metal has surged due to rising worries of a worldwide recession, especially as more nations tighten monetary policy to combat excessive inflation. This led to gold establishing $1,900 per ounce as a strong support level.


Other precious metals maintained a limited trading range on Thursday. Despite the fact that both metals experienced significant losses this week, platinum futures rose 0.1% while silver futures sank 0.2%.


Copper prices eked out slight gains this week, as optimism on China's economic recovery prevailed over fears of an impending recession.


Futures for high-grade copper stabilized at $4.2260 a pound, keeping just below a six-month peak.


Gita Gopinath, deputy managing director of the International Monetary Fund, told Reuters that China could experience a rapid economic recovery in the second quarter of 2022, following the relaxation of the majority of anti-COVID policies.

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