Categories
Markets

World stocks clamber off 18-month lows, but markets on recession watch

 

  • S&P futures up 1.13%, European stocks gain 0.96%
  • MSCI Asia ex-Japan +1.8%, Nikkei +2.64%
  • Worries over inflation, tightening policy remain
  • Dollar hovers near 20-year highs on safe-haven demand

LONDON/SHANGHAI, May 13 (Reuters) – World stocks rose from the previous day’s 18-month lows and the dollar pulled back from 20-year highs on Friday, though investors remained nervous about high inflation and the impact of rising interest rates.

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

In an interview late on Thursday, US Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain.” Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed’s next two policy meetings, while pleading that “we’re prepared to do more.” read more

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

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

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

MSCI’s world equity index (.MIWD00000PUS) rose 0.32% after hitting its lowest since November 2020 on Thursday, though it was heading for a 4% fall on the week, its sixth straight week of losses.

S&P futures bounced 1.13% after the S&P index dropped 0.13% overnight, with the index also eyeing a sixth straight week of declines.

S&P 500 set for a sixth straight week of falls

European stocks (.STOXX) rallied 0.96% and Britain’s FTSE 100 (.FTSE) gained 1.17%.

The US dollar eased 0.22% to 104.54 against a basket of currencies, but remained close to 20-year highs due to safe haven demand.

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

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

The dollar rose 0.36% to 128.76 yen , while the euro gained 0.3% to $1.0408, recovering from Thursday’s five-year lows.

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

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

The moves higher in equities were mirrored in US Treasuries, with the benchmark US 10-year yield edging up to 2.9221% from a close of 2.817% on Thursday.

The policy-sensitive 2-year yield was at 2.6006%, up from a close of 2.522%.

“Within the shape of the US Treasury curve we are not seeing any particularly fresh recession/slowdown signal, just the same consistent marked slowing earmarked for H2 2023,” Alan Ruskin, macro strategist at Deutsche Bank, said in a note.

German 10-year government bond yields edged up to 0.9250%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up almost 2% from Thursday’s 22-month closing low, trimming its losses for the week to less than 3%.

Australian shares (.AXJO) gained 1.93%, while Japan’s Nikkei stock index (.N225) jumped 2.64%.

In China, the blue-chip CSI300 index (.CSI300) was up 0.75% and Hong Kong’s Hang Seng (.HSI) rose 2.71%, encouraged by comments from Shangahi’s deputy mayor that the city may be able to start easing some tough COVID restrictions this month. read more

“We had some pretty big moves yesterday, and when you see those big moves it’s only natural to get some retracement, especially since it’s Friday heading into the weekend. There’s not really a new narrative that’s come through,” said Matt Simpson, senior market analyst at City Index.

Oil prices were higher against the backdrop of a pending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns about inflation and China’s lockdowns slowing global growth.

US crude rose 0.75% to $106.97 a barrel, and global benchmark Brent crude was up 1.05% at $108.58 per barrel.

Spot gold , which had been driven to a three-month low by the soaring dollar, was up 0.2% at $1,824.61 per ounce.

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Reporting by Andrew Galbraith; Editing by Simon Cameron-Moore, Lincoln Feast and Kim Coghill

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Internet

US joins 55 nations to set new global rules for the internet

WASHINGTON, April 28 (Reuters) – The United States and 55 other nations on Thursday signed a political commitment to push rules for the internet that are underpinned by democratic values, at a time when the US has accused Russia of wielding internet disruptions as a part of its escalating attacks on Ukraine.

The commitment, called the “Declaration for the Future of the Internet” – the first such effort of its kind – protects human rights, promotes free flow of information, protects the privacy of users, and sets rules for a growing global digital economy among steps to counter what two Biden administration officials called a “dangerous new model” of internet policy from countries such as Russia and China.

The United States is witnessing a global trend of rising digital authoritarianism, with countries such as Russia having acted to repress freedom of expression, censor independent news sites, interfere with elections, promote disinformation, and deny their citizens other human rights, the officials said.

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“Look at what…Russia is doing, some of the steps China is taking, and I think we see this as a response to these kind of ‘splinternet’ tendencies by a number of authoritarian countries around the world,” one of the officials said, referring to a characterization of the internet as splintering and dividing due to various factors, such as politics.

Since its invasion of Ukraine, Russia has launched cyberattacks, including hacking into a satellite internet provider’s network at the beginning of the invasion. The administration officials said the new effort is not an attempt to address cyber warfare.

The declaration is a modified version of the White House’s efforts from last year to rally a coalition of democracies around a vision for an open and free web.

The countries joining the US include Australia, Argentina, Belgium, Canada, Denmark, Georgia, Germany, Greece, Israel, Italy, Japan, Netherlands, the United Kingdom and Ukraine.

The effort will be launched virtually at the White House on Thursday by Biden’s national security adviser, Jake Sullivan, at 7:30 am ET (1130 GMT).

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Reporting by Nandita Bose in Washington; Editing by Leslie Adler

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Categories
Artificial intelligence

D-Wave sets up latest quantum computer in California

A D-Wave 2X quantum computer is pictured during a media tour of the Quantum Artificial Intelligence Laboratory (QuAIL) at NASA Ames Research Center in Mountain View, California, December 8, 2015. REUTERS/Stephen Lam

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May 12 (Reuters) – Vancouver-based quantum computing firm D-Wave Systems Inc said on Thursday it has deployed its latest quantum computer to the University of Southern California.

D-Wave’s most powerful machine, called the Advantage system, was launched in September, 2020 and has been operational in Canada and Germany, said Murray Thom, D-Wave’s vice president of product management.

US researchers and companies have been able to access the machine online, but the deployment will put a machine physically in the US and comes as Washington boosts its support for quantum technology, he said.

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“People are paying very close attention to where things are located and who’s working on what,” said Murray.

The Advantage system has over 5000 qubits, or quantum bits, which are an indication of the power of the quantum computer.

Quantum computers are expected one day to be able to operate millions of times faster than today’s advanced supercomputers.

D-Wave, founded in 1999, said in February that it will go public by merging with blank-check company DPCM Capital (XPOA.N) in a deal that values ​​the combined company at nearly $1.6 billion. read more

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Reporting By Jane Lanhee Lee, Oakland, Calif.; editing by Richard Pullin

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Business

Bitcoin eyes record losing streak as ‘stablecoin’ collapse crushes crypto

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration

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SINGAPORE, May 13 (Reuters) – Cryptocurrencies nursed large losses on Friday, with bitcoin pinned below $30,000 and set for a record losing streak as the collapse of TerraUSD, a so-called stablecoin, rippled through markets.

Crypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, however, as tokens supposed to be pegged to the dollar have faltered.

Bitcoin, the largest cryptocurrency by total market value, attempted a bounce early in the Asia session and rose 2% to $29,500, something of a recovery from a 16-month low of around $25,400 reached on Thursday.

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It remains a long way below week-ago levels of around $40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.

“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.

“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilize.”

TerraUSD (USDT) broke its 1:1 peg to the dollar this week, as its mechanism for remaining stable, using another digital token, failed under selling pressure. It last traded below 10 cents. read more

Tether, the biggest stablecoin and one whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data. read more

UNSTABLE

Selling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions with the squeeze on stablecoins.

These are tokens pegged to the value of traditional assets, often the US dollar, and are the main medium for moving money between cryptocurrencies or to convert balances to fiat cash.

“Over half of all bitcoin and ether traded on exchanges are versus a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”

Tether has recovered to parity on the dollar and its operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other money-market products.

But it is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation.

Ether , the second-largest cryptocurrency by market capitalization, steadied near $2,000 on Friday after a drop as low as $1,700 on Thursday. Bitcoin and ether are about 60% below record peaks reached in November.

Crypto-related stocks have also copped a pounding, with shares in broker Coinbase (COIN.O) steadying overnight but still down by half in little more than a week.

In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, eyed weekly drops of more than 15%.

Amid the turmoil, Nomura (8604.T) on Friday said it had begun offering bitcoin derivatives to clients, the latest move by a traditional financial institution into the asset class.

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Reporting by Tom Westbrook and Alun John.

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Categories
Business

Twitter CEO says two leaders to depart, hiring paused amid Musk takeover

May 12 (Reuters) – Two senior Twitter (TWTR.N) leaders who oversee the consumer and revenue divisions will depart the social media company, Chief Executive Officer Parag Agrawal told employees in a memo on Thursday, in one of the biggest shake-ups at the company since billionaire Elon Musk announced he would buy it for $44 billion.

Agrawal also said in the memo, which was seen by Reuters, that Twitter would pause most hiring and review all existing job offers to determine whether any “should be pulled back.”

He attributed the decision in part because Twitter was not able to hit user growth and revenue milestones to maintain confidence that it could reach aggressive growth targets it had set in 2020.

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“We need to continue to be intentional about our teams, hiring and costs,” Agrawal wrote.

The company was targeting $7.5 billion in annual revenue and 315 million daily users by the end of 2023, but withdrew those goals in its recent earnings report.

Kayvon Beykpour, who led Twitter’s consumer division, and Bruce Falck, who oversaw revenue, both tweeted on Thursday that the departures were not their decisions.

“Parag asked me to leave after letting me know that he wants to take the team in a different direction,” Beykpour tweeted, adding he was still on paternity leave from Twitter.

“I’ll clarify that I too was fired by (Parag),” Falck said, though he appeared to later delete the tweet.

Falck thanked his team in a tweet thread and updated his bio to say “unemployed.”

“We were able to achieve the results we did through your hard work – quarterly revenue does not lie. Google it,” he said.

Jay Sullivan, who was leading the consumer unit during Beykpour’s leave, will become permanent head of the division. He will also oversee the revenue team until a new leader is named, Agrawal said in the memo.

While no layoffs are planned, Agrawal said Twitter will reduce its spending on contractors, travel and marketing as well as its real estate footprint.

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Reporting by Sheila Dang in Dallas; additional reporting by Katie Paul Editing by Chizu Nomiyama, Will Dunham, Nick Zieminski and Bernard Orr

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Categories
Mobile

In Apple iPhone class action, plaintiffs’ lawyers defend $80 mln fee

An image of iPhone smartphones is displayed in an Apple Store in Manhattan, New York City, US, February 11, 2022. REUTERS/Andrew Kelly

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  • Objectors challenged the $310 mln “megafund” settlement and lawyers’ fees
  • On appeal, class attorneys and Apple counsel defend judge who approved settlement

(Reuters) – A national plaintiffs’ firm on Wednesday asked a US appeals court in California to uphold a nearly $80 million legal-fee award that was part of a $310 million settlement resolving class claims over the performance of certain Apple Inc iPhones.

In the San Francisco-based 9th US Circuit Court of Appeals, Mark Molumphy of Cotchett, Pitre & McCarthy spurned objectors’ allegations that the attorneys’ fee award, which was 26% of the settlement, was too high, depriving the class of tens of millions of dollars, and other claims over the settlement notice process.

US District Judge Edward Davila in San Jose, California, held two days of hearings and “did not rubber-stamp the settlement,” Molumphy told Circuit Judges Jacqueline Nguyen, Ryan Nelson and John Owens. Davila weighed objections to the compensation award and to the settlement, one of the largest class resolutions in California, before approving them in March 2021, Molumphy said.

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The panel raised concerns at the hour-long argument about whether Davila used the wrong legal frame before approving the settlement. Nguyen questioned whether Davila wrongly approached reviewing the settlement under a “presumption” that it was reasonable.

Nelson said to Molumphy: “It doesn’t look to me like the district court engaged to the degree that we might expect the court to do on the substance of some of the arguments that were raised.”

Molumphy on Thursday declined to comment.

The settlement resolved multidistrict claims that Apple secretly diminished the performance of certain iPhone operating systems in order to minimize phones from shutting off unexpectedly.

In setting the case, Apple said it had “agreed to put this matter behind it” but stood by what it called a performance management feature that “solved a complex technological problem.”

Apple’s lawyer on appeal, Chris Chorba, co-chair of Gibson Dunn’s class actions practice group, deferred comment to Apple. A company representative did not immediately return a message seeking comment.

“What does the panel want Judge Davila to do that he did not do?” Chorba said in court, defending the settlement.

“Maybe set up-front the standard that he’s actually applying,” Nelson replied.

The appeals court heard arguments from objectors including Ted Frank, director of the Hamilton Lincoln Law Institute for Class Action Fairness.

His brief on appeal argued that the percentage should not be greater than about 17%, which would return more than $35 million to the consumer class.

The case is In re Apple Inc Device Performance Litigation, 9th US Circuit Court of Appeals, No. 21-15758.

For plaintiffs: Mark Molumphy of Cotchett, Pitre & McCarthy

For Apple: Chris Chorba of Gibson, Dunn & Crutcher

Readmore:

Class counsel in Apple ‘throttling’ case beat multifront attack to land $81 million in fees

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Categories
Markets

Explainer: What are stablecoins, the asset rocking the cryptocurrency market?

Representations of cryptocurrencies including Bitcoin, Dash, Ethereum, Ripple and Litecoin are seen in this illustration picture taken June 2, 2021. REUTERS/Florence Lo/Illustration

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LONDON, May 12 (Reuters) – Most cryptocurrencies have a major problem with price volatility, but one sub-category of coins is designed to maintain a constant value: stablecoins.

As cryptocurrency prices plummeted this week, with bitcoin losing around a third of its value in just eight days, stablecoins were supposed to be isolated from the chaos.

But an unexpected collapse in the fourth-largest stablecoin TerraUSD, which broke from its 1:1 dollar peg, has brought the asset class under renewed attention. read more

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Here’s what you need to know:

WHAT ARE STABLECOINS?

Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.

They attempt to maintain a constant exchange rate with fiat currencies, for example through a 1:1 US dollar peg.

HOW IMPORTANT ARE THEY?

Stablecoins have a market cap of around $170 billion, making them a relatively small part of the overall cryptocurrency market, which is currently worth around $1.2 trillion, according to CoinMarketCap data.

But they have emerged in popularity in recent years. The largest stablecoin, Tether, has a market cap of around $80 billion, having emerged from just $4.1 billion at the start of 2020.

The No.2 stablecoin, USD Coin, has a market cap of $49 billion, according to CoinMarketCap data.

While data on the specific uses of stablecoins is hard to come by, they play a crucial role for cryptocurrency traders, allowing them to hedge against spikes in bitcoin’s price or to store idle cash without transferring it back into fiat currency. read more

In its biannual financial stability report on Tuesday, the US Federal Reserve warned stablecoins are increasingly used to facilitate leveraged trading in other cryptocurrencies.

From 2018 onwards, stablecoins have increasingly been used in international trade and as a way to avoid capital controls, says Joseph Edwards, head of financial strategy at crypto firm Solrise. The stablecoin Tether in particular is used for trade in and around China and South America, he said.

HOW DO THEY WORK?

There are two main types of stablecoin: those which are backed by reserves comprising assets, such as fiat currency, bonds, commercial paper, or even other crypto tokens, and those which are algorithmic, or “decentralized”.

Major stablecoins such as Tether, USD Coin and Binance USD are reserve-backed: they say that they hold enough dollar-denominated assets to maintain an exchange rate of 1:1.

The companies say that one of their stablecoins can always be exchanged for one dollar.

Asset-backed stablecoins have come under pressure in recent years to be transparent about what is in their reserves and whether they have sufficient dollars to back up all the digital coins in circulation. read more

Meanwhile TerraUSD is an algorithmic stablecoin. This means it does not have reservations. Instead, its value was supposed to be maintained by a complex mechanism involving swapping TerraUSD coins with a free-floating cryptocurrency called Luna to control supply.

WHAT CAN GO WRONG?

TerraUSD’s stability mechanism stopped working this week when investors lost faith in Luna, amid a broader downturn in cryptocurrency markets. TerraUSD’s price crashed to as low as 30 cents.

In theory, asset-backed stablecoins should hold firm despite this.

But Tether also broke away from its dollar peg for the first time since 2020 on Thursday, dropping to as low as 95 cents.

Tether sought to reassure investors, saying on its website that holders were still able to redeem their tokens at the 1:1 rate.

WHAT DO REGULATORS SAY?

While regulators globally are trying to establish rules for the cryptocurrency market, some have highlighted stablecoins as a particular risk to financial stability – for example, if too many people tried to cash out their stablecoins at once.

In its stability report, the Fed warned that stablecoins are vulnerable to investor runs because they are backed by assets that can lose value or become illiquid in times of market stress. A run on the stablecoin could therefore spill over into the traditional financial system by creating stress on these underlying assets, it said.

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Reporting by Elizabeth Howcroft; Editing by Michelle Price and Lisa Shumaker

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Categories
Markets

US labor market still tightening; producer price gains moderate

An “Apply Now” sign stands outside the new Faccia Brutta Bar Pallino looking to hire employees on Newbury Street in Boston, Massachusetts, US, April 27, 2022. REUTERS/Brian Snyder

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  • Weekly jobless claims increase from 1,000 to 203,000
  • Continuing claims drop 44,000 to 1.343 million
  • Producer prices rise 0.5% in April; up 11.0% year-on-year

WASHINGTON, May 12 (Reuters) – The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, touching the highest level in three months, but there is no material shift in labor market conditions amid strong demand for workers.

The report from the Labor Department on Thursday also showed that the number of people on state unemployment rolls was the smallest in more than 52 years at the end of April. Companies, scrambling to fill record job openings, are increasing wages, contributing to keeping inflation elevated.

“There is no change in the underlying message of a very tight labor market and employers unwilling to lay off existing workers in the face of extreme labor scarcity,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

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Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 203,000 for the week ended May 7, the highest level since mid-February. Data for the prior week was revised to show 2,000 more applications received than previously estimated. Economists polled by Reuters had forecast 195,000 applications for the latest week.

Claims have been largely treading water since hitting more than a 53-year low of 166,000 in March. Economists blamed the second straight weekly increase on residual volatility in the data around moving holidays like Easter, Passover and school spring breaks. Big rises in filings in California, Virginia and Illinois offset a decline of 9,811 in New York.

Jobless claims

There were a record 11.5 million job openings on the last day of March, and nonfarm payrolls rose by 428,000 in April, the 12th straight month of employment gains in excess of 400,000. Claims have dropped from an all-time high of 6,137 million in early April 2020.

The number of people receiving benefits after an initial week of aid dropped 44,000 to 1.343 million during the week ending April 30. That was the lowest level for the so-called continuing claims since January 1970.

Stocks on Wall Street were trading mixed while the dollar rose against a basket of currencies. US Treasury prices climbed.

LONG ROAD TO LOW INFLATION

The Federal Reserve last week raised its policy interest rate by half a percentage point, the biggest hike in 22 years, and said it would begin trimming its bond holdings next month.

The US central bank, which started raising rates in March, hopes to bring the demand and supply of labor back in alignment, and cool wages and inflation, while avoiding high unemployment as well as an abrupt economic slowdown or recession.

While inflation remains above the Fed’s 2% target, there are encouraging signs it has probably peaked, at least when measured on an annual basis. Last year’s high inflation readings are dropping out of the calculation of annual inflation rates.

In another report on Thursday, the Labor Department said the producer price index for final demand rose 0.5% in April as gains in energy products slowed. That marked a sharp deceleration from March, when the PPI surged 1.6%. April’s increase was in line with economists’ expectations.

Energy prices rose 1.7% after shooting up 6.4% in March. Food prices climbed 1.5%. As a result, goods prices advanced 1.3% after jumping 2.4% in March. The cost of services was unchanged after vaulting 1.2% in March. But energy prices have since accelerated while demand is reverting back to services from goods, which suggests the monthly PPI will pick up in May.

In the 12 months through April, the PPI increased 11.0% after accelerating 11.5% in March.

“While inflation is still looking strong, there are some signs that we may have moved past peak rates,” said Daniel Silver, an economist at JPMorgan in New York.

The slowdown in monthly producer price gains follows a similar trend in consumer prices last month. Data on Wednesday showed that consumer prices logged their smallest rise in eight months in April. The annual increase in consumer prices also slowed down for the first time since last August. read more

Producer prices excluding food, energy and trade services climbed 0.6% in April after rising 0.9% in March. In the 12 months through April, the so-called core PPI rose 6.9% after accelerating 7.1% in March. The rise in underlying producer prices followed a similar trend with the core CPI.

inflation

But components which go into the core personal consumption expenditures (PCE) price index, one of the key inflation measures closely watched by Fed officials, were weak last month. Portfolio management fees dropped for a third straight month because of the stock market sell-off.

The cost of hospital inpatient care and doctor services fell, due to a reduction in Medicare payments to providers starting in April.

Used motor vehicle prices were flat. While airline fares rose, they did not match the record increase in the CPI report.

Based on the CPI and PPI data, economists are estimating that the core price index rose by about 0.2% in April after advancing by 0.3% for two straight months. That would slow the year-on-year increase to 4.7% from 5.2% in March.

“Still, modestly softer PCE inflation is unlikely to alter the near-term path of Fed policy, and we continue to expect 50-basis-point rate hikes at each of the next three meetings,” said Veronica Clark, an economist at Citigroup in New York.

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Reporting by Lucia Mutikani; Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao

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Technology

Google unveils new 10-shade skin tone scale to test AI for bias

A Google employee speaks at the company’s annual I/O developer conference at the Shoreline Amphitheater in Mountain View, California, US, May 11, 2022. Google/Jana Asenbrennerova/Handout via REUTERS

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OAKLAND, Calif., May 11 (Reuters) – Alphabet Inc’s (GOOGL.O) Google on Wednesday unveiled a palette of 10 skin tones that it described as a step forward in making gadgets and apps that better serve people of color.

The company said its new Monk Skin Tone Scale replaces a flawed standard of six colors known as the Fitzpatrick Skin Type, which had become popular in the tech industry to assess whether smartwatch heart-rate sensors, artificial intelligence systems including facial recognition and other offerings show color bias.

Tech researchers acknowledged that Fitzpatrick underrepresented people with darker skin. Reuters exclusively reported last year that Google was developing an alternative. read more

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The company partnered with Harvard University sociologist Ellis Monk, who studies colorism and had felt dehumanized by cameras that failed to detect his face and reflect his skin tone.

Monk said Fitzpatrick is great for classifying differences among lighter skin. But most people are darker, so he wanted a scale that “does better job for the majority of the world,” he said.

Monk through Photoshop and other digital art tools curated 10 tones – a manageable number for people who help train and assess AI systems. He and Google surveyed around 3,000 people across the United States and found that a significant number said a 10-point scale matched their skin as well as a 40-shade palette did.

Tulsee Doshi, head of product for Google’s responsible AI team, called the Monk scale “a good balance between being representative and being tractable.”

Google is already applying it. Beauty-related Google Images searches such as “bridal makeup looks” now allow filtering results based on Monk. Image searches such as “cute babies” now show photos with varying skin tones.

The Monk scale also is being deployed to ensure a range of people are satisfied with filter options in Google Photos and that the company’s face-matching software is not biased.

Still, Doshi said problems could be seen into products if companies do not have enough data on each of the tones, or if the people or tools used to classify others’ skin are biased by lighting differences or personal perceptions.

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Reporting by Paresh Dave; Editing by David Gregorio

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Markets

Explainer: China’s Xiaomi battles probes in key India market

A man walks past a logo of Xiaomi, a Chinese manufacturer of consumer electronics, outside a shop in Mumbai, India, May 11, 2022. REUTERS/Francis Mascarenhas

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NEW DELHI, May 12 (Reuters) – Chinese smartphone giant Xiaomi Corp (1810.HK) faces legal headaches in India as a federal financial crime-fighting agency and tax authorities investigate its business practices.

Xiaomi denies wrongdoing. But it recently hit the headlines with accusations that its executives faced intimidation from Indian enforcement officials, drawing public rebuttals from the agency and words of support from China.

Here are details of the tussles in one of Xiaomi’s key markets:

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WHAT’S THE ROYALTY CASE ABOUT?

India’s financial crime-fighting agency, the Enforcement Directorate, has been investigating Xiaomi since February. On April 30, the agency said the smartphone maker had illegally transferred funds abroad to three entities, including one from a Xiaomi group entity, “in the guise of royalty” payments.

It seized $725 million from the local bank accounts of Xiaomi, though an Indian court has put that decision on hold following a legal challenge by Xiaomi. read more

The Chinese company says its royalty payments were all legitimate and were for the “in-licensed technologies and IPs” used in its Indian products.

In its court filings, Xiaomi says that such payments were made to firms including US chip giant Qualcomm Inc (QCOM.O) and that relevant disclosures had been made to Indian authorities. read more

“PHYSICAL VIOLENCE” THREATS

Xiaomi’s Indian court filing revealed the company had alleged its top executives faced “physical violence” threats and coercion by the Enforcement Directorate.

The company alleged Indian agents multiple times questioned Xiaomi’s global vice president and former India head, Manu Kumar Jain, as well as current Chief Financial Officer Sameer BS Rao, and warned them of “dire consequences” if they did not submit statements as desired by the agency. read more

The Reuters report revealing those accusations sparked a response from the federal agency, which called Xiaomi’s allegations “untrue and baseless” and said executives had been deposed “voluntarily in the most conductive environment”.

China’s foreign ministry in Beijing also reacted, asking New Delhi to carry out investigations into compliance with laws and to ensure Chinese companies were not discriminated against. read more

OTHER TAX PROBES, CHINA SCRUTINE

Chinese companies have struggled to do business in India since 2020, when a border clash occurred between the two nations. India has cited security concerns in banning more than 300 Chinese apps since then, including popular ones, such as TikTok, and tightened norms for Chinese companies investing in India.

Xiaomi’s India offices and manufacturing units were raided in December in a separate ongoing investigation over alleged income tax evasion.

And in another case in January, India’s Revenue Intelligence wing asked Xiaomi to pay $84.5 million for allegedly evading some import taxes.

Xiaomi has expressed concerns in its latest court filing against the Enforcement Directorate, saying the agency’s action “creates an atmosphere of distrust and the image of the country suffers in international circles.”

INDIA KEY MARKET FOR XIAOMI

Xiaomi also sells other tech gadgets, including smart watches and televisions, and has a lot riding on the Indian market.

The company is best known, however, for its affordable smartphone price range that has helped it grow rapidly in India. In March, the company told analysts it retained “the #1 position in India for 17 consecutive quarters.”

Its market share has quadrupled from just 6% in 2016 to 24% last year, making it the Indian market leader, according to Counterpoint Research.

The company has 1,500 employees in India and provides a source of income for at least 52,000 workers employed by its third-party manufacturers, it said in its court filing.

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Reporting by Munsif Vengattil and Aditya Kalra in New Delhi; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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