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Despite improving outlook, ECB to hike rates again

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Despite improving outlook, ECB to hike rates again

The European Central Bank is set to hike interest rates again Thursday as it pursues its inflation fight, despite tentative signs the eurozone has weathered shocks from the Ukraine war better than feared.

The ECB launched an unprecedented campaign of monetary policy tightening after Moscow’s invasion of Ukraine, and subsequent cuts to gas supplies, sent eurozone energy and food costs spiralling.

Since July, it has lifted interest rates by 2.5 percentage points to tame consumer price growth — which peaked in October at over five times the bank’s two-percent target.

The bank’s governing council is expected to deliver a half percentage point hike on Thursday, the same as at their last meeting in December.

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But, with inflation starting to slow, this is down from two jumbo 0.75 percentage point lifts before that.

The Frankfurt-based institution’s president Christine Lagarde “should reiterate that inflation… remains too high and reaffirm the absolute necessity for the ECB to continue to act over time to bring it down,” said Franck Dixmier at Allianz.

The Federal Reserve also lifted rates again Wednesday, but downshifted to a smaller 0.25 percentage point increase as inflation cools in the United States.

Meanwhile, the Bank of England is also expected to increase borrowing costs again on Thursday.

In the eurozone, recent data have raised hopes the worst of the economic shock may have passed.

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Eurozone inflation fell by more than expected to 8.5 percent in January, while the 20-nation currency club eked out growth at the end of 2022, defying fears of a contraction.

The less gloomy figures have given cause for hope that Russia’s efforts to strangle crucial gas supplies to Europe may not trigger the economic shock once feared.

As Moscow slashed deliveries following its invasion of Ukraine, European governments rolled out relief measures to cushion consumers and businesses from surging prices, and rushed to fill up storage facilities.

‘More positive’ signs
Wholesale gas prices have been easing while relatively mild winter weather has meant supplies have not been used up as quickly as expected.

Analysts hope that other factors, such as easing supply chain problems and the reopening of China’s Covid-hit economy, are now offsetting the fallout from Ukraine.

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After months of doom and gloom, officials are striking a more positive note about the outlook.

Speaking at the World Economic Forum in Davos last month, Lagarde said the eurozone economy will fare “a lot better” than initially feared, with the news “much more positive in the last few weeks”.

Signs of weakness are still causing concerns, however.

GDP in Germany, Europe’s top economy, unexpectedly contracted at the end of 2022, signalling it may be about to tip into recession.

But it is expected to be a shallow contraction, and the government has forecast the economy will expand slightly over 2023 as a whole.

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While the ECB has stressed it will “stay the course” to bring inflation back to target, policymakers are walking a fine line — seeking to tighten enough but not so much that it dramatically deepens economic pain across Europe.

Most analysts also expect a further 0.50 percentage point hike in March but, with inflation starting to ease, there are already signs of a debate among policymakers about when to slow the pace.

ECB board member Fabio Panetta, known for his dovish stance, said the bank should not commit to any particular hike beyond the forthcoming meeting.

Others, such as Joachim Nagel, the head of Germany’s Bundesbank central bank, have backed further hikes going forward.

All eyes will be on Lagarde’s comments after the rate decision is announced for hints of a future direction.

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment says Hard Rock-led group weighs bid, shares surge

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment (SGR.AX), opens new tab said on Monday a consortium led by Florida-based Hard Rock Hotels & Casinos is considering a bid for the cash-strapped Australian firm, sending its shares 20% higher.

A potential takeover by entertainment giant Hard Rock would provide a much-needed financial lifeline to Star, which has been plagued by a regulatory inquiry into its flagship Sydney casino operation and an executive exodus.

Star, which had a market value of A$1.29 billion ($863.66 million) as of Monday’s close, said it has been approached by a consortium of investors which includes Hard Rock Hotels & Resorts (Pacific).

The company said it understands Hard Rock Hotels is a local partner of Hard Rock.

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Earlier in the day, Star said it had received “inbound interest from a number of external parties” but flagged none of them had yet resulted in “substantive discussions”.

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

U.S.-based restaurant chain Red Lobster has filed for Chapter 11 bankruptcy protection in a Florida court after securing $100 million in financing commitments from its existing lenders, the company said on Sunday.

The company listed its assets and liabilities to be between $1 billion and $10 billion, according to a court filing.

Red Lobster said its restaurants will be open and operate as usual during the bankruptcy proceedings, and plans to reduce its locations as well as pursue a sale of substantially all its assets.

The restaurant chain also said it has entered into a “stalking horse” purchase agreement to sell its business to an entity formed and controlled by its existing term lenders.

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“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” said Jonathan Tibus, CEO of Red Lobster.

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

German automaker BMW (BMWG.DE), opens new tab imported at least 8,000 Mini Cooper vehicles into the United States with electronic components from a banned Chinese supplier, a U.S. Senate report released on Monday said.

A report by Senate Finance Committee Chairman Ron Wyden’s staff said BMW imported 8,000 Mini Coopers with parts from a Chinese supplier banned under a 2021 law and that BMW continued to import products with the banned parts until at least April.

BMW Group said in an email it had “taken steps to halt the importation of affected products.”

The company will be conducting a service action to replace the specific parts, adding it “has strict standards and policies regarding employment practices, human rights, and working conditions, which all our direct suppliers must follow.”

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Congress in 2021 passed the Uyghur Forced Labor Prevention Act (UFLPA) law to strengthen enforcement of laws to prevent the import of goods from China’s Xinjiang region believed to have been produced with forced labor by members of the country’s Uyghur minority group. China denies the allegations.

“Automakers’ self-policing is clearly not doing the job,” Wyden said, urging the Customs and Border Protection agency to “take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labor in China.” Customs and Border Protection did not immediately comment.

The report found that Bourns Inc, a California-based auto supplier, had sourced components from Sichuan Jingweida Technology Group (JWD). That Chinese company was added to the UFLPA Entity List in December, which means its products are presumed to be made with forced labor. 

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