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Markets put money on ECB rate hike amid rising European bond yields

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Traders boosted bets for a European Central Bank (ECB) rate hike this week, sending Italy’s 10-year bond yield to a six-month high after a Reuters report that the central bank believes inflation will continue to hover around 3% next year.

The day’s main macroeconomic event for global markets is US inflation data released at 1230 GMT which will help shape the Federal Reserve’s rate decision later this month.

But there is plenty happening in Europe too, and traders are also bracing for the ECB’s meeting on Thursday – current market pricing reflects roughly a 75% chance the central bank will raise rates by 25 basis points, up from around a 40% chance on Monday and just 25% a week ago.

A further rate hike this year is now fully priced in.

The rise in rate expectations on Wednesday was, said Jan von Gerich chief analyst at Nordea, a result of a Reuters report late on Tuesday which said, citing a source with direct knowledge of the matter, the ECB’s quarterly projections will put inflation north of 3% in 2024.

That would support the case for a further rate increase, though the source said the rate decision was still a close call.

A pick up in market expectations also makes a rate hike more likely.

“The ECB isn’t as sensitive to market expectations as say the Fed is, but it is not totally insensitive so this kind of pricing on the margin increases the odds of hiking,” von Gerich said.

“It isn’t conclusive, but they do look at market expectations and worry that if they disappoint too much then you could see rates fall, and financing conditions ease, which they don’t want to at the moment.”

The yield on Italy’s 10-year bond hit 4.452% in early trading, its highest since mid-March, and was last at 4.44%, up 3 basis points (bps) on the day.

Germany’s 10-year yield rose 2.5 bps at 2.67%, meaning that the spread between the German and Italian 10-year yields touched 178 bps, its widest since June.

Bond yields move inversely to prices and higher rates from the ECB would typically weigh more heavily on the more-indebted European periphery.

Some market participants expect an acceleration of the ECB’s quantitative tightening measures – in which the central bank reduces its bond portfolio – to hurt peripheral bond prices.

Shorter-dated yields, more sensitive to interest rate expectations, also rose. Germany’s two-year yield was up 3 bps at 3.16%, having briefly touched a one-month high, and Italy’s two-year yield touched a two-month high and was last 7 bps higher at 3.9%. 

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April FDI in Pakistan increased to $358.8 million, according to SBP

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The inflow for April was $358.8 million, up 177% from $132 million in April FY23. Still, that was 39% more than the $258 million from March.

China was the largest investor, with $439.3 million in FDI from the nation between July and April of FY24—the greatest amount—as opposed to $604 million during the same period of FY23. In April, China accounted for $177 million of the total investment.

With $51.93 and 51.89 million invested in Pakistan, the United Arab Emirates and Canada came in second and third, respectively.

The power industry was the main draw for foreign investors in FY24, which ran from July to April. This period’s FDI in the power industry was $637.5 million, compared to $776.2 million the previous year. From $338 million to $460 million this year, Hydel Power garnered more attention.

Continue reading: In FY23–24, Pakistan’s per capita income increased to $1680.

According to a separate data released on Wednesday, Pakistanis’ per capita income increased to $1680 in FY2023–2024.

The size of the national economy grew from $341 billion to $375 billion in the current fiscal year, according to figures made public by PBS.

Throughout this fiscal year, Pakistanis’ yearly per capita income increased by Rs 90,534; the monthly rise was Rs 7,544.

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OGRA forbids the purchase or sale of inferior LPG cylinders.

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The 313 LPG marketing and 19 cylinder-producing companies received notices from the OGRA, which described the act of refilling inferior LPGO cylinders as harmful.

Avoid supplying LPG to unlicensed distributors, the OGRA has cautioned LPG marketing companies. Only approved distributors will be able to sell and buy LPG going forward, per the notification, which states that new SOPs have been developed for the LPG industry.

Additionally, the warning said that the decision was made in an effort to preserve both lives and the business in response to an increase in cylinder blast occurrences.

Price reductions of Rs 20 per kilogramme for liquefied petroleum gas (LPG) were implemented in Quetta on May 3.

There is a reduction of Rs 20 on LPG prices, which means that the price per kilogramme drops from Rs 280 to Rs 260.

The costs of LPG were reduced by Rs 20 per kilogramme earlier, bringing the total decrease to Rs 40 per kilogramme over a few weeks. This is something worth noticing.

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PIA announces a significant student discount.

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According to an airline spokesman, the national flag carrier has recently raised the baggage allowance to 60 kg.

Currently, PIA flies one flight per week on Sundays between Islamabad and Beijing.

The discount may be useful to students who intend to spend their summer vacations in Pakistan or who wish to return home after earning their degrees.

Before, students who wanted to visit China could now receive a 27% reduction on their fares through PIA.

On Eid ul Fitr, the national flag airline also reduced the cost of domestic flights by 20% for both economy and executive economy classes.

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